Chapter 1 The Manufacturing Plant as a Business System

Transcription

1 Chapter 1 The Manufacturing Plant as a Business System We tend to focus on snapshots of isolated parts of the system. And wonder why our deepest problems never get solved. Peter Senge The Scene Beta International is a successful manufacturing company with multiple, diverse divisions and operations across the world. As with all manufacturing companies, Beta is under continuing and often intense pressure from its competitors, particularly those in lower labor cost countries. As such, the company has an ongoing effort to improve productivity and reduce costs. Beta s leadership found long ago that cost cutting may be necessary. But, if the market crashes or technological change makes its products obsolete, that cost cutting fails far more often than not to actually deliver the anticipated savings to the bottom line. They have learned that costs are a consequence of Beta s practices and processes, and therefore, have given more attention to those in recent years. If you get the right practices in place, costs come down naturally and are sustainable. Notwithstanding this, several of Beta s plants continue to struggle with achieving the desired improvements in productivity and unit costs. This is the story of how the plants have used one particular tool to help them make improvements, often step changes, in their performance. Chapter 1 The Manufacturing Plant as a Business System 3

2 A Business System First, a manufacturing plant should be thought of as a complex business system and management and shop floor must understand the events or defects, anticipated or otherwise, occurring that result in the loss of system capability. In a perfect world, a plant would run perfectly all the time. We d have perfect quality, maximum sustainable production rates when we need them, minimum inventory while still meeting customer demand, no unplanned downtime and instantaneous product changeovers. Of course, none of us has ever seen that perfect world. With that in mind, we should understand those events or defects that cause us to lose capability and ask if they are acceptable to the business or not. At times, they will be perfectly acceptable, for example, rapid product changeovers, capital project upgrades, planned maintenance, and so on. At other times they will not. We must understand the causes of lost production capability, poor quality, excess costs, or other problems and then take appropriate action to minimize them. How so? One of the more common methods for identifying important problems is to measure overall equipment effectiveness (OEE) and particularly measure and manage the losses from ideal that go with this measure. The losses from ideal are typically due to planned and unplanned downtime, rate losses, quality losses, changeover losses and other losses, some unique to the business. These are then used to select and apply the appropriate improvement tool to reduce the losses being incurred. However, suppose we re not measuring OEE or its equivalent, what then? Or suppose we don t have confidence in the numbers they are guessed at or fudged in a monthly report that we don t use, what then? Or suppose we d like to understand the system level interactions and be able to make better decisions on that basis. While it s an essential tool in a manufacturing plant, OEE will not provide all the details and/or causes of production losses at a system level. The Analysis Methodology Suppose costs are too high. How do we know where to focus our resources to lower costs? Or perhaps there are too many resources with their associated costs, so expenses are cut with the expectation that costs will come down, but production capability suffers instead. Things are often not what they seem to be. For example, when maintenance costs are too high, companies often cut them to their detriment. Rather than cut maintenance costs, it s important to understand the source of the defects that are resulting in the failures and the subsequent need for maintenance and its attendant costs. Simply cutting maintenance costs in a plant where reactive maintenance is pervasive will reduce the amount of resources available to keep the plant running and the plant will be down more. Other examples could be cited, but this illustrates the point. 4 Where Do We Start Our Improvement Program?

3 The following step-by-step methodology is one that any industrial operation can use and provides a process for understanding where the defects are (i.e., those things that cause us to lose production capability or incur additional costs) so we can eliminate them from our business system and achieve better performance. The steps are: 1. Assemble a cross-functional team from each production area, or from a single area if simply doing that one area, or even a line or machine within an area (e.g., a packaging line). If doing a plantwide analysis, there also should be a support function team. Each cross-functional team typically consists of a senior operator, an operating supervisor, a senior maintenance technician, a maintenance supervisor and the area engineer. It may also include others, such as a vendor and/or a process engineer for certain critical equipment. Team members should be very familiar with the equipment and processes relative to their role in the process. For plant-wide reviews, the support team is typically composed of a stores supervisor, a utilities supervisor, a human resources and/or training manager, a purchasing supervisor and a capital projects engineer. Others may be added as appropriate. 2. The team(s) creates a simple block diagram of the production process or line under review. This can be applied at a plant-wide level by using teams from each area, at a production line level, or even at a complex machine level, like a packaging line. 3. Identify the heart of the analysis process. It is a failure in the business system, production line, or equipment, defined as anything that results in loss of quality production output, or extraordinary costs. Some examples of causes of lost production include raw material quantity or quality, production delays during shift handover, operator breaks that result in machinery stops, short stops, process rate losses (e.g., operating at less than maximum sustainable rate for a given product), production planning disruptions, product changeovers, startup and shutdown delays, quality, yield and recycle losses, and equipment breakdowns. Examples of extraordinary costs might be using an excess catalyst in a chemical process, excess energy in a plant, or having in-line spares that break down frequently (you don t lose any production, but the repair costs for regularly fixing the spare are huge). There are likely other examples that are specific to any given site or process, but the point is anytime you are operating at less than perfect performance, no matter the reason, it is defined as a functional failure of the business system. The impact of these failures on the business are then analyzed and business decisions are made regarding whether or not they are acceptable and if not, what should be done. Chapter 1 The Manufacturing Plant as a Business System 5

4 4. The cross-functional team(s) reviews each step of the production process, identifying failures in the production system at each step of the production process. If a plant-wide review is being done, then each area team does its analysis independently and presents its findings to the other teams at the end of the day. System level issues of area interactions are then considered. 5. Support functions are reviewed for failures in the business system (e.g., poor quality or quantity spares, insufficient utilities, inadequate training and development, poor capital project practices, etc.). 6. During the review, the value of each business level production failure is analyzed and its value is estimated or calculated using these questions: a. What is your biggest failure in this part of the production process? b. How often does that happen (e.g., daily, once a week, once a month, once a year)? c. What is the consequence of the failure in terms of lost production (e.g., tons, units, hours, etc.) or in terms of extraordinary costs (e.g., energy, catalyst, overtime, etc.)? d. What is that worth, for each event? What s that worth per year? e. What s your next biggest failure in this part of the production process? These questions are repeated until all the failure modes known to the group have been identified and each one s value is calculated. The process for doing an entire plant is shown in Figures 1 and 2. More detailed block diagrams are developed for each process (A, B and C) by the cross-functional teams in each area doing the analysis. 6 Where Do We Start Our Improvement Program?

5 Business Level FMEA Model (Failure = Anything that results in loss of quality production; or extraordinary costs) Cross-Functional Team* Cross-Functional Team* Cross-Functional Team* Raw Matl Delay A B C Times Delay Times Product A Analyze each business or operational functional failure: 1. Its Freq. x Value = $$ 2. Its Freq. x Value = $$ 3. Etc. B Analyze each business or operational functional failure: 1. Freq. x Value = $$ 2. Freq. x Value = $$ 3. Etc. C Analyze each business or operational functional failure: 1. Freq. x Value = $$ 2. Freq. x Value = $$ 3. Etc. Support Team *Cross-Functional Team, e.g.: Ops Supervisor Sr. Operator Mtnce Supervisor Sr. Technician Engineer Vendor Figure 1: Model for performing a Business Level Failure Mode and Effects Analysis Business Level FMEA Questions Major Causes of Production Losses? Frequency of Occurrence of Each? Typical Consequence in Units or $? Any Extraordinary Repair or Operating Costs? Preliminary View of Causes of These Failures? Preliminary Priorities for Action? Figure 2: Business Level FMEA questions Chapter 1 The Manufacturing Plant as a Business System 7

6 As an example, let s suppose in step one of the production process that supplier quality is identified as a major problem. That is, once a month the supplier provides raw material of substandard quality and/or insufficient quantity. This subsequently requires adjustment of the process, resulting in lower yields or output. Suppose we calculate that this results in a total loss equivalent of 10 tons of product (or 1,000 units or other appropriate unit), with each ton having a gross profit of $1,000. This would result in a loss of $120,000 per year. Further, suppose other disruptions for accommodating this poor raw material are valued at $2,500 per event (lost productivity of people, plant reconfiguration, etc.) Overall, the value of this failure in the system would be estimated at $150,000 per year, a fairly substantial sum. So, continue with analyzing the process until all major losses are identified in each production area or in each step of the production process, including those attributable to the support functions. Then, prioritize those losses that provide the greatest opportunity for improvement at the lowest investment cost, using the model shown in Figure 3. In doing so, the appropriate tools for eliminating or minimizing these losses can be selected. Note that when estimating these values, do not try to solve any of the problems identified. First determine values and then set priorities based on the ease of solution for each one. After analyzing the business level failures and placing a nominal value on them, plot them on a chart similar to Figure 3. Tasks that are easy to do and have the most value (shown in quadrant 1 in Figure 3) get done first, typically using existing operating budgets. Tasks that have less value, but are still easy to do, (shown in quadrant 2) get done next, likewise using current operating budgets. Tasks that have high value, but are difficult to do, (shown in quadrant 3) are done next. For example, changing a major technical process or getting major capital funding would likely be in quadrant 3. These are typically projects requiring additional funding and staffing, but the return is such that they are normally approved based on the business case developed. The last category, tasks that have low value and are difficult to do (shown in quadrant 4) may not get done at all, at least not in this round of improvements. At Beta s Wheelwright plant, task number 18 in Figure 3 requires a major design change to the process, including considerable capital. It provides high value, but would be difficult to do. On the other hand, task 4 also provides high value, but is relatively easy to do. This has to do with getting operators trained to follow a particular procedure, one they had not been doing because of a lack of training and understanding of its importance. 8 Where Do We Start Our Improvement Program?

7 Decision-Making Model V A L U E Difficulty (cost, time, complexity) Figure 3: Decision-making model A word of caution about identifying preliminary or potential causes when doing the analysis. Very often, the team will want to begin solving the problem after suggesting some potential causes. This should not be done at this time. The purpose of this question is to get people thinking about potential causes for future use, not to solve the problem. Problem solving begins after plotting the opportunities in the decision-making model. Then, those problems that provide the highest return for the least effort given the available resources can be selected, along with the right tool for solving the problem. Too often, people want to immediately begin problem solving. Hold that until after the analysis is completed. It s also important to point out that this process is imprecise and will require validation of initial findings. At times, it will require a change to the plot shown in Figure 3 as the plan develops and a better understanding of the costs and value of various options for improvement is realized. One of the key benefits, however, is that people are working as a team, using a common strategy that s focused on the success of the production line it has a business system focus. Furthermore, the team is working together to develop an action plan to improve the overall system performance. That in itself is invaluable. Chapter 1 The Manufacturing Plant as a Business System 9

8 Typical Results Beta International has found some fairly common problems at almost all its plants when doing a Business Level FMEA. Case studies, provided later in this book, illustrate these problems, including: Lack of understanding of the pacing or limiting unit for setting production requirements. This lack of understanding can create huge variations in each production area when there is a failure to communicate problems across the site. Lack of understanding of the impact of upstream and downstream area performance on each other and on the plant s overall performance. See previous comment. Changeover time and setup/startup problems. Production stops for breaks and lunch in discrete parts and batch plants. Raw material problems, such as poor quality and/or insufficient quantity. Erratic production planning, primarily driven by erratic sales forecasts. Operator inexperience and lack of training resulting in production inconsistencies and equipment failures. Equipment failures. Spare parts unavailability or poor quality. Design/layout features making maintenance and/or product changeovers difficult. Inadequate lubrication resulting in machinery failures, or lubrication delegated to the operators without adequate standards or training. Mechanics in need of training on critical equipment and/or precision skills. It is interesting to note that most of the production losses and additional costs are not due to maintenance downtime or maintenance practices, but rather to systemic or operational issues. In fact, this is quite consistent with data from various plants OEE measurements. When analyzing the losses from ideal production, it is typically found that some 67% of production losses have nothing to do with the equipment, with only about 33% due to equipment failures. When analyzed further, it is typical that two-thirds of the one-third of equipment failures are due to poor operating practices, leaving maintenance in direct control of only about 10% of all losses from ideal production capability. Selecting the Right Tools Using the Business Level FMEA approach to better understand and prioritize production losses and extraordinary costs, companies can now do a better job selecting the appropriate tool and approach to solve or mitigate the problem. What s more, this strategy will be based on a system level review of the production process. For example: 10 Where Do We Start Our Improvement Program?

9 1. If supplier quality and/or quantity is the top opportunity for improvement, supply chain principles and perhaps even Six Sigma can be applied to reduce the variability in quality and quantity of the supply. 2. If the next biggest opportunity is inconsistency in the production process due to a lack of training of operators, a request can be made to human resources or training to develop a plan to address this need. 3. If the next biggest opportunity is related to a specific machine and its unreliability, the 5S methodology might be applied first to get the machine in reasonable order. Remember, the purpose of 5S is defect detection and elimination, along with workplace discipline, not housekeeping. Doing a 5S exercise will eliminate many small defects in the machinery. Next, certain Total Productive Maintenance (TPM) principles, such as operator care, or better preventive maintenance (PM) and predictive maintenance (PdM) may be applied to better manage these failure modes. Then, reliability centered maintenance (RCM) may be used to better understand the machine s functional requirements and the failure modes that are resulting in loss of functionality in an effort to optimize PM and PdM tasks. If the problem with the machine was particularly difficult, root cause analysis (RCA) may be used. 4. If the next biggest opportunity is to reduce the erratic nature of production planning and frequent changeovers, the approach might be to work with sales and marketing to analyze product mix, sales and gross profit by product and key customers, with a view to better understand and rationalize product mix and sometimes even customers. The company would probably want to implement a quick changeover capability and work to level its production flow, even at the risk of modestly increasing inventory in the short term. 5. If the next biggest opportunity is to reduce spares unavailability, RCM methods would be applied to understand the most common failure modes or the highest consequence failure modes. Then, certain supply chain principles would be used to make sure the needed spares are on hand, but no more than is needed. In some cases a company will want to develop a so-called A3, a one-page action plan that contains in very simple terms the current state, future state, business case and action plan. An illustration of a high level A3 that could be used to develop a more detailed and specific one is shown in Figure 4. Chapter 1 The Manufacturing Plant as a Business System 11

10 A3 Action Plan Current State: Describe current performance or condition, including key measures (e.g., OEE, unit cost, etc.) Business Case: Value of Improvement Investment Required Reduced Risk/Injuries Return On Investment Future State: Describe required performance or condition, including key measures (e.g., OEE, unit cost, etc.) Action Plan: Describe the actions you re going to take, including schedule, to meet the business case and achieve your future state Figure 4: A3 action plan Summary Using Business Level FMEA to analyze a particular production process at a system level works well in helping to quantify the opportunities and prioritizing them for further action. It is necessary to understand the business consequences of all major failures in the business system and then select the appropriate tools or strategies to address these opportunities. Case studies illustrating the above methodology and the results of using Business Level FMEA are provided in the next section. References 1. Moore, Ron. Making Common Sense Common Practice: Models for Manufacturing Excellence, 4th Edition. Fort Myers: Reliabilityweb.com, Moore, Ron. What Tool? When? A Management Guide for Selecting the Right Improvement Tools, 2nd Edition. Fort Myers: Reliabilityweb.com, Where Do We Start Our Improvement Program?