Quick response manufacturing shows how less time leads to greater profits
October 20, 2011
Quick-response manufacturing (QRM) focuses on what’s called the “manufacturing critical path time,” or MCT. In manufacturing, time is money--in fact, it’s a lot more money than many realize. Rajan Suri uncovers why in his new book
It makes sense that Rajan Suri spent years studying control theory. Control theorists take a systems view, analyzing how components work in concert to produce an efficient, optimized whole. In control theory, the whole is not only greater than the sum of its parts, it’s everything.
Years ago during a project with MIT, Suri spent time with an Italian manufacturer looking to optimize its automation control systems. Then he took a step back. Analyzing how all the parts in a plant worked together, Suri noticed that a conveyor was running as fast as it could. It was a massive (albeit not very obvious) bottleneck that wasn’t getting attention. It’s not as if removing that bottleneck would have solved everything—far from it. But it was a piece of the puzzle that shouldn’t have been ignored; in fact, if you miss any piece, you don’t get a complete picture of the problem, so how can you uncover the best solution?
So what is the problem many U.S. manufacturers face? Many would say it has to do with costs—they continually rise, while intense market pressures force companies to accept razor-thin margins. But what exactly drives these costs? Is it labor? Not really, according to Suri, who said for many products, direct labor actually makes up less than 7 percent of the selling price. What really costs metal fabricators and other manufacturers money is time—the days, weeks, and sometimes months it takes for an initial order to turn into a shipped product.
That point provides the foundation for Suri’s latest book, It’s About Time: The Competitive Advantage of Quick Response Manufacturing. The work describes quick-response manufacturing, or QRM, an improvement methodology for high-product-mix operations that Suri has championed for years. In 1993 he founded the Center for Quick Response Manufacturing at the University of Wisconsin-Madison. Boiled down, QRM says that time is money—a lot more money, in fact, than many manufacturers realize.
QRM focuses on a metric called MCT, or manufacturing critical-path time. As the book describes, this MCT is the “amount of calendar time from when a customer creates an order, through the critical path, until the first piece of that order is delivered to the customer.”
The MCT forces people to see the forest through the trees. A shop may analyze manufacturing processes to ensure procedures are as efficient as possible, shaving hours off fabrication times. But that actual “touch time” doesn’t account for much in the scheme of things. As Suri describes it, when you look at the whole system, an order often spends not minutes or hours but days or weeks just sitting as raw stock, as work-in-process, or as finished goods.
This is what QRM calls “white space” time, and for most organizations it’s what consumes most of that MCT. And that ever-lengthening MCT, Suri says, is what really drives manufacturing costs skyward. White time occurs in the front office too. An order actually may spend only a few hours in engineering, but the job planner may give that department five days, because he knows the engineers have a big pile of jobs in their inbox.
At the same time, the manufacturer gets those angry calls about late orders, and the hot job commences. Employees drop what they’re doing to expedite a work order through the system, putting in major overtime. Everyone bands together and bends over backward—performing the epitome of customer service, right? Not really, Suri says. For one thing, the order shouldn’t have been late to begin with. More than that, the hot job pushed everything else behind. Plus, the company has to shell out more money for all those overtime hours.
So why are orders late? Why does it take six weeks for an order to flow through the shop, when workers really handle the job for only about eight hours? QRM zeros in on that white time.
So how does a shop reduce white time? For this, QRM focuses on the causes, one being large batch sizes. By reducing batch sizes, a shop can finish a batch more quickly and not leave other jobs sitting for hours or days waiting for machine time. QRM also proposes cellular organization. Like a lean manufacturing cell, these QRM cells may group dissimilar machines or processes, but unlike lean manufacturing cells, they aren’t focused on specific products but instead on targeted market segments. As part of these cells, cross-trained workers carry a product through multiple stages of production. This means the product spends more time moving, less time sitting. There’s less white time, which ultimately leads to shorter MCT.
Perhaps most significant, QRM preaches the virtues of decreased capacity utilization. A highway jammed full of cars has stop-and-go traffic, and the same holds true for a manufacturing facility jammed full of parts, with machines and people working furiously to process them all.
In fact, a highway running at, say, 75 percent capacity actually can handle more cars during a given time than when at 100 percent capacity, at which point even the slightest change in the traffic pattern can cause stop-and-go traffic, meaning it takes much longer for commuters to make the trip home. Now translate that concept to manufacturing. If a shop runs well below peak capacity, it can handle more jobs in less time—and make more money.
Suri’s work is refreshingly logical. And for a book having fewer than 200 pages, it’s incredibly comprehensive, covering shop floor part flow; the front office; engineering; new-product development; scheduling; supplier strategies; and even basic accounting issues, including an insightful discussion of how a shop allocates overhead and the effect it has on shop operations.
Most refreshing of all, not once does Suri mention anything about “doing more with less.” Under QRM, if demand rises, companies should indeed invest in machines and people to build in that excess capacity and ensure utilization doesn’t head into dangerously high territory. QRM does demand that workers perform myriad functions, set up more often, and manage product flow. But it doesn’t demand that they put in long hours to get the job done. During a time when so many companies are reluctant to add to their payrolls, that’s a powerful message.