Author: David Dehne

What’s the Difference Between a Manufacturing Bottleneck and a Constraint?

Bottlenecks and constraints are two terms that are often used interchangeably in Demand-Driven Manufacturing as well as in discussions on Lean Manufacturing and flow. It’s easy to use one term when you actually mean the other. However, since these two limiters on throughput need to be addressed differently, it’s important to understand the distinction.

What is a Manufacturing Bottleneck?

A bottleneck represents a temporary overload on a resource. The cause of the overload can be wide-ranging: a malfunctioning machine, an absentee operator, missing tools, an unexpected materials shortage, newly hired personnel, etc. While a bottleneck can cause serious delays, these are all issues which can be “fixed.”

What is a Manufacturing Constraint?

A constraint is a long-term and persistent limiter to flow. For example, the constraint might be a work center that cannot go any faster because the equipment is already operating at maximum speed or a process, such as a chemical reaction, that takes a set amount of time. Constraints can be found outside the organization as well. For example, a persistent shortage of skilled workers in their industry is a constraint that many manufacturers face.

Based on these explanations, cast your vote on whether Lucy and Ethel’s situation in the chocolate factory represents a bottleneck or constraint. (This is completely anonymous and just for fun. Once you vote, you can see how others voted.) Vote here.

Manufacturing Bottlenecks Are a Prime Opportunity for Continuous Improvement

As I mentioned earlier, bottlenecks are temporary – or at least they should be. In fact, they are often a prime opportunity for continuous improvement.

If WIP regularly backs up in front of a work center because a machine is down, the operator is late getting back from lunch, or the necessary tools have gone missing again, it may not be an easy problem to fix, but the power is in your hands. As part of your continuous improvement efforts, you should be trying resolve recurring bottlenecks.

One thing I’ve learned over the years, is that you can’t resolve these types of problems sitting behind a desk. If you’re pouring over reports in your office, all you’ll see is the variability. No amount of data can tell you what caused it.

You can ask your shop floor supervisors, and they’ll give you their perspectives, but nothing beats getting down on the shop floor on a regular basis and seeing the reality behind the data.

Turn Your Gemba Walk Into a Power Walk.

Constraints: If You Can’t Remove Them, Manage Them

Constraints are also an opportunity for continuous improvement. According to Constraints Management (a.k.a, the Theory of Constraints), there are five steps to addressing a constraint:

1/ Identify – You can’t address a problem if you don’t know it’s a problem. That applies to constraints as well. You probably have a pretty good idea of where your constraints are, but value-stream mapping has shown more than one manufacturer that things aren’t always as they seem.

2/ Exploit – Get as much as you can out of the constraint “as is.” For example, you might reorganize the work center in small ways to smooth the flow of work and increase productivity.

3/ Subordinate – Here, everything else is synchronized to the rate of the constraint. Experts also suggest re-evaluating your constraints at this stage because the process of subordination can cause the constraint to shift to another work center.

4/ Elevate – Take whatever action is necessary to eliminate the constraint, e.g., replacing or refurbishing outdated equipment, adding manpower at the constraint, or reorganizing the factory to remove wasted motion.

5/ Return to Step One. You will never eliminate all constraints. (Nor would you necessarily want to, but that’s a subject for another day.) Elevating a constraint so that it is no longer a constraint just means that something else will become the limiting factor on flow. As part of your continuous improvement efforts, you need to return to step one, identify the constraint and assess whether its capacity is enough to meet demand.

Learn How to Subordinate to a Constraint

For many, step four seems the most challenging because it often involves a capital expense. Even if the business can afford the investment, a business case still needs to be made.

Read: Smart Capital Investing in a Recovering Economy

However, step three is where real performance improvements take place, so be sure you don’t skip over it! We call this step constraints management, and it is a larger part of a demand-driven (or pull-based) production system. For a more detailed explanation of how constraints management works, please download our new white paper – Demand-Driven Manufacturing Principles: Eliminate Bottlenecks; Manage Constraints.

August 20, 2018
Increase Throughput by Replacing Manufacturing Productivity and Efficiency Metrics with These Two KPIs
Manufacturing productivity is a useful metric for measuring the health of manufacturing at a national or global level because it tells us something about whether our factories, in general, are working or sitting idle. But at the level of the individual factory, productivity as a performance metric can be problematic. Before we travel too far down that path, however, perhaps we should start by defining what we mean by manufacturing productivity.

What is Manufacturing Productivity?

The Business Dictionary defines productivity as a measure of the efficiency of a person, machine, factory, system, etc., in converting inputs into useful outputs. Productivity is computed by dividing average output per period by the total costs incurred or resources (capital, energy, material, personnel) consumed in that period.

In short, the MBAs are defining productivity as a measure of how efficiently you are using resources, not how effectively you use them.

At a macro level, manufacturing productivity has been increasing for years. We’re producing more than ever. In large part, this reflects the level of automation in our factories. Automation helps us get more done, in less time, with fewer resources.

Productivity and Throughput Are Not the Same

To be clear, we’re not saying productivity is a bad thing. Just that seeking to increase productivity for the sake of the metric can lead to unintended consequences such as increased inventory levels. A better metric, and one that those of you raised on Lean manufacturing principles are no-doubt familiar with, is throughput.

But once again, we need to avoid defining the word the way the rest of the world does.

A straight dictionary definition defines throughput as the amount of material or items passing through a system or process. Lean adds a bit of an accounting wrinkle to that definition by looking at throughput as the net profit made from selling a product or service.

If it’s been awhile since your last accounting class, look at it this way:

You have a machine that produces ten pieces an hour. By the standard definition, those pieces are throughput. However, under Lean principles, those pieces are not throughput until they are converted into revenue (a.k.a. “sold”). Demand-Driven Manufacturing incorporates Lean theory, with special emphasis on this idea of throughput.

Productivity: Use with Caution!

If you’re measuring your factory or individual resources (employees, work centers, etc.) based on the standard dictionary definition of productivity (or throughput), don’t be surprised if you wind up with inflated inventory levels, missed delivery dates, and long lead times.

There are better ways of measuring productivity that take net revenue into account. For example, one analyst firm recommends a productivity metric that measures profit per hour. Not bad. However, to drive continuous improvement, metrics need to serve two purposes:
- Provide actionable input
- Provide that input while there’s still time to have an impact
Profit per hour doesn’t serve either of these well. Knowing that your profit per hour is X doesn’t really tell you much about how to get it to X+1. The danger in this is that employees and managers may see a focus on profit per hour as a mandate to “work faster,” and as we all know, this is not the same thing as working smarter.

The second problem with metrics like profit per hour is that they are lagging indicators, telling you only how you did in the past. They do nothing to predict future performance. Lagging indicators are how the executive team, the market, and investors look at performance, so it’s not a bad idea to monitor them. But on the shop floor, we also need metrics that will help us influence future performance.

There is one caveat I need to make about measuring productivity. If you’re measuring productivity of a constraint in a Demand-Driven Manufacturing environment, constraint productivity is a very useful metric. If you’re interested in learning more about this, we have a plethora of additional resources on our website regarding constraints management (Theory of Constraints).

If Not Manufacturing Productivity, Then What?

In our continuous improvement efforts, we need to leverage Pearson’s Law: That which is measured improves. That which is measured and reported improves exponentially. If we aren’t going to measure performance or productivity, at least not at the employee or non-constraint work center level, what are we going to measure?

Two metrics can be particularly useful at the work center level, especially in a Lean Manufacturing environment. These metrics support behaviors desired to drive flow and maximize throughput:

Schedule Adherence: Perform work in the order that maximizes global throughput. Schedule Adherence measures how effectively your employees work through orders in the queue. Are they sticking to the plan? Improved schedule adherence leads to better on-time delivery performance and decreased expediting.

Queue Turns: Maximize flow by working to turn queues as quickly as possible. In a typical manufacturing environment, 85-90% of cycle time is made up of the time materials spend in-queue, waiting to be processed. Queue turns measure how often the queue in front of a resource turns over in a given time period. More queue turns means less time waiting and lower cycle times.

Schedule Adherence and Queue Turns are metrics that represent what working effectively in a production environment is all about.
August 6, 2018
The Best Time to Kick Off a Continuous Improvement Initiative

Prosperity is perhaps one of the greatest obstacles to continuous improvement in manufacturing. When things are going well, we don’t feel the need to make improvements quite as keenly. For example, instead of focusing on removing waste in our factories to become more cost competitive, we might opt to add capacity so we can keep up with demand.

There really is no better time to make improvements than when things are going well. In this post, we’ll take a quick look at what the research says about the short-term outlook for manufacturers. Then, I will explain why now is the best time to kick your continuous improvement efforts into high gear.

Things Are Looking Up

After nearly a decade of belt-tightening, many sectors are returning to a renewed sense of optimism. This is especially true in manufacturing. An amazing 93.5% of respondents to NAM’s 1st Quarter 2018 Manufacturer’s Outlook Survey registered a positive outlook, the second highest level recorded in the survey’s 20-year history.

Of course, because NAM is reporting on human sentiment, there’s always the chance that their results aren’t indicative of what’s actually happening in the market. Humans are not always the most objective source of “data.”

MAPI (Manufacturer’s Alliance for Productivity and Innovation) looks at a number of variables to project growth rates for the manufacturing sector. In March of this year, they nearly doubled their projected average growth for the U.S. manufacturing sector for the 2018-2021 period from 1.5% to 2.8%.

It’s not that you can’t find anyone who thinks things are not as rosy as they seem, but much of the negativity stems from a concern that the economy will grow too fast. That sounds to me like what an old colleague of mine in the manufacturing sector used to call “a happiness problem.” For now, most manufacturers I know are just trying to make the most of the opportunity presented to them.

Optimistic Workers Make the Best Change Agents

As anyone who has ever tried to implement a continuous improvement effort knows, the more secure your shop floor workers feel, the more likely they are to support change. While neither the NAM survey or the MAPI analysis look at worker sentiments, there’s no doubt that the optimism at the top has a way of filtering down.

Consider these two very different scenarios:

Scenario A: The Mandate to Cut Costs

A machinist has just stepped out of a company-wide meeting in which executives issued a cost-cutting mandate due to a slowdown in orders. With support from the COO, production managers decide the best way to cut costs is to lower inventory levels by implementing constraints management.

Now they need to explain it to the machinist and other team members in similar roles.

What the operations manager says: “We’ve identified the painting station as the constraint in our operations, so we’re going to set the pace of production to maximize capacity at that station. We don’t want you working on anything other than what the system tells you to. This may mean you have more downtime, but that’s OK. We’re not measuring utilization rates right now.”

What the machinist hears: “We need to cut costs, so we’re going to cut back on production. We know you’ve been making more than you needed to anyway. You’ll probably have more idle time because we won’t always have enough work to keep you busy.”

During one of those idle times, the machinist starts to wonder how long it will be before the cost-cutting measures include his job.

Scenario B: Let’s Pick Up the Pace!

This time, the company meeting is about increasing the pace of manufacturing. The sales pipeline is fuller than it’s been in a long time, and sales believes that if the company can decrease lead times they’ll be able to have a banner year and increase market share.

Once again, the operations managers decide to implement constraints management. This time the focus is on increasing velocity.

What the operations manager says: “We’ve identified the painting station as the constraint in our operations, so we’re going to set the pace of production to maximize capacity at that station. We don’t want you working on anything other than what the system tells you to. This may mean you have more downtime, but that’s OK. We’re not measuring utilization rates right now.”

What the machinist hears: “Business is good, but we need to determine how to step up our pace. We’re going to try this thing called constraints management. It will seem a little strange at first, but it’s all part of the process.”

In this scenario, the machinist does some reading on Lean and attends a few workshops during his downtime. Instead of worrying about his future, he starts to think about how he might contribute to the initiative. Maybe he’ll even work to become a green belt and advance in his career.

Making Hay While the Sun Shines

Nothing lasts forever, and that includes a great economy. The continuous improvements you implement now can set you up to weather the hard times ahead with both better processes and better people. The sun is shining on much of the manufacturing sector. Now is the time to take advantage of it.

In this post, I focused on constraints management, but there are many other types of continuous improvement initiatives. If you’re still defining your approach, we have plenty of resources you can mine for ideas. Here are just a few.

Paper: 4 Ways SyncKanban eKanban Technology Drives Continuous Improvement

Paper: Get Lean on Scrap

Post: How the Internet of Things Can Shorten Lead Times

Post: How the Internet of Things Can Help Lower Inventory Levels

Video: How Orbital ATK is Leveraging the IIoT and Visual Factory Technology to Drive Continuous Improvements

Post: Turn Your Gemba Walk Into a Power Walk

For additional ideas, visit our Resources page on our website.

July 23, 2018
IT/OT Convergence in the Factory of the Future

Since the advent of the Industrial Internet of Things (IIoT), experts and enthusiasts have been talking about the coming together of IT (information technology) and OT (operational technologies). Some call it an integration, while others call it a convergence. I call it a good thing.

In this post, I’ll talk a bit about the convergence/integration of IT and OT, why it matters, and what it will look like in the Factory of the Future.

What is IT/OT Convergence?

WhatIs.com gives a pretty simple, yet solid definition of IT/OT convergence:

IT/OT convergence is the integration of information technology (IT) systems used for data-centric computing with operational technology (OT) systems used to monitor events, processes and devices and make adjustments in enterprise and industrial operations.

Other definitions offer variations on the theme. More detailed definitions, for example, might focus specifically on operational technologies such as the billions of connected devices that make up the IIoT.

What the Definition of IT/OT Convergence is Missing

Machines talking to each other, seamlessly improving operations without any human intervention. Maybe. Someday.

In the meantime, the most vital convergence that needs to happen is the coming together of your IT and OT people. To be clear, I’m not talking about the next big trend in organizational restructuring that merges IT and OT teams into one. I doubt most of you would want your IT technicians managing production schedules any more than you’d want your plant managers configuring your network. The skills and knowledge required are vastly different.

What you want to see is the two teams working together to solve problems. In the convergence of IT and OT, each side has something valuable to offer.

If you’re in operations, you need the folks in IT to make your ideas work. For example, let’s say you want to implement predictive maintenance in your organization to reduce unplanned downtime. You either purchase or retrofit your equipment with intelligence, and you invest in applications like SyncView^® to improve shop floor visibility.

At a minimum, you’ll need to collaborate with your IT team to make sure that your connected devices (both the shop floor equipment and the handhelds you use to access the real-time information) are secured, so they don’t increase your organization’s cybersecurity risk profile.

Connecting devices also increases the traffic on your network. IT can be instrumental in ensuring the IT infrastructure is architected to provide the level of performance you require.

While I don’t imagine there are a lot of IT professionals reading our blog, understanding the benefits of IT/OT convergence from the perspective of the IT professional can help you foster willing collaboration between the two teams.

CIOs and other high-ranking IT professionals are under increasing pressure to add value to the business through digital transformation. In the 2018 Gartner CIO Agenda Report, 17% of respondents said digital transformation was their number one priority. While 17% may not seem like a large percentage, keep in mind that this 17% ranked digital transformation over other important priorities like profit improvement (10%), innovation (10%), and customer focus (9%). The only priority that topped digital transformation was growth/market share at 26%.

The challenge for many IT professionals lies in defining exactly what digital transformation means to the organization. It is NOT simply putting more mobile devices in the hands of factory floor employees. For digital transformation to be effective, it must add value to the business.

Digital Transformation with a Purpose

OT professionals can help their colleagues in IT by providing a reason and a method behind their digital transformation initiatives. Take pull-based replenishment as an example.

In pull-based replenishment, production is tied to customer demand, and materials are only replenished once they are consumed. While pull can help eliminate many of the eight types of waste identified by Lean Manufacturing, it provides two important bottom line benefits as well: Decreased cycle times and decreased inventory levels. Pull is a vital principle in Demand-Driven Manufacturing.

Kanban systems are undoubtedly the most common method for implementing pull-based replenishment. However, manual Kanban systems are fraught with challenges such as human error and lost cards. They can also introduce the waste of excess motion into the system as workers move Kanban cards around the factory floor.

eKanban replaces manual Kanban with connected devices that send electronic demand signals. No more unexpected stock outs due to a lost or misplaced Kanban card. As an example of how much more efficient eKanban is, consider that one of our customers replaced a manual Kanban process consisting of 66 steps with an eKanban process with only six steps. At the same time, they reduced replenishment inventory by 40% and their lead time from 12 weeks to two.

Related article: How Demand-Driven Manufacturing Can Help You Cost-Justify Your Next IIoT Project

IT/OT Convergence IS the Factory of the Future

In the Factory of the Future, I envision IT/OT planning meetings to be every bit as common as the weekly S&OP meeting is today. That’s because, without the convergence of IT and OT – and the people behind these technologies – the Factory of the Future doesn’t exist.

Here are a few additional resources that may help as you create your vision for the Factory of the Future and explore how you can bring together your IT and OT teams. (Remember to share these with your colleagues in IT!)

White papers:

How Technology will Connect Your Enterprise and Create the Demand-Driven Factory of the Future — Today

E2E Supply Chain Visibility Technology is Here

Videos:

How Orbital ATK Enabled the IIoT and a Visual Factory

Visualizing Metrics in the Factory of the Future

Visual Factory Software Overview

If you have comments or questions on this article or any of the concepts we’ve discussed, please add them below or reach out to me directly.

July 9, 2018
Kaizen vs. Kaikaku

Kaizen vs. Kaikaku: 2 Approaches to Lean Manufacturing That Can Transform Your Factory

The Lean Manufacturing world is littered with new terminology, and given the discipline’s origins, it’s not surprising that some of these words and phrases are Japanese. Being “fluent” with these words to the point that you can bring them up in casual conversations with coworkers is half the fun.

Even better, these words have the power to transform your organization in a way that often-used acronyms like MRP, ERP and APS do not. Two of the most powerful are: Kaikaku and Kaizen.

Two Approaches to Lean

Kaikaku and Kaizen are both ways to approach Lean Manufacturing. While they are both important, they are also fundamentally different. Kaizen seems to be the most often used in Lean discussions, so let’s start there.

Kaizen is often described as continuous improvement. There is some convincing evidence that this word has lost some of its original Japanese meaning (and power) when applied in the western way, but it is still highly useful nonetheless.

Kaizen is often used to describe the smaller steps taken as part of the overall lean journey. For example, a Kaizen event may be used to implement 5S – sort, shine, set in order, standardize and sustain – in a work area. Or if you prefer the Japanese S’s: seiri, seiton, seiso, seiketsu, shitsuke. Again, the translation into the English 5’s isn’t exact, but it still works.

While it’s not a literal translation, I like to think of Kaizen as the “zen of change.” You start out with a 5S Kaizen event that creates a cleaner, more organized work center. With everything flowing more smoothly, workers take notice and get behind your efforts. That enthusiasm snowballs, and eventually you have real momentum – exactly what you need when you may be asking people to change an approach they have been following for twenty years or more.

Kaikaku translates into radical change. We don’t hear Lean practitioners talk about Kaikaku nearly as much as they talk about Kaizen, perhaps for good reason. The continuous improvement philosophy underlying a Kaizen event, even a Kaizen blitz, is something people can get behind. You start talking about radical change, and you might encounter some real resistance.

Yet, Kaikaku is as vital to Lean as Kaizen. In fact, I would suggest that if you’re not seeing bottom line improvements from your Lean initiatives, it may be because your company leadership hasn’t bought into the concept of Kaikaku.

Consider the ten “commandments” of Kaikaku:

Looking at these commandments, it’s clear that Kaikaku isn’t intended to be seen as an “event” the way Kaizen is. It’s more of a change in the company culture that says, “we’re implementing Lean, and we’re not looking back.” While some of these commandments can be implemented by facilities managers (e.g., #5), several of them need to be implemented at the highest levels in the company.

You can’t exactly “totally deny the status quo” or “throw out the traditional concept of manufacturing” unless you have support from the CEO on down. Even accepting ideas from ten people instead of one expert is a cultural shift that needs top-down leadership. Getting the C-Suite to give up its gurus isn’t always easy, but if they’re clinging to the idea that change needs to be led from outside the organization, you’re going to have some problems with this one.

Gambatte!

One of my favorite Japanese phrases is “gambatte!” It translates into “do your best!” and is an element of both Kaikaku and Kaizen. (Although I don’t ever think I’ve seen anyone include it in the Lean lexicon.)

The continuous improvement aspect of Kaizen is all about doing your best. You make a change, learn from it, and use that learning to continue to improve.

The concept of doing one’s best is also found in Kaikaku. Commandment #4 specifically states that the goal is not perfection.

So, as you venture forth on your own Lean journey, “Gambatte!” If you have questions along the way or would like to discuss how our applications can support your efforts, we’re always happy to help.

You might also enjoy the recent guest posts from Jim Shore, a principal at Quality Lean Solutions, a consulting firm that specializes in medical device companies, supplier quality and lean manufacturing principles. In these posts, Jim shares his real-world experiences in helping clients implement pull-based replenishment. These posts are all about Kaikaku and Kaizen in action.

Real World Advice for Getting Started on eKanban

Start Your eKanban implementation With Value-Stream Mapping and Engaging Your Suppliers

July 2, 2018
Why Data-Driven Manufacturing is Not Enough

Occasionally, someone will mix up DDM (Demand-Driven Manufacturing) with another DDM acronym in our industry: Data-Driven Manufacturing. There are similarities. For example, executing demand-driven principles relies heavily on data and shop floor visibility. However, it doesn’t stop there.

In this post, we’ll take a look at Data-Driven Manufacturing and why it’s useful but not enough to help you reach your goals.

Data: It Is What It Is

One of the main problems with data is that it’s just data. It passes no judgment on whether the results you’re getting from the shop floor are good or bad. Nor does data provide guidance on how to use it to improve operations.

As an example, let’s say you’re monitoring the utilization rate for a new piece of equipment in which you recently invested several hundred thousand dollars. Suddenly, the utilization rate starts dropping. Is that good or is that bad?

The knee-jerk reaction you’ll probably get from your average, stressed-out production manager (or the CFO that signed off on the order for the equipment) is that it’s bad. However, to make that call, you need to put the data into context.

Maybe your new equipment is so efficient that it is no longer a constraint in the system. At the lower utilization rate, you are still producing product fast enough to meet demand. In that case, the drop in utilization rate isn’t a problem. In fact, if you can find profitable ways to use that extra capacity, such as taking on new business, then the drop in your utilization rate is actually an opportunity.

Trying to address the “problem” without putting it into its proper context could lead you to produce more than you need, which could lead to even greater problems like inflated inventory levels.

You’ve Got to Have the Right Principles

You often see continuous improvement talks or articles that promote the idea of the three levers of improvement: people, processes, and technology. To that, I’d like to add a fourth: principles.

I’m not talking about ethical principles as in “doing the right thing.” (Although that’s never a bad idea.) I’m talking about manufacturing principles such as Lean, Theory of Constraints (TOC), Flow. and Demand-Driven Manufacturing.

In the example I gave above, in making a judgment call on whether the drop in utilization of your expensive new equipment was good or bad, we put it into the context of Demand-Driven Manufacturing and TOC.

Creating Chaos

Many manufacturers take a principle-agnostic approach. They don’t necessarily discount that concepts like Lean, TOC, and Demand-Driven Manufacturing have something to offer, but they understand push manufacturing and MRP because that’s the context they’ve been using for years.

Instead of jumping wholeheartedly into something new – though most of the concepts behind Demand-Driven Manufacturing are hardly new as they’ve been around since at least the middle of the last century – they figure they’ll just take the best from all of these principles and combine them into a holistic approach to continuous improvement that is as unique as their organization.

Unfortunately, this just creates chaos in an environment that is already prone to chaos. Without common principles, senior management might issue an edict to improve productivity and efficiency, while shop floor managers initiate a pull-based skunkworks project. Individual work center operators see one thing from the CFO and the COO, but hear another from their manager. In the end, no one knows quite what their priorities should be.

If you’re still taking the agnostic approach, we can help. John Maher recently wrote a series of posts exploring the use of TOC, Lean, and Six Sigma in a demand-driven environment. In addition, we have a number of white papers that may prove useful such as our Kanban Series White Paper: Gaining Control: Exploring Push v. Pull Manufacturing. Finally, we also have a recorded presentation on YouTube explaining Theory of Constraints if you need a refresher on the concept.

And as always, I welcome your questions and comments. Either reach out to me directly or add them in the comment box below.

June 25, 2018

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