15th March 20187 Minutes

Regardless of the scale or nature of your operations, hidden capacity in manufacturing can be found far more often than you might think.

Curzon Manufacturing sector lead John Mason explains key considerations for manufacturers.

In our experience, even operations that appear to be performing well are often far from efficient. In fact, these inefficiencies have crept in over-time and become accepted and invisible. Requests for more and more capital to deliver capacity increases. High levels of unproductive inventory are the common symptoms that executives see.

One of our clients, a world-leading glass product manufacturer, was suffering from low productivity at their largest European production site and increasing their stockholding to cover poor performance. We worked with them to maximise their production capacity, allowing them to service additional demand. As a result our client achieved a multi million pound increase in operating profit, while simultaneously reducing working capital by 35%.

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What can you do to identify hidden manufacturing capacity and locked-up cash?
Challenge your operating envelope. Are plant and people operating together at their maximum, and how do you know? Improvements to equipment and ways of working will have been made over time but often there is no systematic capture and re-setting of new standards. Plate capacity is probably out of date.

Plan for success.

How much output is being lost through sub-optimal routing and low-efficiency changeovers; and are long production runs the best answer to avoid these losses? Has the best sequence been worked out to balance the need to meet customer demand and to minimise lost productive time, and when the planning is right, how good is schedule adherence to the plan? Getting it wrong will hit capacity or tie up cash in excess inventories. Or probably both.

Measures matter. Plants that appear to be performing well might not be. Have you got a handle on true performance with consistently applied definitions and accurate reporting? Are you incentivising the wrong behaviours through driving cost recovery? Carrying high levels of the wrong inventory is often an unwanted consequence of an unmanaged drive for lower unit cost.

Manufacturing is a science, not an art.

Are processes under control? How quickly and routinely does a plant establish maximum throughput of quality product at start-up, and does it stay there? To what extent is there acceptance of variability and reliance on experience and judgement to ‘coax’ the process rather than repeatable and reliable operations? For instance, focusing on Overall Equipment Effectiveness (OEE) to achieve a 2% increase in capacity on a continuous chemical products plant returned a multi-£m profitability uplift.

Eliminate non-productive time.

What is dictating throughput rate? A precision engineering client was achieving just 3% velocity through their process; a huge opportunity to compress cycle times and slash work-in-progress inventories. Are improvement efforts focusing too much on increasing the output of a single stage or machine rather than looking at the system as a whole? We helped another client to halve the throughput time of their precious metals processing activities by eliminating built-in wait time between stages and achieve a 12% increase in their return on assets.

Don’t overlook maintenance.

A plant that isn’t running is lost capacity and poor maintenance operations are often a cause. How effectively are you organising, skilling and utilising all your resources to look after your assets? Having your operators carry out standard routines for example will improve reliability and free up engineer time. Have you got the right asset strategies, information and service provision to maintain plant availability in the most cost-effective way?

Empower your team.

Manufacturing companies are reliant on front line staff for day-to-day efficient use of scarce resources. How well do your people see the opportunities to improve, how equipped are they to unlock the potential and how appropriately are they recognised for their efforts? These questions are not for Human Resources to answer. One of the biggest levers you can pull is effective engagement and development of your operational staff.

Unlocking additional capacity in manufacturing to create value isn’t just the job of Operations:
Look beyond the factory floor. What impact are other functions having on the ability of Operations to maximise their effective use of capacity? How much stoppage, rework and yield loss is as a consequence of the extended value chain? How effective are the interfaces and relationships between Operations, R&D, Engineering, and Commercial functions? We discovered with a capital equipment engineering firm that the root cause of poor performance and lost capacity in the factory stemmed from poor management in the Design Engineering function.

Customer first, but not at any cost.

Manufacturing companies’ sales teams may want the warehouse full of stock to maintain the highest service levels. But what are customers actually prepared to pay for? Is the available capacity being used to generate the most profitable returns or to just build buffers to mask performance of an ineffective supply chain? Sometimes the results are surprising. One such review uncovered the value-destruction of actively migrating customers to a new, ‘better’ product… with a lower margin.

More capital spending isn’t always the answer.

Often the accepted wisdom is that capital is needed to create additional capacity. Have all the alternatives been looked at before committing? How far can improved leadership and good practice operating disciplines take you first? We helped a specialty chemicals producer avoid a multi-million and multi-year plant build when the capacity already existed to meet their needs by optimising the product mix and de-bottlenecking the plant.


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