Organizational Performance Part 53: Understanding Batch Sizes | Operational Excellence Quick Hits

Speaker 1: (00:05)
In this week’s session, we’re going to continue on the mindset change necessary to make breakthrough improvement in the company. And this week we’re going to talk about batching and batch sizes, and understand the effects of batch sizes on the organizational performance. First of all, I want to talk about what the belief is within the organization. So a lot of people believe that if we increase the batch size, it’ll make us more productive. But we also believe that if we reduce the batch size, it’s going to increase our costs. Let’s challenge those assumptions in this week’s session.

Speaker 1: (00:41)
First, I want to define what is productivity. So if we look at productivity, how do we define that? So the way I define it is increasing the output of a system with the same inputs over the same timeframe. So if we look at the outputs over a period of time and we have the same inputs, if we’re getting more output over that period of time that means productivity’s increasing.

Speaker 1: (01:05)
So we can look at it from two perspectives. So the first perspective is we can look at it from the local perspective. So if I look at one process and we batch our work in that one process, we feel like we’re more productive because we’re accomplishing a large amount of work in a relatively short period of time. But what if we look at it from a system perspective? Are we really being more productive from the organizational perspective? So let’s dive a little bit deeper into that subject.

Speaker 1: (01:35)
So let’s look at this system here and what’s the impact of batch on this system. So in this case, I have work that’s got to go through process A, then process B, then process C and we’re batching the work on each process to a batch of 10. Each item takes one minute to complete. So I release the batch, process A does all 10 items and then they pass it on to process B. Process B processes all 10 items, then they pass it on the process C and they process all 10 items. So we got total time to complete the work in terms of value added is 30 minutes. That’s with no setup. So if we add setups between processes, our queue time is going to take longer.

Speaker 1: (02:21)
And our first item out of the system comes out after 21 minutes. If we’re considering lead time in the process, the lead time to get the first item out of the system and get to the customer is 21 minutes. So now what if we synchronize the flow and we reduce the batch size from 10 to one? Process one item and process A move it on the process B, move it on the process C and we synchronize the operations. Now, if we look at this chart here at the bottom, it’s 12 minutes to complete the total order. And our first good item comes out after three minutes. So we’re significantly reducing the lead time to complete the work.

Speaker 1: (03:08)
And there’s a lot of other side benefits that come from this and what’s the effect on costs. So if we decrease the batch side, the things that we know is that it’ll have no effect on the cost of the organization, but we’re not paying people by the number of outputs they’re producing. We’re not paying piece rate. In most companies, we’re paying an hourly rate or a salary rate. And most of the other costs in the system are fixed in the short-term.

Speaker 1: (03:38)
What’s effect on lead time? It’s going to reduce the lead time significantly. So if we start to reduce batch sizes, the lead time, the complete work is going to get smaller and smaller. And if that’s a significant need of our customer, then we’re adding more value for our customer. It’s going to improve quality. So why does it improve quality? Because there’s a defect the system with one of those items, we’re going to find it immediately. So the time to react to quality problems becomes less and less. And of course, if there’s less work in process, there’s less rework and scrap that happens.

Speaker 1: (04:15)
It’s also going to improve flow. So the time that the job takes to get start to finish is going to improve significantly. Also, it’s going to provide us focus of where it’s important to make improvements. Although if we look at the system, there’s very few points that we need to focus on to make improvements to the system, it’ll give us that focus.

Speaker 1: (04:36)
Also, it’ll free up cash. So if we have investment in materials in the process, we’re going to free up that cash for new investment and materials that we have. And lastly, it’s going to improve customer satisfaction because we’re going to get better quality, shorter lead time, more reliable. So that’s another factor that I didn’t put here is the reliability of the system goes up significantly.

Speaker 1: (05:02)
So that’s our session for today. So the belief is that if we reduce the batch size, we’re going to be less productive and our costs are going to increase. No, it’s actually the opposite. We’re going to be more productive because we’re going to get more through the system with the resources we have, because we’re going to be focused and not multi-tasking and not being disrupted because of these large batches take forever to process through our system. And we’re going to improve our customer satisfaction because we’re going to shorten the lead time, improve the quality and we can respond quicker to customer demand changes.

Speaker 1: (05:38)
In our session next week, we’re going to be talking about changeovers so this has a direct effect on batch size. So we’ll talk about batch size and the effect on changeovers. And if we increase the number of changeovers, what effect does that have on our costs and the system? A lot of people believe we increase the number of changeovers, our costs will increase. We’ll challenge that assumption next week.