By Steven A. Melnyk and R.T. "Chris" Christensen

In the previous column, we began an exploration of the basic but often confusing concept of capacity. In this month's column, we focus on one topic within capacity &endash; the concept of setups and setup times. Like capacity, this is one area with which every manager has had experience but which few really understand. And like capacity, it is both critical and a major source of confusion and frustration.


What is setup?
Before we can define setup, it is important to note that setup has two distinct meanings. The first meaning pertains to capacity as a source of demands placed on capacity. The second deals with the cost implications of setup. This latter definition is most frequently encountered when dealing with lot size calculations (e.g., the famous or infamous economic order quantity or EOQ). In this month's article, we will focus on the capacity aspects of setup.

As previously noted, capacity is finite. That is, there is only so much capacity available in any time period. This finite amount of capacity is consumed by such demands as production, maintenance, idle time and setup time. There is an inverse relationship between setup time and capacity availability. The more time that we take for setup, the less time that is available to meet the other demands placed on capacity. On the other hand, the less time that is used for setup, the more capacity that is available to meet the other demands.

Given the importance of setup time, what exactly is it? We will define setup time as the amount of time (which often translates directly to the amount of capacity consumed) that it takes to change a machine or work center to go from the last part of a production lot to the first consistently good part of the next production lot. Within this definition, the key words are amount of time and first consistently good part. Setup does not end until we are able to consistently produce parts meeting our specifications. Any parts which are rejected because they do not meet our specifications during this initial period are considered part of setup.

What setup time recognizes is that the amount of capacity consumed is subject to some degree of variation. This variation occurs because setup times are themselves the result of a process which typically consists of four major types of activities. Whenever we begin to setup a work center or machine, we must first get the necessary items. This first step consists of finding and reviewing the specifications and processing information for the part to be next produced. We must also locate the necessary tooling and verifying so that the tooling is able to process the necessary number of parts (i.e., there is sufficient life available in the tooling). Next, we must physically tear down the previous setup and rebuild the equipment (by inserting new tooling) so that it can produce the necessary items. The third step involves positioning the parts and ensuring that the items to produce are correctly lined up. Finally, there is adjustment. This adjustment activity affects both the parts and the tooling. It is here that we clamp down the tooling, run a few parts to test the positioning, and reposition the tooling if necessary. We continue this process until we are sure that the tooling is correctly positioned and that we are now able to consistently produce quality parts.

We can see from this brief description that these four activities can be sources of variability. For example, if the tooling and the processing information is not readily available near the work center, we expect that the operator will be forced to leave the work center while that person searches for the necessary tooling and information. In practice, it is difficult to predict how much time this searching activity will take. To understand why, consider the search process that many operators seem to follow when searching for tooling and processing information (the following process description is based on our experiences and observations on the shop floor, and it can be verified by most shop foremen).

The first step in looking for tooling and processing information is for the operator to take a pit stop. This is inevitably followed by a smoke break (for those so inclined) and a coffee break for the others. Then, the operator inevitably feels the need to talk with people that they meet while looking for the necessary items. Often these conversations cover items such as the problems of finding the lost tools as well as the status of last night's football game (everywhere except in Cleveland). Eventually, the process sheets and the tooling is located. The operator can now proceed back to the work center (again at his own pace). However, this description is only appropriate if the tooling and/or the process sheets are ready to be used (e.g., the tooling is in good condition and the process sheets are up to date). If there are problems with any of the items to be located, then it is almost impossible to predict the total time needed to find the right items with any degree of certainty.


Internal activity, external activity, and capacity usage
At this point, you might be wondering whether there is any relationship between setup time and capacity usage. The time needed for the four activities previously described does not necessarily consume capacity. To make the link, we have to introduce the concepts of internal and external activities.

An internal activity describes any activity that must be done while the machine is sitting idle (i.e., not making parts). Internal activity reduces capacity availability. In contrast, an external activity describes any activity that can be done while the equipment is producing parts. Setups which take the form of external activities do not reduce capacity.

At this point, we can see that the impact of setups on capacity usage is strongly dependent on the percentage of time taking the form of internal activities. For example, suppose that the total setup time is 150 minutes (2.5 hours). Of this total time, internal activities make up 120 minutes, while external activities consume only 30 minutes. Under these conditions, we can see that one setup reduces capacity by 2 hours (120 minutes) because the equipment must be stopped and idle while the setup is taking place.


Why worry about setups?
There are several reasons for being concerned about setups. First, setups, through their internal activities, can affect capacity availability. Second, setups can act as a source of variability (i.e., unpredictability and uncertainty). In addition, when faced by large setups, most managers react by increasing the lot sizes or run quantities. Finally, it is important to remember that setups are fundamentally non-value-adding but necessary activities. That is, a setup is needed because it enables us to produce those parts that the customers want. It is the act of producing the parts that is the real source of value to the customer. Customers do not pay for setups. As a result, we are obligated to keep setups to a minimum and control any variance present in them.

To manage setups, there are certain basic things that we must do. We must first study the existing setups without judgment. This means that we must study what is being done without criticizing or judging. Often this means that we document the setups using video cameras. Next, we must break down the setup process into the four steps previously described. In addition, we must identify the distribution of time for each step. This means identifying not only the mean time, but also the variance. Having done this, we can break down the setup times into the two major components of internal and external activities. Having done this, we can focus on two major activities: (1) identifying the sources of variability and reducing or eliminating them; and (2) converting internal into external activities and then reducing the amount of external setup.

Next month, we look at setups and lot sizing.

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