2021 can be your best year or your worst year, it all depends on your perspective. If you see 2021 as trending upwards or that 2020 was a market correction, then your optimism may serve you well. If you had dreams of doubling your sales and you fell short, you may view the past year as a nightmare.
Plan, do, check, act if the circular operation of lean goals. You need to PLAN what you want to accomplish. You should DO what you plan and study. CHECK if you are on track and meeting your milestones. ACT on those adjusted milestones to revise and execute your plans. Circle back and start again, says Joseph Zulick, manager at MRO Electric and Supply
Our baselines determine our potential. If we set the baseline as our starting point we can plan for our success. We build out our milestones like mile markers on the way to our goals.
If you think about a single point of measurement it’s is impossible to know if you are progressing or regressing. If you look at the picture below you can tell if you’re going up or down because you can see where you started on the baseline and that allows you to determine if you are trending up or down. That trend line allows you to plot an expected path.
Unfortunately, too many of us start with arbitrary goals and milestones because we have never properly analysed our baselines. These are the starting points. Think of this as your first weigh-in on a diet. We may not like the number that shows up on our scale but, good or bad, it’s the number that you start with on day one.
This is much like what happens when most businesses take a look at their first “true” Overall Equipment Effectiveness (OEE) number. Most companies have lied to themselves, saying, “I only have a few pounds to lose.” Or in this case, “I believe we are very productive and closer to the finish line.”
The reality isn’t usually positive. The key is, “don’t beat yourself up!”
This number is only a starting point, nothing more. Congratulate yourself for taking the first step. Be honest, don’t sit and make excuses for how this has happened or who is to blame. Determine all the key metrics and make sure you look at the big picture and not break down department goals into smaller chunks, this is usually a bad idea. Bad metrics lead to bad results. The worst problem I see in companies is that goals and metrics are not company-driven but instead department-focused.
I’ve seen companies reward purchasing goals and bonuses for offshoring tooling and then pay a premium to rework the poor tooling. Unfortunately, the goal wasn’t to improve the company goal of lowering cost instead the bonus was paid and the premium rework cost went up resulting in more overhead not less. It shifted the cost to internal costs that were hidden in overhead.
Look to the result, identify the proper flow and improve what’s important. Because of the breakdown I’ve seen companies discount the value of the efficiency of a department because it wasn’t a bottleneck. Since it wasn’t hindering the flow no one cared how inefficient the specific department was since they weren’t creating red flags.
This was creating wasted space and wasted machine time since they didn’t have anything to do they would just shut the machine down. It never got factored into OEE because it wasn’t scheduled to run! This meant that they were only running about 20% of their machines.
The baselines we create must be appropriate and make sure the flow keeps occurring. This doesn’t mean that you’re at 100% because you never caused the flow to stop. Another issue is that companies don’t take into account technology improvement. Their OEE is misleading. Think about using a hand drill and a hand tap. Let’s say you get good at drilling and tapping holes. You get to where you can do 4 per minute. This may be close to the maximum you can achieve. You’re overlooking the industry standard that is using automated machines and producing 100s per minute!
If you are using a standard motion press that can produce a formed part at 15 per minute but your competitor is using a link motion press and can produce the same part at 32 per minute. They can be horrible with their changeover and only produce at 80% and still be better than you. A 5 axis machining centre is hard to beat with a single-axis Bridgeport no matter how efficient you get.
I emphasize the above examples but you don’t want to waste money on buying an $85,000 (€72,178.18) 1 ton truck to deliver pizzas. You have to examine your needs and take into account technology improvements. I believe that you have to have a company that can take advantage of these improvements. You don’t need a high-end computer to read email and do simple letter typing and simple math spreadsheets. Know your needs.
The opposite is also true. If you’re in landscaping, the best vehicle for you is probably not going to be a Prius. You will not be optimising that fuel economy by making 10 trips to the nursery to pick up trees when one trip in a pickup would have achieved the same thing.
Think about a runner, certain things are absolute, distance, time, place.
If you convince yourself that you are running a mile in 8 minutes but you are only running .9 miles. Week after week you believe you are competing with other people but when you get in a race.. you know that you were kidding yourself.
Unfortunately, many companies are doing just this without realising it in most cases. Competing without feedback prevents us from seeing the accuracy of our system. Instead, we keep running that 9/10 of a mile at 8 minutes and can’t understand when we are against competition we are losing.
This happens quite often in new manufacturers or job shops where the core competencies are something like tooling or jigs and fixtures and the company has available manufacturing time. Experienced manufacturers know a job will lose money and they choose not to bid. Inexperienced companies with no information bid low because they don’t know current costs and leave out all of the overhead aspects associated with a job.
In business, knowledgeable companies with a history of baseline information can assess good and bad information to help them predict their outcome. All pertinent information can potentially be important. How does your customer pay? If they pay in 30 days then your pricing could be valid. If they are 120 days plus, you are funding their business unless you factor this into the pricing.
All of these points factor into your baselines. Bad baselines make incorrect assumptions. Much like the case above where a company only looks at when the machine is running as being impactful to OEE or productivity numbers. That’s the wrong approach typically and falls into the category of waste.
Manufacturing is the most valuable when you add more shifts. If you only run one shift and run efficiently at 80%. Someone running 3 shifts at 70% are not only out producing you but are better on OEE and are stretching their investment in machinery and overhead over far more products thus lowering their cost per item. A machine costs $100,000 (€84,915.50) whether you run it 8 hours per day or 24 hours per day. You still are paying the employees, electricity, etc. but your investment is stretched out making your costs lower per item.
Do you have fixed expenses? Yes, because they are fixed. $10,000 (€8,491.55) payment for that machine per month. However, how often you use that machine is a variable depending on the company and their understanding of the machine optimisation.
The Overall Equipment Effectiveness or efficiency is what determines your baseline and will determine your profitability. Start measuring immediately! Don’t wait till your numbers improve or you get in a certain piece of equipment. All measurements have a value, good or bad, they will help you indicate the direction you’re moving and the speed with which you’re accomplishing your goals.
The author is Joseph Zulick, manager at MRO Electric and Supply.