Intelligent Manufacturing € May € 1995 € Vol. 1 € No. 5

Improving Manufacturing Cycle Time

By Mike Donovan

Customers are rapidly and forever changing the landscape for their suppliers when it comes to quick delivery response, quality and price. More and more, customers demand on-time delivery, product perfection and low cost. They are becoming more unforgiving - no excuses. And yet many manufacturers continue to have trouble delivering products on time, never mind quickly. They are plagued with excessively long order-to-delivery cycle times and cannot seem to find a solution.

Often, more than 95% of the order-to-delivery cycle time consists of waiting: for sales orders to be processed; for engineering documentation; for corrective actions to design information; for a production process to be corrected; for a manufacturing bottleneck to be cleared. All of this waiting just keeps stretching the order-to-delivery cycle time, while adding unnecessary operating expense in the mad scramble to correct the problems that should never have been created in the first place. It's a vicious cycle that feeds on itself, and one that should be stopped. Fortunately, cycle time compression is comparatively easy to accomplish and offers numerous benefits.

Many companies today are so engrossed in cost-cutting that they've lost sight of the value equation. This equation consists of quick, on-time delivery coupled with exceptional product quality and a competitive price. Price and overhead pressures have forced too many companies to focus solely on cost-cutting, frequently at the expense of delivery and quality. Even though customers always ask for better pricing, this is often not their highest priority.

So how does a company know when its order-to-delivery cycle time is too long. Some of the symptoms of poor cycle time include: poor quality, low throughput, falling sales, too much inventory, too much non-value added activity, poor delivery and unhappy customers.


Causes of Long Cycle Times
Most cycle time problems can be traced back to root causes. Identifying and correcting the root cause impediments must be done to achieve significant cycle time improvements. Some of the most common causes for poor cycle time include:

• Bottlenecks. Manufacturing operations are very similar to a six-lane highway, and these bottlenecks can be fixed, like adjusting toll booth capacity or flow to capacity. For instance, too much queue from work-in-process inventory will clog workcenters, slowing velocity, creating bottlenecks.
• Poor supplier relations. Close ties to suppliers is critical to cycle time reduction. Suppliers must know your goals and needs, and have production and business processes that can support nothing less than 100% of your needs. On-time delivery of quality materials is essential to reducing cycle time, decreasing inventories and lowering costs.
• Improper performance metrics. Frequently, management rewards production practices that actually result in longer cycle times. For instance, if the success of the shop floor is measured simply by efficiency and utilization, you can be sure that parts will be produced even when they are not needed, resulting in too much inventory of unneeded material and possibly shortages of what is needed.
• Overly complicated business processes. Ineffective practices and slow, fragmented systems for handling sales orders, acquiring materials, scheduling production and other information are often big contributors to overly long order-to-delivery cycle times. Complication needs to be replaced with effectiveness to reduce cycle times and costs wherever possible.
• Inadequate production scheduling. Poor production scheduling information and practices invariably lead to flow imbalances which create bottlenecks and depress manufacturing throughput. Production scheduling is usually an area of great opportunity. So significant is the production scheduling opportunity that it should be high on top management's list of priorities.

Achieving Cycle Time Reduction
Cycle time reduction can mean reduced costs, reduced inventory levels, improved production predictability, improved customer satisfaction, and better quality. If a company had to pick a single operational issue to focus on, time compression across the entire operation would be an excellent one to start with. Time compression in all aspects of an operation will lead to greater efficiency, better products, higher profit and happier customers.


Cycle Time Improvement Tips
Cycle time reduction must be a cross-company, cross-functional effort. Cycle times must be compressed at every stage of the order-to-delivery cycle, from order processing, material procurement and production scheduling to engineering, marketing, receiving, shipping and accounts receivable. Only by reengineering the entire supply chain can a company effectively achieve a balanced operation and reduced cycle times.

Balance and flow must be maintained in order to reduce bottlenecs in every area of a company. Production bottlenecks generally occur because a poor scheduling routine created them, resulting in the need to expedite orders and a disruption in the flow of production. Many MRP II systems in use today actually increase cycle times due to their "illogical logic" about what the real schedule should be. Many managers believe their MRP II system will provide accurate answers to these questions, but it won't.

Only when a company can accurately answer critical questions like - When will it ship? Which orders wil be late? What is the right sequence of jobs to work on now? - will it be able to get a handle on cycle time reduction.

Companies should measure their cycle time efficiency with a "simple" calculation:

First, determine how much of a particular business process cycle time is devoted to real Value Added Activity - the time during the business process when work that will benefit the customer is actually occurring.

Second, determine the Total Time it takes to deliver the product, including all wait time.

Then, divide the Value Added Activity Time by the Total Time to arrive at an efficiency percentage.

The result is often a surprise for management with Value Added Time at 10% or less in many business process situations. This is something management needs to think hard and quickly about, and then take the right corrective actions.

• Thoroughly train key personnel in all aspects of cycle time reduction and quick response.
• Quantify the business impact of cycle time reduction and quick response.
• Organize and train multi-functional teams to shorten cycle time for all manufacturing, non-manufacturing and administrative processes.
• Map all supply chain processes, clearly identifying value added and non-value added activities, bottleneck, queues, cycle times, etc.
• Specifically define the barriers preventing you from achieving reductions in cycle time, and have an action plan to remove these barriers.
• Actively work with key vendors to achieve mutually agreed upon goals for cycle time reduction.
• Reduce lot sizes, changeover times and queues in all areas.
• Heavily weigh primary performance measurements and reward systems toward fast, on-time customer response.
• Precisely predict your delivery leadtime for customers and/or replenish inventories.
• Ensure that leadtimes are equal to or less than what your customers need and want.