Bruce E. Jacobs04.04.08
Radically Improving Output Capability: Freeing-Up Encumbered Capacity
By Bruce E. Jacobs
Like most enterprises that make products, manufacturers of medical devices and equipment are asset intensive: Major sums of capital are invested in physical plants, property and equipment, manufacturing processes and inventory. As products become more sophisticated and complicated, the processes used to manufacture them become more capital intensive. Either new or more modern equipment becomes necessary to complete the manufacturing process. Rather than make investments in new manufacturing capabilities that are not a core competency, many manufacturers may decide to find quality suppliers with specific expertise and manufacturing capability. Using a supplier whose core competency is the manufacturing capability and expertise your company does not have allows you to focus and invest in the core competencies your company does have. This generally results in least total cost for the items being produced until the capabilities become one of your core competencies.
But does the new equipment operate at a rate so much different than your existing equipment and manufacturing processes? Has its performance already degradated to the level demonstrated by your existing equipment, and how would you know?
The Case for Measuring Reliability
If you measured reliability, you would be on track to optimizing the capability, capacity and use of your equipment and manufacturing processes and would be able to work with much lower inventory throughout the supply chain. Reliability measures how well your equipment and manufacturing processes are doing the right things right.
Manufacturers that understand the principles involved in reliability demonstrate higher capacity usage from greater uptime, higher run rates and better product yield, which lowers the total cost of operations because of greater output for less cost. Encumbered capacity is no longer imprisoned by the failure of the equipment and manufacturing processes to operate when they’re needed, produce product at their demonstrated capable run rates and provide the quality of product and yields when producing. Consequently, when reliability declines, inventory levels increase to compensate for the lower reliability performance, direct and indirect costs increase and product quality and material yields decline, requiring more product to be manufactured to compensate for the yield loss.
The principle of reliability is to drive the manufacturing assets to perform at the highest capable output, produce at the specified run rate and manufacture product with the highest quality and yield. Figure 1 defines how the principle of reliability is measured in its simplest form. Application for specific manufacturing processes will require modification to the measurement’s calculation.
The objective is simple: Make the asset work. Manufacturers invest millions of dollars in too many manufacturing assets and processes that are not required to do the right things right. When measuring reliability, if uptime, dependability or first run yield (FRY) drops to less than 1, the reliability level drops to a range of 90% to 99%. If two of the dimensions of reliability drop to less than 1, the level declines to a range of 80% to 98%. If three of the dimensions drop to less than 1, the level of reliability ranges from 73% to 97%. If any of the three reliability dimensions declines to the range of .8, .7, .6 or lower, reliability performance degredates at an accelerated rate.
To put the principle of reliability in perspective, most of us would replace our primary sources of transportation immediately if reliability dropped below 90%, yet we allow large capital investments in equipment and processes to limp along at reliability rates ranging from 30% to 60%. If you calculate an hour of manufacturing process time, every reliability point increase results in order-of-magnitude capacity gains and cost improvement. Improving reliability from 45% to 60%, or 15% points, is a 33% improvement in reliability that equates to higher output, greater capacity usage and better yields for the same embedded cost that’s incurred at 45%.
As reliability improves, extra capacity becomes available, costs are lowered and inventory can be reduced. Moreover, enterprises that focus on reliability tend to be less concerned about labor efficiency because, when reliability increases, labor efficiency and utilization increases.
To be effective, the reliability performance measurement must become a major reporting metric, generated and tracked in manufacturing. At the end of the operating day, each manufacturing process determines its reliability performance. During the day’s operation, downtime is recorded when the equipment is scheduled to be in operation, failure to produce at the demonstrated scheduled production rate is documented and product yield and defects are recorded. In addition, the reporting mechanism used to record reliability identifies the causes of reduced uptime, dependability and FRY, which are analyzed to correct and eliminate the causes and thereby improve process reliability.
Of the numerous causes of poor reliability, most are never recognized but contribute to poor performance of the reliability dimensions of uptime, dependability and FRY. Changeovers, cleanouts and equipment setups are major factors contributing to the poor performance of all three dimensions. Poor material quality or substitute materials contribute to the decline in reliability. Other factors include employee inexperience, knowledge and training, tooling wear, out-of-alignments and adjustments, lack of maintenance, breakage, inappropriate settings, off-spec parts, supporting process failure and inconsistent work practices where each operator adjusts the equipment differently.
One caution about measuring reliability: When most companies begin measuring it and are surprised at how low it is, they modify the measurement so it doesn’t look so terrible. The issue is not what the baseline reliability performance measurement is, but how to make reliability performance improve. Improving reliability will yield order-of-magnitude business and economic gains as the encumbered capacity that couldn’t be used is made available.