How to buy - Step 14) Flexibility Study Part 5

FLEXIBILITY STUDY PART 5 – MANUFACTURING FLEXIBILITY & THE ECONOMIC BENEFITS

Objective and development of the Flexibility Study

The flexibility study is divided into two sections, section A and section B.

Section A identifies the changes that are occurring in an organisation and classifies these changes. An organisation needs to be flexible to accommodate these changes and continue functioning normally. All organisations must know what changes are occurring and why.

This is crucial information that enables them to understand where they need to place their attention.

It is essential to prioritize these changes as it gives an insight into the needed flexibility. Changes will be prioritized based on their frequency of occurrence and how each affects the performance factors. A comprehensive set of performance factors was developed, and it includes:

Labour Efficiency

Labour is one of the most important resources of a facility; therefore, any change that affects labour efficiency will definitely affect the facility's performance as a whole.

Machine Utilisation

Machinery and equipment are also important resources; any change, good or bad, that affect machine utilisation affects the facility's overall performance.

Material Utilisation

Material utilisation directly relates to a facility’s performance. Any change that reduces material utilisation, e.g. by increasing scrap, will reduce the facility’s performance.

Space Utilisation

A major part of a business investment goes into acquiring the space; therefore, space utilisation becomes a performance factor.

Inventory

The inventory turnaround of a facility gives a clear picture of its performance; therefore, inventory will be considered a performance factor.

Lead Time

A change affecting the lead time of a facility will upset the facility's overall performance, e.g. a change that increases the lead time of a product will reduce the facility's performance.

Instruction

This is considered a performance factor because any change that increases or decreases the transfer of information, i.e. instruction, affects the lead time, which is a performance factor.

If a change's impact on these performance factors could be quantified, it would provide a perspective of the intensity of that change. Impact on any of the performance factors causes a change in the overall efficiency of the organisation.

Frequency plays an important role in prioritizing a change. Naturally, a small change occurring more frequently should be given a higher priority than a change with a higher performance impact but occurring less frequently.

The implementation plan of the Flexibility Study

Firstly, a manager with flexible responsibilities is identified. The flexibility study is designed to identify all the changes that are currently occurring in the business or identified to happen. These are individuals who understand the company's manufacturing environment and who can answer the questions completely and accurately.

The participants of the flexibility study should be familiar with the equipment involved, processes, maintenance and current business direction. This knowledge would enable the individual to list changes, causes, and efforts to address the changes. Various individuals from various departments or by a group of individuals could complete the flexibility study. The number of participants depends on the size of the organisation and their ability to answer all the questions accurately.

Section A of the flexibility study has six questions. All the questions are listed and explained below:

Question: #1

Indicate the five most important external changes that have occurred in your company and classify each change by marking them 1 - 5.

This question intends to list external changes and classify them. The classification would help relate these changes to the needed flexibility. This also provides the participants with an opportunity to review the changes that are impacting their business.

Question: #2

Indicate the five most important internal changes that have occurred in your company, and classify each change by marking on the appropriate box as:

● Internal Change generated as a consequence of an external change
● Internal Change generated as a consequence of an internal policy
● Internal Change generated as a consequence of an internal failure
● Other

This question intends to list all the internal changes occurring in the business and classify them. Classification into internal and external change guarantees that no change is missed. Internal and external changes may be reported by different individuals based on their information, e.g. a sales manager may fill in the external changes. At the same time, a process engineer lists the internal changes.

Question: #3

Briefly state the causes of the changes you have listed above.

This question allows the participant to investigate why the changes are occurring. The information gathered will be used to prioritize the changes.

Question: #4

Briefly state the efforts that you have made to counteract the changes listed above.

Here the participant lists all the efforts taken to address the change. This will give the flexibility to study an idea as to whether any flexible solution has already been used.

Question: #5

How do you rate the impact on performance factors listed below due to the change?

The answer to this question will enable us to prioritise the changes.

Assume that performance of each factor is 100 % before a change takes place.

Fill in the performance of the factor after the change has occurred as illustrated below:

Labour Efficiency: How does a change affect labour efficiency?
e.g. Due to new tolerance requirements, the labour efficiency reduces by 5%.

Machine Utilisation: How does a change affect machine utilisation?
e.g. Due to the addition of a new product, the machine utilisation reduces by 10%.

Material Utilisation: How does a change affect material utilisation?
e.g. New manufacturing process leads to more scrap; hence material utilisation dropped by 20%.

Space Utilisation: How does a change affect space utilisation?
e.g. The policy reduces the inventory space utilisation by 50% inventory.

Lead Time: How does a change affect the lead time (% increase or decrease)?
e.g. A new machine reduces the lead time by 8%.

Instruction: How does a change affect the need for required instructions?
e.g. A new inspection policy demands more instructions for the inspectors.

Question: #6

How often does the change occur per year?

This question notes the frequency of a change. The value is “1” if the change occurs once every year or “0.5” if it occurs once every two years, and so on.

An average impact on all the factors is calculated for each change and is multiplied by its frequency of occurrence to get the rating for each change.

The changes could be rated according to their impact on the total performance. This helps decide which change should be addressed first and the type of flexibility needed to counteract it.

Section B has ten questions; these questions are asked to calculate the actual and needed measures of the five flexibilities listed previously.

Question: #7

For each change you have stated, select the type of flexibility that would counteract it.

This question gives the participant a chance to express their views on the needed flexibility. More than one type of flexibility could be selected as a strategy to address a change.

Question: #8

How many bottleneck processes do you have?

The number of bottleneck machines is important for computing all the flexibilities. The bottleneck machines are crucial for any improvement in flexibility.

Question: #9

What number of operations is the system designed for?

This gives an insight into the capability of the system in terms of machine flexibility.

Question: #10

How many operations does the system actually perform? This is the actual machine flexibility of the system.

Question: #11

How many bottleneck operations do you have?

This information is useful to compute all the flexibilities, and these operations are crucial to improve the system's flexibility.

Question: #12

How many different ways can a product be produced?

This is the actual scheduling flexibility of the system for a particular product.

Question: #13

How many products was the system designed to produce?

This gives the capability of the system in terms of process flexibility.

Question: #14

How many products does the system actually produce?

This is the actual process flexibility of the system.

Question: #15

What is the cycle time of a new product?

This is the time spent from designing to launching a new product. This information is used to calculate product flexibility.

Question: #16

How often is a new product introduced?

This gives the actual product flexibility of the system.

Needed Product Flexibility

Product flexibility refers to the ease with which new products can be added or substituted for existing products. Thus, the needed measure for product flexibility would be; the number of products to be added or substituted for existing products to counteract the demand variety change. Product flexibility is essential for a facility that is increasing the number of product introductions for a certain period, as it enables faster response by bringing newly designed products.

Several factors should be considered to determine the needed product flexibility. We begin with the basic question, why do we need to substitute an existing product or add a new product? The probable reasons could be:

● Maturity Cycle of the existing product
● Technological Innovations
● Market stimulation
● New market search and
● Competitive pressures
● Key drivers; G.P., revenue, margin, strategic compatibility.

Maturity Cycle

Product Life Cycle is the time a product exists from conception to abandonment or retirement. A typical product life cycle passes through four stages, introduction, growth, maturity and decline.

The maturity stage is a period of time when the sales increase at a decreasing rate. After the maturity phase starts the decline phase; here changes in competitive activities, consumer preferences, product technology and other environmental forces tend to lead to the decline of mature products.

The need for a new product increases as the maturity phase of an existing product begins to end.

Technological Innovations

The emergence of new technologies makes it unfeasible to keep on manufacturing the current product. In fact, technological innovation is one of the reasons that start the decline phase of a product. This forces a manufacturer to substitute the current product with a new one that incorporates the new technology.

Market Stimulation

Sometimes it becomes necessary to introduce new products to stimulate a dull market. For example, a writing pen manufacturer would introduce pens with different colours and shapes to stimulate the otherwise dull and steady pen market.

New Market Search

Sometimes a manufacturer is forced to manufacture a new product to enter a new market. The new market could be new customers for the same product or new customers for new products. The same product could be improved to match the customer preferences of the new market, or it could be a totally new product from the same product family. Following the previous example, the pen manufacturer would manufacture a gold plated pen to enter the new market, i.e., the executives. The manufacturer could also start manufacturing pencils and erasers that fall in the same product family of “writing aids” and enter a new market of pencils and erasers.

Competitive Pressures

A manufacturer might be forced to manufacture a new product only to counteract competitive pressures. The competitor might develop a new product due to maturity cycle, technological innovation, market stimulation or new market search. For example, a car manufacturer might be forced to manufacture a bubble-shaped car to prevent the erosion of his market share by a competitor’s car that has brought about a change in customer preferences. One could consider the percentage increase in the competitor’s sales for a period, which could be attributed to the new products that he offers. The needed product flexibility to meet the market demand would be calculated as follows:

For each of the five reasons mentioned above, list the products needed to counteract the change in the given table. Assign an ID for each product. Cross out the products that repeat. For example, a new product because of the maturity cycle might incorporate technological innovations;; hence only one product will satisfy both conditions.

Repeat the above procedure for all the products in the family. In the case of the “writing aid” example, repeat the pen, pencil, and eraser procedure. The summation of all the products will be the needed product flexibility.

Needed Volume Flexibility

Volume flexibility of a manufacturing system is its ability to be operated profitably at different overall output levels. A system is always economical if it is operating above the break-even volume. Thus, the needed measure of volume flexibility is the volume below the break-even at which a facility should operate economically to overcome the demand volume change.

Needed volume flexibility is a critical measure. As a result of today’s fluctuating market, it has become increasingly important and difficult for a facility to function economically at different levels of output. Volume flexibility is a measure of the facility’s ability to continue operating economically at less than 100% capacity. For any production facility, the revenue generated increases with capacity utilisation.

The facility suffers losses if it operates below its break-even. Thus, break-even capacity will be considered a measure of a facility’s volume flexibility. Therefore, for a given period, the needed volume flexibility will be the desired capacity for a facility to operate to be economical. It should be noted that volume flexibility is needed only if a facility has to operate below its current break-even capacity.

The actual measure of volume flexibility will be the current break-even capacity. Market demand
might force the facility to operate below the break-even.

Machine Flexibility

Machine flexibility refers to the various types of operations that a machine can perform without prohibiting switching from one operation to another. Thus, the needed measure of machine flexibility would be the number of operations a machine should perform to produce the needed number of products.

Machine flexibility is important for all other types of flexibilities;; it provides the basic framework for manufacturing flexibility. Machine flexibility provides strategic advantages of smaller batch sizes, inventory cost-saving, higher machine utilisation and shorter lead-time for new product introduction.

Needed product flexibility yields a set of all the operations needed to manufacture the needed products. A set of all the machines is available; a matrix is constructed with rows representing the various operations' machines and columns. Each value in the matrix will represent the efficiency of a machine to perform the corresponding operation. The efficiency will be calculated as follows:

Identify a machine for each operation that can operate at the fastest speed. The efficiency of this machine becomes 100.

For the selected operation, find the efficiency of the remaining machines relative to the fastest machine.

Repeat the above procedure for each operation.

The position of a machine will depend on the number of operations it performs. The higher the number of operations, the higher will be the ranking of that machine. Similar machines (i.e. machines performing similar operations) will be grouped.

Machines dedicated to only one operation need not be considered if there is no possibility of that machine performing any other operation. E.g. a painting machine can never perform machining operations.

The procedure to calculate the needed machine flexibility will be as follows:

For a standard period, compute the number of operations to be performed, e.g. five drilling jobs to be completed in one hour.

Schedule the machine in the first row for the operation it performs most efficiently or to the operation that no other machine can perform.

Calculate the time available on that machine; if the machine is still available after completing all the scheduled jobs; now schedule it for the operation that it can perform the second most efficiently.

Again compute the time available on that machine, schedule the third most efficient operation or
proceed to the machine in the next row.

Keep repeating the above steps until all of the machines or all of the operations are scheduled. If all the operations are scheduled, and there are machines unutilised, they are redundant, and removing them from the facility can increase machine flexibility.

If all of the machines are scheduled, and there are still some operations undone, identify the underutilised machines and schedule the remaining operations to these machines. The underutilised machines will have to increase the number of operations they perform. Thus, the needed measure of machine flexibility could be calculated.

Summary

Flexibility influences the performance factors that include labour efficiency, machine utilisation, material utilisation, space utilisation, inventory, lead time and instructions. A flexible system offers a strategic advantage to a company. The advantages of flexibility include increased machine utilisation, scheduling flexibility, ease of engineering changes, ease of expansion, reduced manufacturing lead time, lower in process inventory and reduced direct and indirect labour.

The choice of flexible strategy becomes very important. The “Flexible Solution Design Process” considers the market conditions to compute the needed flexibility and the percentage gap between the actual and the needed measure to select the appropriate flexible strategy. Factors such as affordability, ROI on investment, organisational readiness and top management support are also considered before suggesting a strategy;; this reduces the risk involved and justifies the investment.

The flexibility study allows the participant to understand the changes occurring in the business, classify and prioritise them.

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