Organizational Performance Part 40: Understanding the Impact of Idle Resources | Operational Excellence Quick Hits

Quick Hits share weekly tips and techniques on topics related to Operational Excellence. This week’s theme relates to effective use of resources. We hope you enjoy the information presented!

Speaker 1: (00:05)
In today’s session, we’re going to continue on the mindset change necessary for companies to make breakthrough improvements.

Speaker 1: (00:13)
The next one on the list is idle resources are a major waste. So, when we look at resources, if they’re not busy, we want to make sure that they have things to work on, so we find work for them to do. So, we do that multiple ways: through batching work, or pulling orders ahead, or increasing the order size to make sure that people are always busy. So, there’s multiple things that we see that companies do to make sure that resources are always busy because the belief that idle resources are a major waste.

Speaker 1: (00:47)
If we look at a simple system here, we have raw materials that come in, it goes through four operations. Each operation has work-in-process between them. And again, this isn’t an assembly line operation, it’s discrete manufacturing steps where it might be a machining operation then goes to a second machining operation that might go to a heat treat operation, and then a grinding operation, for example.

Speaker 1: (01:14)
And when we have different cycle times, different demand rates for different products, different amount of machines in each department, different staffing, different number of shifts, we have unbalanced capacity. And so, this simple example, we have work-in-process between the steps and we’re shipping to the customer. And flow is moving from left to right.

Speaker 1: (01:39)
When we run the simulation and we have people with different capacities, and we try to make everyone efficient what we find is that work piles up between processes. So, you can see this first person, Matt, was 100% efficient. The second process step was only 80% efficient. And there’s a bunch of work-in-process between the operation steps. In an unbalanced system, if we try to maximize the efficiency of every resource, we’re going to end up with this scenario with piles of work between operations. That’s not flow. That’s trying to keep everybody busy. When we focus on flow what we want to do is we want to stop some resources from time to time, to create better flow. And if we have extra capacity, so Matt has extra capacity here, I might want to move him downstream to have him work in another department to create better flow.

Speaker 1: (02:42)
So, sometimes a resource not standing idle is a major waste. And we see this many times in many companies where, “Oh, we need to keep everyone busy. And we actually have a measurement system that supports that in measuring efficiency of everybody. Or overall equipment effectiveness of every resource. Or maximizing utilization of the resources.” But this mode of operation in an unbalanced system creates many problems. So, I’m talking about an unbalanced system here. So, when we have an unbalanced system and we try to make sure that everyone remains busy by over utilizing their protective capacity, it creates these issues, excessive work-in-process, extends the lead time for the customer, ties up valuable cash, increases the risk of quality problems. And lastly, increases costs because of the pressure to run over time. Defects can be created and not found until later in time. So, we have a bunch of work-in-process that’s suspect. We do more expediting and so forth. So, those are costs that increase as a result of trying to keep everybody busy. And the imbalance of inventory.

Speaker 1: (04:00)
Our goal is to balance the flow, which means the work-in-process is consistent between each operation. And when we do that, we get better results in terms of less WIP, higher productivity, shorter lead time, frees up cash, reduces quality problems, and so forth. And then, ultimately, reduces cost. So, this mindset change required for companies to get breakthrough improvement, we need to stop resources from time to time from working to prevent over production. Over production creates excessive inventory.

Speaker 1: (04:38)
So, this is our session for today. Next week, we’ll be talking about process improvement, and measuring the process improvements in isolation, and how that translates into overall company performance improvement.