On the Value of Time in...

In my last post, I talked about the value of time in manufacturing, focusing on cyclic or repeatable times. However, the bigger problems are often non-cyclic or fluctuating times. The main difference is that non-cyclic work is a fluctuation, and it causes all kinds of other waste, from excess inventory to additional waiting times. On the other hand, depending on how often the fluctuation happens, there may not be so much benefit in reducing its duration. Read on…

Reducing Fluctuations of Cyclic Work

As mentioned above, there is benefit in improving the duration of non-cyclic work and other fluctuations. Here, we have to distinguish a bit where we save the time in the non-cyclic work. Changeovers especially have some significant potential. But first, let’s look at fluctuations as part of the normal cyclic work.

Labor Cost

Reducing these non-cyclic fluctuations also reduces labor cost. However, since it is a fluctuation, it is much more likely that the worker is a (temporary) bottleneck, and that the time saved is much more likely to affect all other workers on the line. Hence, the potential for labor cost saving is often bigger than with a reduction in cyclic work, depending on the frequency and the size of the fluctuation. Additionally, a problem may often need the help of additional workers like team leaders or maintenance. Not having a problem saves time of these support functions too! (Again with the caveat that the freed-up time should be used and not end up as wasted waiting time.) Additionally, such problems are often the source of frustration and firefighting, whereas cyclic time is often easier for the operators (albeit some people LOVE firefighting).

Efficiency and Quality

Similar to labor cost, reduction of fluctuations has an outsized effect on efficiency and quality. A fluctuation is usually an unforeseen event or a problem, and the operator may not have a lot of experience with this type of problem. Hence, the operator may struggle to resolve the fluctuation, leading to a lower efficiency and to potential quality problems.

Capital Invest

As with labor cost, capital invest also often benefits more from reducing fluctuations, as these fluctuations are often the temporary bottleneck. Hence, by reducing these fluctuations the entire system benefits by being able to produce more.

Lead Time

Reducing cyclic work will reduce the lead time a little bit. However, the effect is small. Reducing fluctuations, on the other hand, has the additional benefit of making your entire system more reliable, and you are more likely to keep the deadlines that you promised your customer.  If your lead time is on average ten days, but fluctuates by up to 100%, you have to plan with twenty days delivery for your customer, while having ten days worth of stock sitting around (or the customer gets its part earlier than planned). Reducing these fluctuations will have a direct impact on the consistency and planability of the lead time.

Buffer Inventory

In general, there are three ways to decouple fluctuations: inventory, capacity, and time. Time is the easiest one; you let the customer wait. I already mentioned this above with the lead time. Capacity is ramping your production capacity up and down to meet demand, but this is usually more for long-term fluctuations. Short-term fluctuations are often best decoupled using inventory. Hence, fluctuations are the main cause of inventory, and its associated cost. Therefore, reducing the fluctuations will allow you to reduce your inventory.

Non-Cyclic Fluctuations Affecting Lot Size

Normally, reducing fluctuations will also reduce the buffer inventory. In other words, less frequent breakdowns and shorter duration will be better. Hence, in general, fewer fluctuations are better, as it allows you to have less inventory.

However, there are certain fluctuations where INCREASING the number of fluctuations will REDUCE inventory. In generally, these are fluctuations that allow a reduction of the lot size.

The two most important “fluctuations” that allow you to reduce the lot size are changeovers and shipping quantities/frequency. Changeovers are a type of fluctuation. The time between changeovers needs to be covered with inventory. You need to have enough products of one type to cover the demand until you produce that type again. Hence, very different from other fluctuations, more frequent changeovers (fluctuation) will REDUCE inventory since it allows you to reduce the lot size. From a theoretical point of view, more frequent and shorter changeovers REDUCE fluctuations. Because of this unusual behavior, changeover optimization (SMED) is such a popular tool.

The second common example is shipping frequency or quantity. Here, too, a more frequent action overall reduces fluctuations. The more frequently you ship, the smaller your lot size, the smaller your inventory. Toyota is known for having a strong preference for more frequent but smaller deliveries to reduce inventory. In Toyota City, most suppliers are within a two-hour radius of the plants and delivery is very frequent.

Overall, reducing fluctuations is often more worthwhile than simply reducing the duration of cyclic work, albeit the details depend heavily on your situation. Now, go out, reduce your non-cyclic fluctuations (except for changeovers or transports, these you should increase), and organize your industry!