To stay competitive, today’s manufacturing companies often focus on cost reduction. In terms of the literature on this subject, the Goal by Eliyahu Goldratt remains one of my favorites. Written nearly 30 years ago, the story of the book is still as relevant today as it was then.

The book charts a manufacturing plant manager’s struggle to cut costs and create local efficiencies while his factory continues to lose money. He eventually saves his factory (and incidentally also his marriage) by understanding that two bottlenecks are limiting the factory output. By optimizing the output, reducing batch sizes and adjusting the flow of goods around them, the hero reduces his lead time dramatically. The ‘theory of constraints’ that Goldratt discusses in the book may be less trendy now, but the principles of modern lean manufacturing can be found throughout.

Lead times – not just about the shop floor
We notice that many of today’s manufacturing companies still focus on reducing operation lead times. However, we frequently see that real benefits can also be achieved by looking at the holistic, overall lead-time. Rather than concentrating solely on local machine-orientated optimization, taking into account administrative processes and reducing planning lead-times can have a major impact.

Office operations tend to be neglected
Diving deep into the overall lead time, Rajan Suri saw that more than half of the total lead time is consumed by office related activities like quotations and order processing. (See: “Beyond Lean: It’s About Time!” by R. Suri, 2011). He also revealed that these processes can account for more than 25% of total product costs.

Integrated software solutions can manage and streamline these business processes, simplifying requests for quotes, item information management and product quality registration. If they can then be twinned with a workflow system to ensure efficient execution, lead time can be dramatically reduced.

Compare run time with the manufacturing lead time
Companies also tend to focus on reducing the ‘run’ times within the factory, while the overall manufacturing lead time consists of planning time, waiting, queuing, etc. However, this is unlikely to deliver the results they’re looking for.

By calculating the run time (per item) divided by the queue time, it’s possible to create a factor expressing how fast a product flows through the factory. Having this available via a management information dashboard or other reporting system in your ERP can be a big help in highlighting disproportionate waiting times.

One of our customers recently analyzed their shop floor and discovered the resulting decimal to be very low indeed. Rather than giving attention to increasing the machine running time, focus on reducing the queuing time quickly improved the ratio. With smaller batch sizes and better capacity planning to keep orders off the shop floor, the company was able to significantly improve the speed at which orders moved through the factory. Looking at the bigger picture gave them the lead time reduction they were looking for.

Achieve your goal
Anno 2012, and the Goldratt book is as relevant as ever. A thorough investigation of the processes affecting your overall lead times can still deliver significant returns. The key is to look beyond the shop floor, considering the effect that every link in the chain has on the time it takes you to deliver your product.