Setup reduction is usually accompanied by quality improvement. Why is that? There are several reasons: equipment improvement, elimination of adjustment, and faster feedback on quality are the key ones.
Quality improves when equipment improves: Many machines need to be overhauled and improved as part of setup reduction. Bearings may be worn, there may be oil leaks that require repair, nuts and bolts may be loose, and filters and fluids may be due for replacement. All of these repairs can lead to improvement in capability and repeatability of the machine. This will improve quality. It is also usual to move all key gauges to one point, where they can be easily monitored. This improvement will allow the operator to ensure that the machine is working at an optimum setting at all times. Again, quality will usually improve as a result. Not only machines, but tooling will be improved as part of setup reduction. With more frequent setup, weaknesses in design will be found, and improved. More frequent checks of the last part in a run will ensure that the tooling is kept properly adjusted.
Quality improves when adjustment is eliminated: A key cause of variation in quality is variation in machine settings. Many operators are constantly making small adjustments. One operator sets the machine differently from another. This lack of process control needlessly causes defects and variation. Once the correct settings have been established, there is no need for constant adjustment. It is also frequently found that purchasing agents change vendors to get a better price. While the specifications are apparently followed in material selection, small variations will be found in material quality. Setting the specification properly can be a key element in the elimination of adjustment. This also leads to better quality. The higher yield achieved justifies keeping a tighter specification, and possibly somewhat higher prices. Looking at the system as a whole, rather than from a limited perspective, shows its importance in this instance. Looking upstream, incoming quality from internal operations will also be improved, as variation that causes extended setup time for extra adjustment is discovered and corrected.
Faster feedback leads to better quality: This is a key to quality improvement through setup reduction, as long as setup reduction is followed by batch size reduction. It is possible to improve the learning curve, and to speed up the feedback cycle, when batch sizes are smaller. If a mistake is made, in features, specifications, settings, and other aspects of the production process and product design, it can be corrected next time the product is run. Faster learning also leads to reduction and even elimination of inspection throughout the process. Not having large quantities on hand that need to be depleted should a defect be found, or a design feature changed, the time to improvement is shortened, and equally important, fewer customers will have been inconvenienced. Fast improvement to a feature can also have the beneficial feature of showing the market responsiveness to customer opinion.
Sunday, November 30, 2008
Thursday, November 6, 2008
More economic arguments for setup reduction
In addition to the cost of acquisition, there can be significant expenses in actually being in possession of inventory, including, but not limited to:
- Borrowing costs of capital
- Cost of storage space – racking, storage bins, building space rent, lighting, heat, etc.
- Insurance
- Spoilage of inventory (e.g. obsolescence or deterioration)
- Theft, pilferage and other losses
- Damage to inventory – physical damage from lift trucks or during other handling
- Cost of handling to move or rotate
- Cost of management, measurement and accounting for inventory
- Cost of inefficiency due to inventory issues – e.g. layouts may be less than optimal in a large factory with large amounts of inventory
- Loss of business due to inventory problems – e.g. inaccuracies in inventory records that lead a business to assume that there is sufficient inventory, when there in fact is not, leading to overdue deliveries
A reasonable rule of thumb is to estimate that inventory holding costs can equal 25% to 33% of the inventory value each year.
Also considered by some is the opportunity cost – the value of other uses of the money identified above. It should be noted that opportunity cost is not a category in a financial statement.
Some estimates put the total cost of inventory as high as 50% per annum.
We have seen some of the benefits of quick setup:
- flexibility, for better customer service
- lower costs, due to less inventory
Other benefits to be explored are:
- improvement in quality
- improvement in safety
- improvement in general operations, due to need for coordination
- ability to work to customer order instead of forecast
- smaller factories improve communication
- improvement in problem solving
- ability to level loading
- Borrowing costs of capital
- Cost of storage space – racking, storage bins, building space rent, lighting, heat, etc.
- Insurance
- Spoilage of inventory (e.g. obsolescence or deterioration)
- Theft, pilferage and other losses
- Damage to inventory – physical damage from lift trucks or during other handling
- Cost of handling to move or rotate
- Cost of management, measurement and accounting for inventory
- Cost of inefficiency due to inventory issues – e.g. layouts may be less than optimal in a large factory with large amounts of inventory
- Loss of business due to inventory problems – e.g. inaccuracies in inventory records that lead a business to assume that there is sufficient inventory, when there in fact is not, leading to overdue deliveries
A reasonable rule of thumb is to estimate that inventory holding costs can equal 25% to 33% of the inventory value each year.
Also considered by some is the opportunity cost – the value of other uses of the money identified above. It should be noted that opportunity cost is not a category in a financial statement.
Some estimates put the total cost of inventory as high as 50% per annum.
We have seen some of the benefits of quick setup:
- flexibility, for better customer service
- lower costs, due to less inventory
Other benefits to be explored are:
- improvement in quality
- improvement in safety
- improvement in general operations, due to need for coordination
- ability to work to customer order instead of forecast
- smaller factories improve communication
- improvement in problem solving
- ability to level loading
Wednesday, November 5, 2008
Setup reduction and flexibility - the economics
The above image shows how quick setup provides flexibility to an operation. By reducing the time spent setting up, it is possible to retain the original productivity, but reduce run size.
There may be marginally higher costs to initiate each order. These could include more material handling, more supervisory time (on paperwork, and the like), more maintenance time (on last off inspection to determine tool condition), more time spent preparing and cleaning up after each setup, and perhaps other similar activities. In the above example, the WIP was reduced by a factor of 12 (i.e. greater than 90%).
Depending on circumstances, the cost of holding WIP and finished goods is 30% to 50% annually (including opportunity cost). There is also a value to the business of the increased flexibility that is harder to determine – but it pertains to how well the customer is served, and what benefits this provides. It is mainly the cost of servicing return business compared to the cost of obtaining new customers. Furthermore, to achieve this level of flexibility, quality and maintenance must be very good, further reducing the cost of production.
Tuesday, October 14, 2008
Open eyes, open mind
It takes open eyes and an open mind to start the process of setup reduction. The psychology of observation tells us that in many cases, especially those we are familiar with, we mostly fail to see what is in front of us. We fail to notice, we fail to pay attention to what we see.
Observing a setup, either recorded or live, there is a lot going on. It is easy to assume that we know what it is that is taking place. Even when we analyze a video tape of a changeover process, assuming it captured the salient activities, we tend to write down what we think is taking place.
It takes an open mind to question each and every activity – is it necessary? why is it done this way? why is it done at this point? Especially when these questions are asked by someone on the team who has not done the setup personally, or is from outside the immediate area, especially if it is someone from the office, or someone without subject matter expertise, the questions may sound silly to those who are familiar with the process. It is especially those familiar with the process who need an open mind. The typical reaction is to want to explain an activity as making sense, as being the right thing to do.
It may take extensive 5Why, or Fishbone, or other root cause analysis, to determine whether an activity is actually needed, or whether it is done in the best way.
Observing a setup, either recorded or live, there is a lot going on. It is easy to assume that we know what it is that is taking place. Even when we analyze a video tape of a changeover process, assuming it captured the salient activities, we tend to write down what we think is taking place.
It takes an open mind to question each and every activity – is it necessary? why is it done this way? why is it done at this point? Especially when these questions are asked by someone on the team who has not done the setup personally, or is from outside the immediate area, especially if it is someone from the office, or someone without subject matter expertise, the questions may sound silly to those who are familiar with the process. It is especially those familiar with the process who need an open mind. The typical reaction is to want to explain an activity as making sense, as being the right thing to do.
It may take extensive 5Why, or Fishbone, or other root cause analysis, to determine whether an activity is actually needed, or whether it is done in the best way.
Monday, October 13, 2008
A story about setup
When North American executives started going to Japan to tour plants, having heard of the “Japanese miracle”, one of the things they wanted to see was quick die change. Many did not believe that the Japanese were telling the truth about press setups in less than ten minutes, when their own best efforts were not yielding anything like it, and their own people were telling them that it was impossible.
One group of executives invited to see such a die change, and to be present at a specific stamping press in the plant they were visiting 11 am, when the next die change would take place. Since they were not paying very close attention to the time, they got to the press about 15 minutes late, and all they saw that day was some cleanup activities around the press, which by that time was already making parts. Astonished, they asked what had happened. They were told that, as scheduled, the press was changed over precisely at 11 am. They believed that 11 am was just a target, not a fixed time in the daily plan. They were informed that, had the setup crew waited for the executives to arrive, the rest of the day would have been thrown out of whack for a large number of people who depended for their work on parts flowing from the press in precise quantities, at precise intervals.
The lesson they learned was that quick changeover exists in an environment of precision and standardization, that it is not an isolated aspect of the production system.
One group of executives invited to see such a die change, and to be present at a specific stamping press in the plant they were visiting 11 am, when the next die change would take place. Since they were not paying very close attention to the time, they got to the press about 15 minutes late, and all they saw that day was some cleanup activities around the press, which by that time was already making parts. Astonished, they asked what had happened. They were told that, as scheduled, the press was changed over precisely at 11 am. They believed that 11 am was just a target, not a fixed time in the daily plan. They were informed that, had the setup crew waited for the executives to arrive, the rest of the day would have been thrown out of whack for a large number of people who depended for their work on parts flowing from the press in precise quantities, at precise intervals.
The lesson they learned was that quick changeover exists in an environment of precision and standardization, that it is not an isolated aspect of the production system.
Tuesday, October 7, 2008
Role of skill
A key issue that will be confronted when reducing setup is the role of skill – and those that possess skill. The skill in question is the ability to get a piece of equipment or system to function properly after it has been changed over. As was discussed, many setups suffer from variability in both the tooling and the machine. Those with skill in setting up have the ability to quickly get settings correct, under the specific operating conditions of tooling and equipment. Material also suffers from variation, as does the environment, and all of these factors must be put into harmony by the skilled setup person or team.
SMED strives for a setup that requires no adjustment, no measuring, indeed, for a simple procedure that has been completely standardized. The skill that was formerly required to set up will no longer be needed to achieve a successful changeover. To speak to the concern that we normally feel when we take away the skill and replace it with standardization, it should be said that that skill must be “vested” in the setup – the knowledge of the factors of variation must be made explicit, and eliminated from the setup. How those who have performed the setups are involved in reducing the changeover time can be key to how well this reduction in achieved. Of course, engineers and others can study the elements of the setup, and determine how to control them, but such studies tend to be lengthy, and the results slow in coming.
What about afterwards? It has been said that no one will help to improve a process, if the result is the elimination of their job. First of all, the key result of setup reduction is not elimination of labor. Labor is simply just not that big a part of the total cost of production that it should be pursued as a primary goal. Of course, the history of industrial societies is one of less and less labor required per unit of output. So, labor reduction is inevitable. What needs to be understood, however, is that some of the labor saved needs to be used elsewhere to maintain, and improve, the new system created through improvement processes such as SMED. It is prudent, then, at the outset of a SMED program to assure those involved in changeover, be it operators or dedicated setup resources, that there will be no layoffs or terminations as a direct result of the program. Normal turnover, training programs aimed at those who have the ability to gain new skills, and other ways of redeploying people, are the best way to allay fears about involvement in SMED.
SMED strives for a setup that requires no adjustment, no measuring, indeed, for a simple procedure that has been completely standardized. The skill that was formerly required to set up will no longer be needed to achieve a successful changeover. To speak to the concern that we normally feel when we take away the skill and replace it with standardization, it should be said that that skill must be “vested” in the setup – the knowledge of the factors of variation must be made explicit, and eliminated from the setup. How those who have performed the setups are involved in reducing the changeover time can be key to how well this reduction in achieved. Of course, engineers and others can study the elements of the setup, and determine how to control them, but such studies tend to be lengthy, and the results slow in coming.
What about afterwards? It has been said that no one will help to improve a process, if the result is the elimination of their job. First of all, the key result of setup reduction is not elimination of labor. Labor is simply just not that big a part of the total cost of production that it should be pursued as a primary goal. Of course, the history of industrial societies is one of less and less labor required per unit of output. So, labor reduction is inevitable. What needs to be understood, however, is that some of the labor saved needs to be used elsewhere to maintain, and improve, the new system created through improvement processes such as SMED. It is prudent, then, at the outset of a SMED program to assure those involved in changeover, be it operators or dedicated setup resources, that there will be no layoffs or terminations as a direct result of the program. Normal turnover, training programs aimed at those who have the ability to gain new skills, and other ways of redeploying people, are the best way to allay fears about involvement in SMED.
Monday, October 6, 2008
SMED and TPM
Standardization is not just for tooling or the element that is being exchanged. It applies to what is not being exchanged, the machine or permanent element. Adjustment becomes necessary if the exchanged element, or the permanent element, or both, have variation in performance. It is especially difficult to get right if both are varying from one run to the next.
Standardizing the tooling or exchanged element will not eliminate adjustment if the permanent element, a machine, system, or program, is not stable and standardized. There is thus a link between SMED and TPM, between setup reduction and maintenance. Wear, vibration, and other kinds of drift from the design condition all create problems that must be dealt with during setup. This kind of instability is particularly troublesome, because they cause the internal aspect of the changeover to take more time. If the condition is not known, or not dealt with during scheduled maintenance, then it must be dealt with, whether directly, or provisionally, during changeover. The second approach is, unfortunately, more common, because of the rush to get back up and running. Thus, the problem is faced again and again, with no chance for standardizing the internal setup procedure.
Careful observation is required to disentangle the sources of variation. Preventive maintenance and equipment improvement are necessary to eliminate variation in the permanent element of the production system.
Standardizing the tooling or exchanged element will not eliminate adjustment if the permanent element, a machine, system, or program, is not stable and standardized. There is thus a link between SMED and TPM, between setup reduction and maintenance. Wear, vibration, and other kinds of drift from the design condition all create problems that must be dealt with during setup. This kind of instability is particularly troublesome, because they cause the internal aspect of the changeover to take more time. If the condition is not known, or not dealt with during scheduled maintenance, then it must be dealt with, whether directly, or provisionally, during changeover. The second approach is, unfortunately, more common, because of the rush to get back up and running. Thus, the problem is faced again and again, with no chance for standardizing the internal setup procedure.
Careful observation is required to disentangle the sources of variation. Preventive maintenance and equipment improvement are necessary to eliminate variation in the permanent element of the production system.
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