How throughput is affected by capacity utilization
by Admin on Apr 11, 2023
The following example highlights how a recent college graduate, Kim, was quickly promoted to an unlikely position of plant manager. She brought her team, Duncan the machine operator, and Jack the production floor supervisor, together to identify the throughput issue at hand on the production floor.
As mentioned before, Kim got quickly hired after graduating college into a customer service position at a manufacturing plant. After talking to customers, managing work order invoices, etc. for a few short months, the company identified that they could give her back-end exposure to the plant floor because of her strong managerial skills. It’s not very often that a graduate is given a plant manager position.
On Kim’s first day as the new plant manager, her new boss told her that the company was in a financial bind, and she had one month to turn it around. To be as efficient as possible with her limited time, the first thing Kim knew she had to do was to understand the plant’s current status. The only way to do that was to walk among the plant operators and see the flow of production.
In addition, she was also aware that she was filling big shoes of the previous plant manager and needed to earn the trust of the employees if she was going to turn the plant around.
The first area of the shop grew semiconductor wafers. It consistently created the same output and took the same time to create it. It was the most efficient section of the shop. She had no worries there.
Then, she continued to move through each section of the shop floor curiously, watching the wafers be separated into chips. Next, the chips would be mounted into packages. At each section, Kim would talk to the operators to try and understand their positioning and start building a relationship with them. Everything seemed to be running smoothly; it didn’t make sense why this company was failing.
In the last section of the production floor, Kim noticed a man briskly walking between a machine and team members’ stations. He was furiously huffing and puffing and breathing down their necks.
The last area of the plant contained all the components that were prepared and assembled into lamps to create the luminaires. There was a very small handful of people putting together the housing structure and LED packages at their separate stations.
Kim gets a brief moment to stop the man and introduce herself. “Hi, I’m Kim the new plant manager.”
“Oh good, another person to tell me that my throughput is tanking. Don’t you think I know that? I mean look at my people. They have tape on their fingers to avoid getting blisters from assembling lamps.
“You see that machine over there? It’s running at full capacity, and we still can’t keep up. My people are working as fast as they can, but throughput has decreased by 33%.” He takes a quick breath before continuing.
“I have more people calling me every day that they can’t come into work because they have joint pain preventing them from working. Or they call to quit.” He continues to walk to the next station with a notebook in hand.
The man is obviously frustrated and not interested in pursuing the matter any further. However, she now knows why upper management is stressed about the production floor. Throughput was not where it was supposed to be. Then, Kim walks over to the machine and talks to the guy operating it. “Hi, I’m Kim the new plant manager.”
“Hey, my name’s Duncan. How’s Jack feeling today?” he says with a smirk on his face. Kim knew that earning the trust of the employees was going to be challenging, but Jack the supervisor made her think twice about how much of a challenge it was going to be.
She ignores the question and asks, “Duncan, can you tell me about this machine?”
He relates that the machine can assemble LED packages and housing structures five times faster than three team members assembling one finished product. It would complete goods at a consistent rate.
After lunch, Kim walks up to Jack as he hangs up the phone sighing loudly with his eyes closed. He proceeds to say that Dennis, his fastest assembler has to go home early today. “That means we’re only going to complete one-third of what we planned for today. Great, another reason for upper management to chew me out.”
She invites Jack into her office to talk. Jack opens up about how even though the machine is pushing through a decent amount of product, the team still can’t seem to keep up. One of his biggest problems is that the sequencing is all over the place.
At the beginning of the day, the sales team will ask for a batch of medium housing structures. Then, after a couple of hours, they’ll ask for a batch of small housing structures to come back only then and tell Jack and his team that they need a batch of large housing structures and another batch of the medium before the day is through.
Jack frustratingly lets out, “The sales guys can’t decide what they want!” All this creates a flow of “don’t think, just do,” which is extremely labor-intensive, exhausting, and absolute chaos. They’ve been working like this for months; however, it’s not practical or sustainable.
He continues to say that he needs to hire more workers who are skilled enough to do the setup or get another machine. Jack shares that Duncan spends around four hours a day prepping parts to go into the machine. He’s the only one that was trained to do the complex setup. Therefore, if Duncan was ever gone for a sick day, then the machine wouldn’t run that day, and the finished goods would decrease significantly.
Kim decides to bring Duncan into her office along with Liam, the main communicator from the sales team, to continue the conversation with Jack. “Hi, Duncan. Hi, Liam thanks for coming in. Duncan, how difficult was it to learn how to prepare parts for the machine?”
“It took a good week to get it right I suppose.”
“Jack, you said you need more people. We can’t afford to hire more, so what if we have Duncan train a few of our current operators to help with the setup? How much more product do you think you could push through that machine?”
Duncan gives a shout laugh, “I can tell you our throughput issue would be almost nonexistent.”
“Okay, so we’ll train more people to help Duncan. Liam, why does the sales department keep changing the products that need to be finished?” Kim asks. Liam explains that customers make an order, which creates the initial completion date. Then, they change their mind and want a different due date.
Liam defensively says, “It’s not our fault that they’re so many changeovers. We need finished goods as fast as possible since the backorder log is so behind. Our customers are threatening to take their business to competitors!”
Now that all the cards were on the table, Kim and the team could now decide on a plan to put into place. For the rest of the day, Jack, Duncan, and Kim put together a rough draft training plan that could be executed the next day. Plus, Liam, Jack, and Duncan were able to come to a census of a sequence that would help everyone mostly get what they wanted. One that made sense for managing the production floor more easily while completing products that the sales department needed for customers.
It was very logical that throughput would take a hit for a short time while the team members got trained, but it would be worth it. One month was all that she was given to turn this place around, and Kim wasn’t sure it was possible.
After a week of training and only a couple of days with more operators helping with the setup, the finished goods storage area was overflowing. Liam and the other sales team members were frantically calling customers to tell them that their orders were ready.
Throughput started performing at the levels that upper management was expecting. Both Jack and Kim were relieved, especially Kim because she had such a short amount of time to improve the situation. The team had gotten caught up on all the back orders and was starting to get ahead on other orders.
Even with the limited number of workers that were skilled and trained enough to set up the machine for changeovers, preparation time went from four hours per day to one and a half hours per day. Plus, the completed production time for one product went from over two months to one month.
The manufacturing company was finally able to get back on track by addressing its profitability issues. In addition, Kim was able to earn the trust of the plant team members and upper management.
At the end of a long three months of successfully operating their new system and increasing throughput, Kim invited Jack, Duncan, and Liam back into her office to review and celebrate. She wanted to hear what they had learned from this process to be sustainable in the future.
Duncan started first by saying, “You know when we trained more operators to help with the setup, I noticed fewer people quitting. The guys that I cycled between started asking more questions about the machine and the rest of the plant. I overheard one of them say that this was the first job they didn’t think about quitting after working for one day.”
Then, Jack piped in with, “Yeah, and once we finally got the sequencing right, I stopped growing grey hairs.” Everyone had a good laugh.
Kim turned to Liam since he was the last one to share and asked him what he learned. He said, “It was nice to finally meet with you guys and plan out how we were going to get orders completed instead of butting heads. By looking at the entire plant we were able properly to solve the root issue rather than react to individual issues at hand.”
Once everyone finished reminiscing about it all, Kim shared her thoughts, “What we have started is only the beginning. We have done some great work to increase our throughput. But can you imagine how much more capable this plant would be if we were able to use technology to automate some of the work we did together? By moving away from spreadsheets and paper, we would have more visibility of our constraints and resources. Plus, it would free us up to mitigate the other plant struggles.”
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