An Epicor® White Paper Four Quick Ways To Unlock Hidden Manufacturing Capacity 1Introduction With the economic upturn, the times of low volume and rationalization are over. Volume is steadily rising for many, and manufacturers are now dealing with a different problem than cost-cutting—how to meet increasing demand after resource cuts and no new investments in productivity improvement in recent years. With your manufacturing operations already running close to capacity, the traditional ways of gaining new capacity is to make large capital investments, or to outsource some of the new manufacturing demand. These are challenging tactics as getting new resources in line will take time and there’s no guarantee that the numbers will continue to climb. You do, however, have a third option available to you. You can meet the increased demand by freeing up needed resources within your current operations. The key is identifying areas of improvement within your existing operations with real-time manufacturing information and accurate, consistent metrics to make improvements in efficiency. The Steps Step 1: Reduce downtime losses In an industry where reliability is key, and downtime hits your bottom line hard, reducing losses can yield great results. In addition to cost savings, reducing downtime leads to proportional increases in manufacturing capacity. Best practices implemented on a single line can be easily transferred to other lines, multiplying the impact and finding even more needed capacity. Efforts to reduce downtime routinely have a high probability of success. Sometimes it is possible to eliminate an entire loss category with a simple change in work practice. For example, many companies have discovered that it can be very effective to stagger break and lunch intervals; others have eliminated a specific loss category entirely by replacing small parts, or increasing the frequency of routine maintenance. Step 2: Reduce minor stops Minor stops are short-duration hesitations and stops, usually less than five minutes— short enough to be “unnoticed” but long enough to disrupt the business and efficiency. These can add up to significant loss of manufacturing time, especially if you don’t have visibility around the number of and reasons for minor stops. If you have the right tools in place, it’s reasonable to expect a high level of success when attacking minor stops: 50-75% reduction. However, remain cautious because minor stops can reappear. To sustain gains, world-class manufacturers consistently examine root-cause indicators and continue to make adjustments. Step 3: Eliminate production variability and quality loss Production consistency translates into a more reliable and predictable supply chain, increasing the rate of first time ‘perfect orders’ while cutting time lost due to rework. Stable lines run at higher production rates consistently, resulting in higher volume. Four Quick Ways To Unlock Hidden Manufacturing Capacity 2Quality loss and rejected product has a double impact: material and labor. A standard overall equipment effectiveness (OEE) calculation includes a reject as a lost opportunity for production which impacts capacity. Therefore, when calculating OEE, it is important to consider the cost of material and labor. There is no “typical” operation, and the range of quality variation can be 1% to 5% or even as much as 10% of total production. Consider this: the cost of material can be four times the cost of labor. From a pure cost perspective, a 1% first-pass reject rate translates to 4% loss. You can vary the analysis to reflect production improvement, cost reduction and probability of success. Step 4: Establish priorities to tackle loss It’s important to realize that not all downtime is equal. Applying cost information with the same analysis may reveal an entirely different perspective—the cost of downtime. A cost-of-downtime analysis can be used to establish priorities with a financial context. Moreover, a probability of success analysis across loss categories will prepare operations professionals to prioritize efforts, and achieve sustainable improvements. Operations excellence professionals generally focus on lean practices to establish production priorities. When they consider cost factors as part of the evaluation, they have the ability to focus on those areas that will have the highest impact on the financial performance of the company. To quantify the financial impact of each category, it is necessary to understand material and labor cost components. Labor-intensive operations have a greater risk of downtime throughout the entire manufacturing process. Meanwhile, operations with high material costs usually experience significant material loss near the end of the production line. Waste and material loss due to rework may be more significant than the cost of labor. Conclusion The best and easiest way to find hidden capacity is to examine operations with systems that monitor and analyze manufacturing operations in real-time. These systems provide crucial information to help you find lost capacity, and avoid costly investments for new machinery, additional labor, or contract manufacturing. Four Quick Ways To Unlock Hidden Manufacturing Capacity Latin America and Caribbean Blvd. Antonio L. Rodriguez #1882 Int. 104 Plaza Central, Col. Santa Maria Monterrey, Nuevo Leon, CP 64650 Mexico Phone: +52.81.1551.7100 Fax: +52.81.1551.7117 Australia and New Zealand Level 34 101 Miller Street North Sydney NSW 2060 Australia Phone: +61.2.9927.6200 Fax: +61.2.9927.6298 Asia 238A Thomson Road #23-06 Novena Square Tower A Singapore 307684 Singapore Phone: +65.6333.8121 Fax: +65.6333.8131 Europe, Middle East and Africa No. 1 The Arena Downshire Way Bracknell, Berkshire RG12 1PU United Kingdom Phone: +44.1344.468468 Fax: +44.1344.468010 Worldwide Headquarters San Francisco Bay Area 4120 Dublin Boulevard, Suite 300 Dublin, CA 94568 USA Toll Free: +1.888.448.2636 Direct: +1.925.361.9900 Fax: +1.925.361.9999 Contact us for more information on Epicor Products and Services +1.888.999.6995 firstname.lastname@example.org www.epicor.com About Epicor Epicor Software Corporation is a global leader delivering business software solutions to the manufacturing, distribution, retail, and services industries. With more than 40 years of experience, Epicor has more than 20,000 customers in over 150 countries. Epicor solutions enable companies to drive increased efficiency and improve profitability. With a history of innovation, industry expertise, and passion for excellence, Epicor inspires customers to build lasting competitive advantage. Epicor provides the single point of accountability that local, regional, and global businesses demand. For more information, visit www.epicor.com. This document is for informational purposes only and is subject to change without notice. This document and its contents, including the viewpoints, dates and functional content expressed herein are believed to be accurate as of its date of publication, October 2013. However, Epicor Software Corporation makes no guarantee, representations or warranties with regard to the enclosed information and specifically disclaims any applicable implied warranties, such as for fitness for a particular purpose, merchantability, satisfactory quality, and reasonable skill and care. As each user of Epicor software is likely to be unique in their requirements in the use of such software and their business processes, users of this document are always advised to discuss the content of this document with their Epicor account manager. All information contained herein is subject to change without notice and changes to this document since printing and other important information about the software product are made or published in release notes, and you are urged to obtain the current release notes for the software product. We welcome user comments and reserve the right to revise this publication and/or make improvements or changes to the products or programs described in this publication at any time, without notice. The usage of any Epicor Software shall be pursuant to an Epicor end user license agreement and the performance of any consulting services by Epicor personnel shall be pursuant to the standard services terms and conditions of Epicor Software Corporation. Epicor is a registered trademark of Epicor Software Corporation. All other trademarks mentioned are the property of their respective owners. Copyright © 2013 Epicor Software Corporation. All rights reserved.