January 2003 | Commentary | Viewpoint

Cycle Time Reduction Gives Life to Productivity

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Manufacturers that can't deliver on time won't keep their customers happy—or keep them at all. This reality is all the more reason why small and mid-sized manufacturers need to get their products into customers' hands as quickly as possible. Often, however, bottlenecks in the production process make this impossible. The following scenarios of lost productivity should be familiar to anyone managing manufacturing operations.

  • The company can't meet delivery dates, no matter how much it tinkers with lead times.
  • Operators always have a backlog, regardless of the production schedule.
  • One rush order from a major customer throws the whole week's production schedule out of kilter.
  • The finished product warehouse is bulging, in part with items customers no longer want.

Each scenario takes a bite out of a company's productivity. The sum of these productivity losses adds up to a major waste of resources that could otherwise be used to improve customer service, increase revenues, or enhance the company's competitiveness.

CTR to the Rescue

One management tool that has proven successful at eliminating waste and improving performance for small and mid-sized manufacturers is Cycle Time Reduction (CTR). CTR consists of speeding a company's order-to-delivery time to get product into the customer's hands expeditiously, at the lowest possible cost. It's a way of looking critically at a company's business processes—from order entry to scheduling to inventory management and shipping—to find opportunities to squeeze more efficiency out of them.

Successful CTR typically produces manufacturing improvements that can easily be quantified:

  • 60 to 90 percent reduction in lead time.
  • 30 to 50 percent reduction in manufacturing floor space.
  • 40 to 80 percent reduction in total quality cost.
  • 50 to 90 percent reduction in setup times and lot sizes.
  • 95 to 100 percent of promises met on every shift.

Days of Delay

There may be several causes of a manufacturer's long order-to-delivery cycle. Often a problem early in the cycle triggers other problems down the line, snowballing into days of delay.

Here are four common factors that can stretch the order-to-delivery cycle:

1. Too many non-value-added activities. The time an order is actually being worked on in most companies averages less than five percent of the order-to-delivery cycle. Inventory thus spends 95 percent of the time between order entry and shipment waiting for the next step in the process. Complicated paperwork and long waits during the work process can add days to the cycle, but no value to the product.

2. Measuring the wrong parameters. Many times companies measure their performance against criteria such as equipment utilization, productivity, or order completion date and think they're doing fine if they get high scores. But a company can excel by these criteria and still lose out to the competition if it can't get its product to the customer when promised. Employees perform to what's being measured.

3. Capacity management. Balancing customer demand and available capacity is essential to success. This is not to say a company should refuse orders, but rather that it realizes it must meet delivery commitments that satisfy customers.

4. Corporate culture. Employee attitudes toward work can have an adverse effect on performance.

At one manufacturer, for example, some shop floor personnel developed the habit of never emptying their bins by the end of the day. No matter how much time they were given, they were consistently behind. They confessed that having work waiting for them the next morning increased their sense of job security. Not only was the manufacturer doing a sloppy job of managing production, it also failed to communicate corporate values and objectives to its employees.

Just in Case Inventory

The way a manufacturer manages its inventory can be a key indicator of its efficiency and a prime target for analysis when looking for factors that contribute to poor delivery performance. At many manufacturers, inventory—whether raw material, work in process, or finished goods—is a buffer against inefficient planning, long setup times, poor product quality, and inability to deliver on time. Companies keep inventory around "just in case."

But excess inventory indicates that the company is not doing a good job of matching production to current customer demand. And it ties up cash. Reducing inventory is an effective way to expose hidden production management problems.

There is no one-size-fits-all answer to the problem of long cycle times. A company has to identify the bottlenecks specific to its operations, devise solutions, set realistic goals, and develop a plan to achieve them. There are, however, some fundamental principles underlying successful CTR:

Make only what the customer wants when the customer wants it. That means letting orders drive the manufacturing schedule. To take it to an extreme, what a company shipped yesterday is what it should make today, because that's what its customers want. Lot sizes will shrink, because a company won't be ganging jobs or stockpiling for future orders.

Reduce inventory throughout the cycle, but especially work in process and finished goods inventories. That means your suppliers have to be able to meet your on-time delivery requirements so you have just enough of what you need when you need it. You have to schedule production to work to capacity without permitting backlogs.

Set goals and measure performance against benchmarks that matter to the customer. This might include on-time delivery, number of returns, and price compared to the competition. The goals should be based not on your company's past performance, but on what the best companies in the industry are achieving, because those are your competitors.

Cycle time reduction gives manufacturers a way to identify and eliminate the causes of the scenarios mentioned earlier by giving it a framework for:

  • Balancing orders with capacity so they don't promise what they can't deliver.
  • Eliminating backlogs in work in process, so they can process every order expeditiously
  • Basing production on current demand, so product doesn't pile up in the warehouse waiting for orders.
  • Creating an environment where management and employees work toward common objectives.

The Voice of the Employees

An objective, outside analysis by someone experienced in manufacturing management, who can work with management to analyze the company's processes and develop goals and a plan, can ensure the success of a CTR initiative.

It is also important to take into consideration the voice of the employees—listening to their suggestions, communicating them to management, and identifying and allaying their concerns about change.

Small and mid-sized manufacturers in the current competitive and increasingly global marketplace are seeking ways to differentiate themselves from their competitors. CTR is an effective, proven way to give a manufacturer a competitive edge in price, quality, lead time, and on-time delivery.

Cycle time reduction is an ongoing process that takes strong management commitment. Change can be difficult, but manufacturers that keep doing the same things will keep getting the same results—for better or for worse.

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