Shipulski On Design

Posts Tagged ‘Seven Wastes’

I hear it’s a good idea to move manufacturing work back to the US.

Before getting into what it would take to move manufacturing work back to the US, I think it’s important to understand why manufacturing companies moved their work out of the US.  Simply put, companies moved their work out of the US because their accounting systems told them they would make more money if they made their products in countries with lower labor costs. And now that labor costs have increased in these no longer “low-cost countries”, those same accounting systems think there’s more money to be made by bringing manufacturing back to the US.

At a low level of abstraction, manufacturing, as a word, is about making discrete parts like gears, fenders, and tires using machines like gear shapers, stamping machines, and injection molding machines.  The cost of manufacturing the parts is defined by the cost of the raw material, the cost of the machines, the cost of energy to power the machines, the cost of the factory, and the cost of the people to run the machines. And then there’s assembly, which, as a word, is about putting those discrete parts together to make a higher-level product.  Where manufacturing makes the gears, fenders, and tires, assembly puts them together to make a car.  And the cost of assembly is defined by the cost of the factory, the cost of fixtures, and the cost of the people to assemble the parts into the product.  And the cost of the finished product is the sum of the cost of making the parts (manufacturing) and the cost of putting them together (assembly).

It seems pretty straightforward to make more money by moving the manufacturing of discrete parts back to the US.  All that has to happen is to find some empty factory space, buy new machines, land them in the factory, hire the people to run the machines, train them, source the raw material, hire the manufacturing experts to reinvent/automate the manufacturing process to reduce cycle time and reduce labor time and then give them six months to a year to do that deep manufacturing work.  That’s quite a list because there’s little factory space available that’s ready to receive machines, the machines cost money, there are few people available to do manufacturing work, the cost to train them is high (and it takes time and there are no trained trainers).  But the real hurdles are the deep work required to reinvent/automate the process and the lack of manufacturing experts to do that work.  The question you should ask is – Why does the manufacturing process have to be reinvented/automated?

There’s a dirty little secret baked into the accounting systems’ calculations.  The cost accounting says there can be no increased profit without reducing the time to make the parts and reducing the labor needed to make them.  If the work is moved from country A to country B and the costs (cycle time, labor hours, labor rate) remain constant, the profit remains constant.  Simply moving from country A to country B does nothing.  Without the deep manufacturing work, profits don’t increase.  And if your country doesn’t have the people with the right expertise, that deep manufacturing work cannot happen.

And the picture is similar for moving assembly work back to the US.  All that has to happen is to find empty factory space, hire and train people to do the assembly work, reroute the supply chains to the new factory, redesign the product so it can be assembled with an automated assembly line, hire/train the people to redesign the product so it can be assembled in an automated way, design the new automated assembly process, build it, test it, hire/train the automated assembly experts to do that work, hire the people to support and run the automated assembly line, and pay for the multi-million-dollar automated assembly line.  And the problems are similar.  There’s not a lot of world-class factory space, there are few people available to run the automated assembly line, and the cost of the automated assembly line is significant.  But the real problems are the lack of experts to redesign the product for automated assembly and the lack of expertise to design, build, and validate the assembly line.  And here are the questions you should ask – Why do we need to automate the assembly process and why does the product have to be redesigned to do that?

It’s that dirty little secret rearing its ugly head again.  The cost accounting says there can be no increased profit without reducing the labor to assemble the parts.  make them.  If the work is moved from country A to country B and the assembly costs (labor hours, labor rate) remain constant, the profit remains constant.  Simply moving from country A to country B does nothing.  Without deep design work (design for automated assembly) and ultra-deep automated assembly work, profits don’t increase.  And if your country doesn’t have the people with the right expertise, that deep design and automated assembly work cannot happen.

If your company doesn’t have the time, money, and capability to reinvent/automate manufacturing processes, it’s a bad idea to move manufacturing work back to the US.  It simply won’t work.  Instead, find experts who can help you develop/secure the capability to reinvent/automate manufacturing processes to reduce the cost of manufacturing.

If your company doesn’t have the time, money, and capability to design products for automated assembly and to design, build, and validated automated assembly systems, it’s a bad idea to move assembly work back to the US. It, too, simply won’t work.  Instead, partner with experts who know how to do that work so you can reduce the cost of assembly.

With inflation on the rise and sales on the decline, the time to reduce costs is now.

But before you can design out the cost you’ve got to know where it is.  And the best way to do that is to create a Pareto chart that defines product cost for each subassembly, with the highest cost subassemblies on the left and the lowest cost on the right.  Here’s a pro tip – Ignore the subassemblies on the right.

Use your costed Bill of Materials (BOMs) to create the Paretos.  You’ll be told that the BOMs are wrong (and they are), but they are right enough to learn where the cost is.

For each of the highest-cost subassemblies, create a lower-level Pareto chat that sorts the cost of each piece-part from highest to lowest.  The pro tip applies here, too – Ignore the parts on the right.

Because the design community designed in the cost, they are the ones who must design it out.  And to help them prioritize the work, they should be the ones who create the Pareto charts from the BOMs.  They won’t like this idea, but tell them they are the only ones who can secure the company’s future profits and buy them lots of pizza.

And when someone demands you reduce labor costs, don’t fall for it.  Labor cost is about 5% of the product cost, so reducing it by half doesn’t get you much.  Instead, make a Pareto chart of part count by subassembly.  Focus the design effort on reducing the part count of subassemblies on the left.  Pro tip – Ignore the subassemblies on the right.  The labor time to assemble parts that you design out is zero, so when demand returns, you’ll be able to pump out more products without growing the footprint of the factory.  But, more importantly, the cost of the parts you design out is also zero.  Designing out the parts is the best way to reduce product costs.

Pro tip – Set a cost reduction goal of 35%.  And when they complain, increase it to 40%.

In parallel to the design work to reduce part count and costs, design the test fixtures and test protocols you’ll use to make sure the new, lower-cost design outperforms the existing design.  Certainly, with fewer parts, the new one will be more reliable.  Pro tip – As soon as you can, test the existing design using the new protocols because the only way to know if the new one is better is to measure it against the test results of the old one.

And here’s the last pro tip – Start now.

Image credit — aisletwentytwo

If you want to grow the top line right now, create a hard constraint – the product cannot change – and force the team to look for growth outside the product. Since all the easy changes to the product have been made, without a breakthrough the small improvements bring diminishing returns. There’s nothing left here.  Make them look elsewhere.

If you want to grow the top line without changing the product, make it easier for customers to buy the products you already have.

If you want to make it easier for customers to buy what you have, eliminate all things that make buying difficult.  Though this sounds obvious and trivial, it’s neither. It’s exceptionally difficult to see the waste in your processes from the customers’ perspective.  The blackbelts know how to eliminate waste from the company’s perspective, but they’ve not been taught to see waste from the customers’ perspective.  Don’t believe me?  Look at the last three improvements you made to the customers’ buying process and ask yourself who benefitted from those changes.  Odds are, the changes you made reduced the number of people you need to process the transactions by pushing the work back into the customers’ laps. This is the opposite of making it easier for your customers to buy.

Have you ever run a project to make it easier for customers to buy from you?

If you want to make it easier for customers to buy the products you have, pretend you are a customer and map their buying process. What you’ll likely learn is that it’s not easy to buy from you.

How can you make it easier for the customer to choose the right product to buy? Please don’t confuse this with eliminating the knowledgeable people who talk on the phone with customers. And, fight the urge to display all your products all at once.  Minimize their choices, don’t maximize them.

How can you make it easier for customers to buy what they bought last time?  A hint: when an existing customer hits your website, the first thing they should see is what they bought last time.  Or, maybe, a big button that says – click here to buy [whatever they bought last time].  This, of course, assumes you can recognize them and can quickly match them to their buying history.

How can you make it easier for customers to pay for your product? Here’s a rule to live by: if they don’t pay, you don’t sell. And here’s another: you get no partial credit when a customer almost pays.

As you make these improvements, customers will buy more.  You can use the incremental profits to fund the breakthrough work to obsolete your best products.

“Shopping Cart” by edenpictures is licensed under CC BY 2.0

There are two domains – what is and what isn’t. We’re most comfortable in what is and we don’t know much about what isn’t. Neither domain is best and you can’t have one without the other. Sometimes it’s best to swim in what is and other times it’s better to splash around in what isn’t.  Though we want them, there are no hard and fast rules when to swim and when to splash.

Improvement lives in the domain of what is. If you’re running a Six Sigma project, a lean project or a continuous improvement program you’re knee deep in what is. Measure, analyze, improve, and control what is. Walk out to the production floor, count the machines, people and defects, measure the cycle time and eliminate the wasteful activities. Define the current state and continually (and incrementally) improve what is. Clear, unambiguous, measurable, analytical, rational.

The close cousins creativity and innovation live in the domain of what isn’t. They don’t see what is, they only see gaps, gulfs and gullies. They are drawn to the black hole of what’s missing. They define things in terms of difference.  They care about the negative, not the image. They live in the Bizarro world where strength is weakness and far less is better than less. Unclear, ambiguous, intuitive, irrational.

What is – productivity, utilization, standard work. What isn’t – imagination, unstructured time, daydreaming. Predictable – what is. Unknowable – what isn’t.

In the world of what is, it’s best to hire for experience.  What worked last time will work this time. The knowledge of the past is all powerful.  In the world of what isn’t, it’s best to hire young people that know more than you do. They know the latest technology you’ve never heard of and they know its limitations.

Improving what is pays the bills while creating what isn’t fumbles to find the future. But when what is runs out of gas, what isn’t rides to the rescue and refuels. Neither domain is better, and neither can survive without the other.

The magic question – what’s the best way to allocate resources between the domains? The unsatisfying answer – it depends. And the sextant to navigate the dependencies – good judgement.

Image credit – JD Hancock

“Hyper” for Lean — Lean Directions, SME

Hypertherm’s lean journey began in 1997 as a natural and enthusiastic extension of its long history of continuous improvement. Founded in 1968, the company’s “lean vision” includes training, application of 5S components, visual factory audits, single and mixed-model flow lines and the engagement of its product design functions.

A recent Hypertherm success is found in the company’s HyPerformance series of plasma arc, metalcutting systems. The company’s product design community designed a product line with Read the rest of this entry »