Organizational Performance Part 54: Understanding Process Changeover | Operational Excellence Quick Hits

Speaker 1: (00:06)
In today’s session, we’re going to talk about the necessary mindset change in order to get breakthrough improvement within an organization. Today’s session is on understanding changeover. The belief I see in many organizations is that increasing the number of changeovers on a process will increase our cost. So there’s pressure to not do changeovers and increase our batch size, which we talked about in our last session.

Speaker 1: (00:32)
Let’s dive into that a little bit deeper. If we use system thinking and we look at traditional batch and Q, where we have different process steps. So it doesn’t matter what type of organization you are, if there’s defined process steps to get work done, and it goes through different resources. Typically we’re going to have an unbalanced system.

Speaker 1: (00:53)
And in this case, we have this operator four that’s overloaded with work. So there’s pressure then to run larger batches of work on that resource. So to get more work through that resource, we want higher utilization. One way to get higher utilization is to run larger batches of work. But what happens is we start producing items for the medium to long horizon at the expense of other items that we need in the short horizon. So then there becomes a mismatch between operations and sales, and then expediting increases, quality decreases, and the investment and resources increases such as material over time, expediting costs, and so forth.

Speaker 1: (01:38)
So if we look at this from a paradigm perspective, our objective is to produce to meet customer demand. And what happens is, we increase the order size to produce for the medium to long horizon. And the undesirable effect is we see work is focused on items that are not needed at the expense of items that are needed in the short horizon. And then the amount of work and process increases, quality decreases, and resources spend more time on non-value added activities and expediting, and then cost increase. And that’s stemming from the fact that the mindset is increasing the number of changeovers, increases our cost.

Speaker 1: (02:19)
But if we want to recalibrate our thinking, what we do is we should only produce items for the short horizon. So whatever the lead time within our value stream, that’s the longest horizon that we should be working on. And then changing that mindset to increasing the number of changeovers actually increases flow. So what happens when we see increase in flow, work is focused on items that are needed in the short horizon. Work in process decreases and quality increases. Resources spend time on value added activities and actually costs decrease.

Speaker 1: (02:56)
So if our focus is on flow, the effects that we see are reduced costs. If we have the cost mindset, what happens is we see increased cost, which is sort of a huge paradigm shift for companies. To reduce costs, we want to increase the number of changeovers to create flow. There’s a lot of positives that come out of that and a lot of negatives that are avoided.

Speaker 1: (03:22)
So what happens when we increase the number of changeovers? We’re going to see no effect on the cost. So we don’t allocate cost to the product. We look at cost holistically and especially on non constraints, actually doing more changeovers on the non constraints is actually going to have more positive effects on flow. On the constraints, we use SMED, single minute exchange of dies principles, to reduce the change over time so we have a positive net effect on the organization. It reduces lead time, improves quality, improves flow, provides focus where it’s important to reduce changeover, freeze up cash, improves customer satisfaction.

Speaker 1: (04:05)
So that’s our session for today. Next week, we’re going to focus on the use of resources. So the belief that utilizing a less efficient resource will increase our costs. And we’re going to challenge that assumption and recalibrate the mindset around use of resources.