Fast Cycle Production

In manufacturing, few things remain constant and true. Little’s Law is one exception. The equation: Cycle time in days is equal to amount of Work In Process (WIP) in units, divided by the daily output in units is always true and meaningful. If, for example, you have a total of 1000 units throughout the work areas either being worked on, or sitting around, and your output is 100 units per day, your unit cycle time is 10 days long. It is also true, although the equation itself does not specifically point this out, that if you take action that results in a buildup of WIP, and that buildup results in increased cycle time, you have probably made a mistake in judgment.

Continuing on, it is also true that if your WIP remains constant and your output is decreased, your cycle time will go up. If manufacturing could maintain close control over the cycle time of its product, from the time it leaves the release point until it has completely finished, it could safely predict to customers what they could expect in terms of delivery. If the process were completely under control, and nothing bad ever happened, there would be no problem in meeting requirements, if those requirements were within manufacturing’s capabilities. Companies that are able to control their cycle time and meet their requirements are usually very successful manufacturers. They may not be successful in other critical areas, such as sales and planning, however. Sales, production control and executive management can make the best manufacturing processes inept, simply because they often have the power to do so, and just don’t operate from the proper production value set. They make decisions and promises that are destructive to their production processes in order to make their own measurements look favorable. Then, when manufacturing can’t make the promises come true, it is blamed for the failure.

Realistically, most companies have unpredictable manufacturing processes. Problems occur every day and some of those problems may have lasting negative effects. People don’t show up for work, machines break, vendor problems and an assortment of other problems, are all designed to lower the output capability of the factory. When the output capability goes down, and the WIP remains at constant or at increasing levels, the cycle time of the product goes up. When cycle time goes up, and product doesn’t get out of the door on time, the prognosis for success goes down dramatically. When manufacturing runs into problems and the demand still exceed its capabilities, it is sometimes possible to make up the delta through overtime or by bringing in extra workers. When this fails, and it often does, chaos reigns supreme! If a company is running very close to its maximum capabilities, and troubles hit, pushing it beyond its capability, the probability for disaster is high. When troubles start, it is very likely that questionable business decisions will be made that will make the problems worse.

The reason is that management starts using values that are designed to make things worse under the guise of customer service. Prioritize this order, push that order through, and release extra WIP to make up the difference. If they really knew what they were doing, they wouldn’t react that way. Little’s Law gives us a set of manufacturing values that always work. Built within the simple equation are rules that should never be broken. These are values, and as such, they guide us, no matter how tough it gets. In a business that relies on the happiness of its customers, which is probably true for a majority of businesses, the reliability of the product, and the timely delivery of that product, is essential, not only to success, but basic survival. In manufacturing management, it is important that you be consistent and predictable under a variety of conditions. Always fall back to those basic values and you will prevail. Take the short-term loss and fix the problems by addressing your detractors. Meanwhile, stick to the values contained within Little’s Law.

There are a number of ways that a company can react to production problems. The most common way is to go directly to the problem area and try to fix it as quickly as possible. That approach is just fine, except for the fact that the problem is probably limited to one or two departments, while the rest of manufacturing conducts business as usual. Consider this scenario: Department C has problems that have reduced its output rate by a third. Every other department has normal output capability. Engineering and maintenance are working feverishly to fix the problem, but the situation remains the same for a week. In the meantime, product is released to manufacturing at normal levels. Customers are unaware that problems exist that would threaten their delivery dates. Department A and B produce at their normal levels, but WIP is building up at Department C. The WIP that has ac*****ulated has gone beyond the delivery due dates. The customers are not notified of a problem until their product has met or exceeded the due dates. It could have been predicted that the product would bunch up at Department C. Little’s Law is clear on that point. If the input is the same, and the output goes down, WIP will most definitely build up at the bottleneck. It was known up front that C could not keep up the pace until their problem was fixed. That identifies them as the bottleneck. If that were known, why would you want to send them more than they could handle?

One could defend the logic by saying that it was hoped that the problem would be fixed quickly, so they took the gamble and continued with business as usual, but that logic is flawed. The truth is that the company took appropriate action as far as going after the problem is concerned. After that, they made errors that will probably create other problems both short and long term. They could have minimized the major problem by following the principles of TAKT scheduling: react quickly to problems or opportunities on the floor by adjusting the rate downward or upward on a daily basis. Little’s Law tells you how much you can raise or lower your output. Once product is released to the floor, it is essential that the company do everything in its power to keep it moving. If you know that it will not continue to move, and will build up somewhere, it is better to slow or stop the release of product. It is impossible to keep it moving if you continue to release product in timed quantities that exceed the capabilities of the bottleneck. Once the product queues up somewhere, bad things are probably going to happen to it. The product is probably going to be handled more often than it should, and increased handling very often results in quality problems. In addition, it can also be damaged while it is just sitting there waiting to be worked on. If product is damaged while it is idle, it is seldom reported because the perpetrator either doesn’t know it happened, or doesn’t want anyone to know that it happened because of his or her mistake. The effects of heat or humidity on dormant product can also cause quality problems on certain types of product. Continuing with the scenario, even when the problem is fixed, it will take Department C some time (total WIP divided by output rate) to work off the excess WIP, and the additional problems that I spoke of will crop up eventually, creating even more slow downs and further degrading the output rate. What was originally a machine problem will suddenly become Quality problems. Adding to that is the fact that customers will start to voice their discontent because they want their product. The more clout the customer has, or the louder it complains, the higher the chance that someone that deals directly with the customer will exert pressure on manufacturing to increase the priority of certain product. Then there is the pressure that is placed on manufacturing by senior management: Hurry up! Who’s to blame for this? We’re in serious trouble! This type of pressure begins the downward spiral. Suddenly, the department is overwhelmed with requests for the prioritizing of certain “Hot” orders. The effect of this is a further deterioration of the output capability of that department, because the simple act of prioritizing has devastating effects on output capability. The effect is equivalent to a downward spiral of output capability to the point that manufacturing is soon incapable of satisfying any of its clients. Meanwhile, back at the front, the other departments are still pouring salt on the wound, meaning they are still pumping new product into Department C at the original rate. They are doing their thing. It’s not their fault that Department C is in trouble. Basic corporate survival is at stake now. The best thing that other departments can do is to show that they are not the bad guys. “Cover Your Own Butt” becomes the battle cry. As a result, the problem grows. The downward spiral has begun, and it will continue until this company starts to work as a team, uses analysis instead of pressure, and establishes across the board discipline based on sound production values into its process.

Little’s law should have guided the original response to the problem. By applying a few basic manufacturing values, the problem would still have caused some pain, but the pain needn’t have lasting and increasing effects. Never release product in timed quantities that exceed the timed capability of any part of your manufacturing line. Work hard to make decisions that take into consideration the fact that you will lose capacity temporarily, but the product that you are able to produce will have the same cycle time it would have had without the problem. Work on the problem and accept your temporary limitations, but do not try to continue releasing product normally, as if you had no problem. Do not make decisions that increase cycle time. How does that apply to our scenario? For the short term, the proper response would have followed the same logic. The department reports its problem promptly through TAKT. Maintenance and engineering quickly and realistically determines the time line for the fix, and informs manufacturing and Customer Support when the problem will likely be fixed and production will be normal. Department C may or may not be the normal gate of the factory. A one third loss of output in Department C may equate to a much less factory output loss. This only means that the adjustment may, or may not be one third. Whatever the effect on the line is, it can be calculated through Little’s Law or determined through TAKT Management.

Managers should know what their capability is. Moving people around from one department to another may further minimize the loss of capacity. The point is that you are now in the mode of proper damage control. You are working to increase output, but you are trying to maintain a low cycle time. As soon as manufacturing determines the effect that the problem will have on output (33% for 1 week), the next step should be to alter the input rates to Department A to a level that is consistent with the known degraded net output capability of Department C. If the problem is fixed more quickly, it will easy to increase the output rate back to normal levels within an hour of the fix. It is much less difficult than trying to work off excess inventory for a week or more, or having to re-release product because of quality issues. While the fix is being worked on, the customers should be contacted to determine the proper priority of product release. Level with them and find out which orders are critical and which can be delayed. Customers usually react to this kind of honesty positively. If every customer wants their product now, which is unlikely if handled correctly, the answer is to treat them all equally. Prioritizing will only make things worse unless you have an X Factor of less than 5. While the problem exists, employees in other departments can take time to do other things, like training and PM’s. If there are extra people available, they could be used to make sure that when the product is ready to ship that there is someone there to process it. Once the fix happens, you use the overtime to catch up, not work off excess inventory that has been sitting around. The company may have lost ground on their monthly output, but they can probably make up the difference. The big difference is that the orders that are produced are shipped on time with no loss of quality, and they are now well positioned for productive output. When the problem ends, Department C is now well poised to quickly get back up to speed because there is no large buildup of WIP in their area. The problems that accompany WIP buildup aren’t there. The process is under control, and now the output increases as it should, and the cycle time remains constant or is improved. The original problem has still caused some pain, but the damage was minimized. The science of manufacturing was used to solve the problem, not the panic tactics of management.

Little’s Law was observed because the amount of WIP released was consistent with the required cycle time and output capability. If a company wants to increase their output, they don’t do it by increasing the amount released to the floor, when those output levels can’t be reached. They do it by finding ways of increasing the output of the slowest department. They find the bottleneck and work to increase its output. If they have done everything that they can and still can’t get their output to equal required levels, they may have to buy more equipment or hire more people. They don’t make promises that are right at the edge of their capabilities because they know that something bad will probably happen that may swing the momentum in the wrong direction. If there is to be growth, it must be accompanied with proper planning and execution. Little’s Law presents an equation on the surface, but says much more. It says that product cycle time is of prime importance. If you do anything to increase it you are probably making a mistake. If you reduce cycle time, you should do so by increasing your output capability, and adjusting the WIP to meet the demand. You do not reduce cycle time by simply lowering the amount of WIP on the floor.

Do not operate on the edge of your capabilities or accept orders that are at the edge of manufacturing’s capabilities. If you do, you are rolling dice that will eventually come up losers. There are times when releasing extra product to the floor would be advantageous, such as creating a temporary Strategic Kanban for equipment scheduled to go down for an extended period, but with the capability of catching up quickly, once up. This would allow the department behind them to work off the WIP in the Kanban while the equipment is being worked on, thus giving the appearance of no down time at all. The cycle time would go up, but the effect would be continuous output at required levels. Also, temporarily increasing the level of one or more buckets of a Dynaban because of a similar problem (You know what is coming, and you know how long the situation will exist) could also save you some pain. Proper management means preparing yourself for certain situations. Most importantly, you are following proper manufacturing values and observing the science of manufacturing. Many companies have strong product lines, and have buyers standing in line, but fail as manufacturers because they can’t meet the delivery dates. In racing to fill the demand, they resort to manufacturing values that only bring their capabilities down, instead of creating improvement. The orders exceed the capability of the factory, but they take them anyway. They are afraid that if they turn a customer away because they may lose them forever. They forget about, or fail to even care about, the science of manufacturing and start pressuring their employees to produce more than they are capable of producing. Management is under the gun to make more product and they pass that pressure on to the people that have to make miracles happen to save the company. Manufacturing gets the brunt of the pressure, and when you pressure your producers, you may get negatives that you didn’t bargain upon. Production Control and scheduling in most factories is operated as a stand-alone department. They usually have IE standards that guide them in their order acceptance criteria. Little’s Law means nothing to them, as it means nothing to Sales. Each of these departments base their operations on criteria created by other support departments, such as Engineering. If it were true that every department was marching to the same drummer in terms of understanding capabilities, there would be harmony between Sales, Production Control and Manufacturing. It is seldom true unless PC and Sales truly understand Manufacturing’s capabilities. For this to happen, the standards have to be created through historical TAKT data. TAKT scheduling is the only sure fire way of making sure that when a promise is made, there is a very high probability that the order will leave on time. It is the only way that the bottleneck issues will be addressed because the bottleneck is right out there for all to identify. You release according to the capabilities of the bottleneck, and if that isn’t enough to meet demand, you go out there and increase your capabilities.

When you have accomplished that and have demonstrated that the increased capability is not a fluke, you start releasing more. Little’s Law is never violated, and is used to calculate needs. Excess WIP doesn’t create new problems and pressure is put where it should be put - on fixing the problems. It is oriented towards increasing capabilities. So, what does the LL equation say? It says, quite simply that, in order to achieve an acceptable product cycle time, a company MUST balance the amount of product released to the floor with the capabilities of manufacturing. It says that if you increase the amount released, you must have an increase in the amount produced. If you don’t, it says that you will increase your product cycle time. If you increase cycle time you have probably made an error in judgment. If you decrease cycle time and increase output, you have something to be proud of. It is all so simple, yet so easy to overlook. Little’s Law has been around for a long time. For a few years, it was deemed important just to reduce the amount of WIP on the floor. A lot of people were promoted or given bonuses because they reduced inventory by thousands or millions of dollars. All they did was reduce the amount of WIP to a level that was consistent with their output, if they were lucky. If they weren’t, they took too much work off the floor. There is more than one part of the equation there are three, with Cycle time being the prime number.