Why Managing Efficiency Matters
Next time you are in the drive-thru at your local McDonald’s, see how long it takes to place your order and leave with your food. A few years ago, McDonald’s created an advertising campaign where you could get your food and go in 1 minute or less. Promotions don’t last forever, but McDonald’s does seem to have an internal 90 seconds drive-thru service rule.
Now compare that time to the drive-thru at Culver’s. They have you pull ahead and wait for someone to walk your meal out to you: a process that is considerably slower. What about your local cable TV company? When you call them to change or cancel your service, how long do they keep you on hold before you get to talk to a human being? 1 minute? 2 minutes? 3 minutes? Do customers really care about quick service? You bet they do! We all are sensitive to waiting on hold, to delays, and to the setting of poor expectations. Servicing customers is important to sustained business. At The Lake Companies, we have always said, “It takes only one oh s#*t to wipe out a thousand at-a-boys.”
The faster and more efficiently businesses can get things done, the more customers are going to take notice, the more you will attract, the more you will retain, and the greater the cost savings. Speaking of efficiency, ever wonder why Southwest Airlines flies the same style jets?
According to Fortune magazine, Southwest Airlines is “the only major airline that primarily flies one basic type of plane. Almost its entire 689-plane fleet consists of Boeing 737s in two varieties, the 737-700 and the newer 737-800.”
What could be the reason for this? Actually, there are many reasons, but the result is efficiency and that translates into greater service and speed to the customer. Using one type of plane means that pilots and maintenance crews only need to be trained on one plane. When parts are needed for service, Southwest only needs to maintain stock for one model of plane. Plus, in the event that a plane needs to be substituted, there is an exact model readily available somewhere nearby. Less variability designed into the Southwest service translates into efficiencies that lower costs and improve service for the customer.
Efficiency in Manufacturing
In manufacturing, efficiency is becoming a no-option strategy.
Former United States Energy Secretary Dr. Ernest Moniz says, “Smart technologies, such as sensors, can help manufacturers better design, measure, predict and control all aspects of the manufacturing process. As a result, these traditional manufacturing processes become more productive and efficient.”
Much of what is referred to with the term “smart technologies” leans heavily toward the lightning ascent of the Internet of Things (IoT). IoT is about making your organization more efficient and has the technology to provide a complete view of your entire production line. Jeff Immelt, CEO of GE, says that the Internet of Things is a misnomer and should be called “no more unplanned downtime.” If you can reduce downtime by 10%-20% a year by investing in new technology, your production business could potentially save millions of dollars.
The majority of manufacturers do not measure performance and manage machine downtime. Unfortunately, downtime is overlooked as a cost of doing business. Innovative technologies, like The Lake Companies’ Shop-Trak software, easily allow the tracking of machinery, work cells, etc., which provides management clarity to measure and manage equipment, as well as resource efficiency, quality, and utilization. These three measures result in the calculation of Overall Equipment Effectiveness (OEE).
Consider a smaller manufacturer with just 30 CNC machining centers. A 10%-20% reduction achieved by managing downtime alone could result in converting $800K-$1.6M a year of costs attributed to idle machine time, back into productive time, parts, sales, and profits. The numbers are staggering as the size of the company increases. Once saved, this is not a one year benefit. The savings can go on year after year. Downtime happens for a number of reasons, including waiting for parts, finding a supervisor to get the next job to work on, hunting down paperwork for the next job, etc. This is not something that impacts just machining centers. Waiting for parts can shut down an entire work cell or assembly line as well.
Smart manufacturing utilizes Big Data and network communications to increase the efficiency of manufacturing processes. The Lake Companies has been working for years to make our customers more successful by becoming more automated and more efficient. One way is by introducing a smart manufacturing solution called Beacon-Trak®. Beacon-Trak® infuses efficiency into the production environment with the strategic placement of beacon devices, allowing managers armed with tablet computers to be constantly updated on machines, workers, and jobs when they are in their office, having a production meeting, or walking about the production floor. For more information on our breakthrough technology, check out our Beacon-Trak® page or visit a recent blog post on the technology. Beacon-Trak® represents just one component of our ecosystem of solutions for manufacturing organizations to achieve greater efficiency. Putting technology into the hands of management is the next evolution in being an even more successful, efficient, and profitable manufacturer.
Embracing Smart Manufacturing
Smart manufacturing technology is something to seriously consider. Many manufacturers supply large customers who demand price reductions of 2-3% per year. Those customers expect suppliers to aggressively become more efficient and pass that savings on to them. Unfortunately, many manufacturers are challenged to find ways of cutting costs year over year. Many end up just taking the revenue hit and damaging their own profits as a result. This doesn’t need to happen.
Fortunately, you can very easily turn cost centers (unproductive downtime of your machines) into profit centers. This reduces the costs those machines contribute to your overhead pool on a job by job basis. The result is lower costs allocated to all jobs, combined with more utilization of machinery, equipment, and resources. It all adds up to greater sales and greater profits.
You can easily be at the leading edge of the new era of management. This new era is what we call MOM (Manufacturing Operations Management). MOM can provide tremendous benefits that will create an Unfair Advantage for you over your competitors. Is there ever a right time to take the most profitable customers away from your competitors? The answer is YES! That right time is any time you have a window of opportunity to do so. MOM will give you an excellent window to do that for the benefit of your company. If you ignore the window of opportunity, you might as well hand your competitors your best customers and your business.
A prime example is when aircraft manufacturer Boeing requested that its suppliers share the pain of dealing with government and organizational customers that were demanding lower prices with less favorable contract terms. When their U.S.-based supplier balked, Boeing replaced them with a Canadian manufacturer. Now the landing gear that is responsible for holding up the weight of giant 777 airline jets is made by a much smaller business. How small? Well the 7.5 ton, 14 foot high landing gear is assembled by two guys. Well technically four—two mechanics, a quality inspector, and a site leader. Boeing used competition to its advantage by demanding a lower price. Fortunately for them, it found the efficiency with a smaller manufacturer. Who are your customers and when will you have to make the decision to either cut out the fat in your organization or risk the loss of significant customers?
Key Performance Indicators are nothing new and every business should be tracking numbers that are important and specific to their industry. The objective is to keep improving and stay ahead of the competition, whether it’s keeping track of productivity, rejects, cycle times, downtime, OEE, and more. The key to small and medium-sized businesses is you can be much more flexible than the big guys. You can bring in improvements far easier than your larger competitors. You can have an Unfair Advantage over anyone. Taking advantage of technologies like IoT will allow you to better manage your shop floor by bringing real-time clarity to your decision makers. That clarity makes it easier to manage and stay on top of your internal operations to make sure you are hitting peak production levels.
The Lake Companies would like to help your manufacturing business evolve, become more efficient, and create an Unfair Advantage for you. We offer an integrated ecosystem of intelligent, interconnected enterprise software solutions. Contact us today to see how we can make your organization more efficient and successful.