SUMMARY
In this article we address the issue of flexibility, understood as the ability to supply small quantities of varied products within short delivery times, and how reducing manufacturing changeover times makes it possible to do this economically.
INTRODUCTION
One of the pillars of Lean, originating from the Toyota Production System, is Just-In-Time, which can be summarized as the ability to produce the exact quantity of the product at the right time, as the customer wants it.
The current reality of most markets, in a trend that has been evident for a long time, points to the need to produce a wide variety of different products, in ever smaller quantities and with ever shorter delivery times.
In other words, developing the ability to efficiently produce small and varied batches is particularly important for the survival of manufacturing companies.
Next, we’ll see how different production lot sizing paradigms have been developed and applied over time.
THE MASS PRODUCTION PARADIGM
The mass production paradigm states that the greater the quantity to be produced, the lower the unit cost of production (see figure 1). This is due, according to the rules of the paradigm, to the dilution of investment, setup, start-up, and non-quality costs, among others.
We can summarize this paradigm in the phrase “the bigger the production batch size, the better!”
Figure 1
We can understand the acceptance of this paradigm given the simplicity of the (intuitive) reasoning that supports it.
The paradigm of mass production remains rooted in many organizations, where the dominant thinking continues to favour the production of large series, even when the realities of the market point to the need to do otherwise.
In fact, a natural and inevitable consequence of adopting this paradigm is an increase in stock levels, since the greater the quantities produced for the same sales the greater the resulting stock. Another consequence, which stems from the previous one, is an increase in lead-time (understood as the time elapsed between the start and the end of the process).
In this paradigm, customer service is achieved:
In the case of make to order, with very long delivery times (consequence of lead-time).
In the case of make to stock, with short delivery time, but at a high inventory cost (a consequence of batch sizes).
Given these realities, the paradigm of mass production was questioned, and other alternatives were proposed.
THE ECONOMIC ORDER QUANTITY PARADIGM
Developed by Ford W. Harris (at Westinghouse) in 1913 and published by R.H. Wilson, this model advocates calculating an economic order quantity that minimizes total cost. This total cost is the sum of holding cost and ordering (or setup) cost, as shown in figure 2.
Figure 2
R.H. Wilson proposed the following formula for calculating the aforementioned “economic order quantity”:
Being:
Q* = economic order quantity
D = annual demand quantity
K = fixed ordering or setup cost, regardless of quantity
h = annual holding cost per unit
This model which, unlike the mass production paradigm, has the advantage of also considering the cost of holding stock, nevertheless has some limitations that complicate the application of a supposedly simple formula:
The difficulty in estimating a setup cost (note that the model was originally developed for purchasing products from external suppliers, where estimating an ordering cost is easier);
The not always consensual and easy way of calculating the cost of holding stock, which is often underestimated.
Perhaps because of the difficulties and limitations mentioned above, it is common to find companies using batch sizes (dimensioned using Wilson's formula) that are completely out of date and out of touch with reality.
The difficulty in periodically (re)calculating the economic quantity (the "ideal" batch size) inhibits companies from adapting to dynamic competitive environments, negatively impacting their flexibility.
FLEXIBILITY IN THE TOYOTA PRODUCTION SYSTEM
The Toyota Production System proposes a completely different approach to those described above.
According to the Toyota paradigm, rooted in the genesis and history of the company, stock is a waste to be combated incessantly, as it consumes scarce resources and lengthens lead-time (or time line, in Taiichi Ohno's description).
Therefore, and contrary to common sense, production batches should be as short as possible, as long as they don’t affect the time needed to produce the demand).
The constraint on reducing batch size is now solely capacity.
Figure 3
In practice, the time available for changeover is obtained by subtracting the time needed to produce customer demand from scheduled time (with the strictly necessary margin to cover inefficiencies). Dividing the time available for changeover by the average changeover time, we can determine the number of changeovers that can be carried out and, consequently, the production batch size.
Being:
D = Demand
Ts = Scheduled time
Td = Time to produce demand (consider OEE)
Ta = Time available for changeover
Tc = Average changeover time
N = Number of changeovers
L = Lot size
You get:
Ta = Ts – Td
N = Ta / Tc
L = D / N
This paradigm led Toyota and later other Japanese automotive companies to make a continuous effort to reduce changeover times. This reduction was used to improve flexibility, unlike to what was practiced for years by Western companies, which used changeover time reduction to increase capacity and continue producing in large batches.
CHANGEOVER TIME REDUCTION
In the early 1950s, Toyota acquired stamping presses equipped with quick die changing systems and began a changeover time reduction program called Quick Die Change QDC. The method developed was based on TWI’s ECRS – Eliminate, Combine, Rearrange, Simplify.
In the 1960s changeover times that previously took 3 to 4 hours were reduced to 15 minutes on average. By the 1970s, changeover times had been reduced to 3 minutes.
Shigeo Shingo, an industrial engineering consultant, took part in one of these improvement activities at Toyota in 1969. He later compiled the knowledge obtained in a method he named Single Minute Exchange of Die (SMED), or “die change in less than 10 minutes (single digit)”. This method was disclosed by Shigeo Shingo in his "A Revolution in Manufacturing: the SMED System" book published in 1981.
The method, as explained by Shingo, comprises the following steps:
Observe the current changeover method.
Separate internal and external activities (internal activities are those that can only be carried out with the machine stopped; external activities are those that can be carried out with the machine running).
Convert, where possible, internal activities to external.
Simplify internal activities.
Simplify external activities.
Document the new method.
Repeat the improvement cycle.
The effect of applying SMED is summarized in the following diagram:
Figure 4
SMED, which originated in the automotive industry, in presses for stamping body parts, was gradually applied to other industries and, later, to other activities such as healthcare (operating theatres), hospitality, and sport (Formula 1…), among others.
It can also be used advantageously in preventive maintenance operations.
As mentioned above, the SMED Single Minute Exchange of Die concept implies changeovers in less than 10 minutes (single digits). The evolution of the concept gave rise to OTED One Touch Exchange of Die (changeover in less than 60 or 30 seconds, depending on the source) and Zero Changeover (instant changeover).
IN SUMMARY
The competent and continuous application of SMED leads to a considerable reduction in changeover times and, consequently, a drastic reduction in the size of manufacturing batches and stock levels. This increases the flexibility of the company, which will be in a position to better serve its customers by economically producing a greater variety of products, in small quantities and with short delivery times.
REFERENCES
Shigeo Shingo
"A Revolution in Manufacturing: the SMED System "
CRC Press
ISBN-13: 978-0915299034
ISBN-10: 0915299038
Kenichi Sekine; Keisuke Arai
"Kaizen for Quick Changeover: Going Beyond SMED"
Productivity Press
ISBN-13: 978-1563273414
ISBN-10: 9781563273414
Michel Baudin
“Lean Logistics”
Productivity Press
ISBN 1-56327-296-2