It's a rare plant that operates around the
clock. You decide to operate one, two or three shifts, five or six
When we're running we aren't running! The
internal circles represent cholesterol blocking the pipes. They
take time to perform but no salable output is created.
At the bottom of the outside ring is obsolete
and slow moving inventory. Here is where the required capacity
was deliberately, or perhaps in error, inflated to keep the
Now a critical thought. Does it cost more to
operate a piece of equipment or keep it idle? The answer, it costs
to operate a machine. It costs zero to leave it idle. Don't
confuse sunk costs with operating costs. The cost of the machine
was paid or committed to when you bought the machine. It won't
cost you one penny more if you leave it idle.
But to operate it you must buy raw materials,
people, maintain it, pay for energy, etc. All this is incremental
out of pocket.
Based on this you should have a program to keep
every machine idle. Run them just enough to meet every customer
demand, no more, no less. You should do this even if it means idle
people. Direct labor is a small fraction of your total business
costs, certainly compared to purchases. Why spend lots for
material to save a small amount of direct labor? This is foolhardy
to say the least. And cluttering up your machine capacity just to
keep people busy is one way to create a false bottleneck.
The other items on the two outer rings are self
explanatory. The only important thing to remember is these are all
detracting from your ability to make salable product. Shrink these
circles and your ability to produce goes up, with the same
You need the middle circle, labeled recovery
capacity, to recover from the slings and arrows of outrageous
fortune you put in. You might need to break into a run to replace
scrap, with consequent loss of production. Or you have to produce
something in a hurry on a non productive piece of equipment.
Nonstable demand means peaks and valleys,
feast or famine. Bottlenecks can be created when the peaks occur,
to disappear during the valleys. Level out the demand if you can
(reference my talk in the 1992 Conference Proceedings, "A
World Class Manufacturing Business Demands World-Class Sales and
Marketing") and you will reduce the peaks, stopping
bottlenecks from being caused.
You need idle capacity today to grow the
business tomorrow. Hence the fifth circle labeled Growth.
The small circle in the middle, labeled actual
output, is what is trying to make money for the business. It
is what the plant or machine could be operating at if all the
outer rings were shrunk to zero. This is obviously impossible but
does suggest that any shrinking of the outer rings frees up time
to produce, increasing salable capacity with little or no capital
Involve Your Employees
Few companies have the data to draw Figure 1.
They have pieces of it, but nowhere is it pulled together into one
composite picture. And these same companies complain about
bottlenecks, justify buying machinery and tooling, hire
additional people but they don't know how well their existing
productive resources are performing.
The best way to develop Figure 1 is to get the
operators to create a 24-hour log of what is happening to a
machine or process. Figure 2 is an example of such a log. It
identifies when the machine is adding value and codes the reasons
why time was lost. This won't pick up the time lost making scrap
that is identified at a later operation, warranty returns,
obsolete and slow moving inventory, etc., but it will give you a
start on identifying the time lost in the plant. You will have to
back into these other numbers to get a complete picture.
stay current on bullet-proofed manufacturing solutions, subscribe to
ezine, "The Business Basics and Best Practices Bulletin."
Simply fill in the below form and click on the subscribe button.
also send you our free
Special Report, "Five Change
Initiatives for Personal and Company Success."
personal information will never
be disclosed to any third party.
leaders have a responsibility to educate and train their team
members. Help for developing a self-directed, World Class
Manufacturing training program for your people is just a click
are welcomed to print and share this bulletin with your
manufacturing teams, peers, suppliers and upper management ...
better yet, have them signup for their own copy at:
the escalating spam-wars, it's also a good idea to WHITELIST
our bulletin mailing domain via your filtering software or
This will help guarantee that your bulletin is never deleted
Knowledge you’ll not find at offsite
seminars nor in the books at Amazon.com
Lean Manufacturing - Balanced Scorecard
ISO 9000:2000 - Strategic Planning - Supply Chain
Management - MRP Vs Lean Exercises - Kaizen Blitz
Lean Six Sigma - Value Stream Mapping
All at one Website: Good
Six Sigma Training Thinking
Out of the Box
Supply Chain Inventory Management Total
Quality Management Principles
Manufacturing Implementation Lean