In working with our manufacturing and supply chain clients, I frequently encounter folks who simply are unaware of the effects that production batch and transfer batch sizes have on other elements of their business that they are trying to manage.
If you don’t understand the cause-and-effect of your decisions, you will frequently make decisions that produce unexpected negative effects (UDEs or UnDesirable Effects). Worse! Your management team may not even be able to correlate Decision A with Effect B.
Here’s an excerpt from a letter to one of our clients as an example:
…[I]f these deliveries are due on different dates, why does [company name redacted] want to enter a production work order for the full quantity? Typically, any given work order may have only one Required Date—and these quantities are clearly required on different dates.
I’m not a big fan of traditional MRP (Material Requirements Planning). Nevertheless, if it were to be used, even traditional MRP would see the demand on different dates and, depending upon the MRP options on the routing (e.g., Batch Size, Max Qty, Min Qty) and the Planning Period Days, MRP would then suggest several different production work orders to satisfy the demand based on the required dates.
AVOIDING GREEN GIANTS
Satisfying the demand incrementally actually may help prevent another issue from arising, as well: Big orders are generally good for business. However, a big order may also end up becoming a “green giant” on the shop floor. A “green giant” is a big order being processed in a single batch that is blocking the timely completion and delivery of several other customers’ orders that may be smaller, and could easily have been delivered on time, were it not for the “green giant” standing in the way and occupying the required resources. Building the large order incrementally ends the “green giant” scenario.
Does your company build the whole order in a single processing batch?
UN-DESIRABLE EFFECTS (UDEs)
If it does, the large batch size is also tending to increase your WIP (work in process) inventory. This, in turn, according to Little’s Law, increases your cycle time (CT) for production, as well. This is especially true if, as you say you do, you make your transfer batch between work centers the same size as your production batch.
Little’s Law states that WIP is directly correlated to throughput time and cycle time, where throughput time (TT) is the average output of a process per unit of time, and cycle time (CT) is the average amount of time from when a job is released for production until it exits the production process. The formula is:
WIP = TT * CT
For example, if a process produces 3.1 units per hour (TT), and the total time from release to the process until the exit from the process (CT) is 2.8 hours, then the average queue length or amount of WIP is 3.1 * 2.8 = 8.68 units.
However, if the cycle time (CT) is 20 hours, then the average WIP (or queue length) must be 3.1 * 20 = 62 units.
USING LITTLE’S LAW TO REDUCE CYCLE TIME
Little’s Law may be rewritten as:
CT = WIP / TT
Therefore, you can manage WIP lower (by releasing the shop floor and processing in smaller batches), and as long as TT remains unchanged, CT also decreases.
Because as WIP falls, queue time and wait time decrease. Things being processed on the shop floor spend less time sitting—non-value-added time—and more time actually being worked on—value-added time. This is one of the clear principles of LEAN, but it doesn’t require a LEAN implementation to gain the benefit. It simply requires understanding Little’s Law and a willingness to reduce process and transfer batch sizes.
WHAT ABOUT SET-UP TIME and EFFICIENCIES
Could reducing batch sizes lead to more set-up time?
Clearly, the answer is, “Yes.”
However, additional set-up time is only critical at two points:
- At a CCR (capacity constrained resource)
- At a non-CCR when the sum of run time and set-up time begins to exceed available time (in which case you begin making the non-CCR a new CCR)
At a non-CCR, set-ups are essentially “free,” in the sense that (until the point of number 2 above is reached) additional set-ups add nothing to your operating expenses or to your truly variable costs of production. “Efficiencies” at non-CCRs are a mirage and earn nothing for the company. Not doing additional set-ups at a non-CCR actually saves the company no money at all.
I know this is a long answer to your question, but I believe these matters are worthy of consideration and that how a company executes is even more important than how they configure their ERP system.
Let me know if you have further questions or concerns on this matter.
Now it’s your turn
So, how are you managing batch sizes, WIP inventory levels, and cycle time? We would be delighted to hear your comments. Please leave them below, or feel free to contact us directly, if you prefer.