Being Blinded by Machine Utilization Rate

By on February 21, 2018
Being Blinded by Machine Utilization Rate

He called out to me excitedly saying, “Man, we had a really great day yesterday on the bottled water line. The equipment ran at 98% of capacity and we produced over 20,000 bottles.

I didn’t enjoy stifling his obvious joy but felt compelled to ask this question, “How many bottles did you need to produce to satisfy yesterday’s customer demand?” He said simply, “I don’t know.” Thinking that this was a teachable moment, I replied, “I don’t mean to make light of what you just told me but the fact that the equipment ran at 98% of capacity is of importance for only one company and it’s not yours. It’s of importance to the company that manufactured the equipment.

He gave me a quizzical look. I continued, “If equipment is run at top speed, producing as much product as possible as quickly as possible, rather than being run to meet customer demand, the result is overproduction. And overproduction results in wasted money.

It’s obvious that the longer a product is in a factory, as work in process or as a finished product, the longer it takes the company to realize a return on its investment in the raw materials needed to make the product. It’s equally obvious that the best way for a company to maximize its investment in these raw materials is to get the product through production and out to customers as quickly as possible.

Since the importance of adhering to a production rate that is modulated based on customer demand is so obvious, why do so many companies pay more attention to machine utilization rate? Why do we still find questions such as this one posted recently in a manufacturing discussion group?

When a manufacturing facility has excess capacity, how do you address not using the excess capacity and allowing it to be wasted? We build product to stock only so we do not squander that capacity.

We build more than our customer needs just to not waste production capacity. It’s magical thinking and it’s intoxicating. And thinking this way has a direct, negative impact on profitability.

So what are some steps that can be taken to drive out this very illogical thinking and to extract waste from production processes while moving toward continuous flow? Here they are:

  1. Build to need and not to production capacity. When need has been met, stop production. And keep telling yourself this, “It’s better to stop producing than to produce waste.”
  2. When production is stopped on a line, have your employees prepped to engage in work that will optimize their production processes. They can clean their work areas. They can check equipment. They can review their standardized work documents and think about ways of improving them. They can think about ways of reorganizing their area that would help take some of the struggle out of the work they do.
  3. Go to the line regularly and engage your employees in discussions about ways of improving their work processes. Listen to them. Respond to what they say. Show them respect. Let them know that the company needs their ideas. Show them that you understand that they are better prepared than anyone else in the organization to improve their individual work processes.
  4. Make achieving continuous flow a prime objective of the organization. Here’s a thought from Henry Ford on this issue. “We are trying to link all processes—from the final consumer back to raw material—in a smooth flow without detours.
  5. Continually look for ways of decreasing work in progress. Making this happen will require moving from push to pull production. This will result in the amount of product produced in each stage of production being governed by what the next stage in production needs, not by forecasts from production control. Here’s Henry Ford’s take on this issue, “All we are trying to do in our plant is to get one process to make only what the next process needs when it needs it.
  6. Finally, and most importantly, tell your employees that they’ve been hired to do two things, to work and to think. And let them know that, of the two, thinking is the most important. By the way, this is exactly what Toyota tells new employees. Of course, the fact that Toyota does this isn’t necessarily a reason for other companies to do it. So why do it? Here are some reasons:
    1. Any organization’s most valuable asset is the intelligence, knowledge, and creativity of its employees.
    2. Deriving value from this asset has to be intentional. It won’t happen automatically. As I stated earlier, employees need to be told that their ideas are both needed and highly valued.
    3. Employees need to be provided with easy ways to channel their ideas so they can be quickly responded to.

Achieving continuous flow. Eliminating work in process. Making full use of the potential of all employees. These should be the prime goals of any organization. St. Louis Community College’s Workforce Solutions Group has a wide variety of well-tested and highly regarded training and consulting resources that you can put to work now in support of these goals.

We’ll help you drive the specter of Machine Utilization Rate out of your company.

Let’s meet to review the ways in which our resources can be put to work in support of your drive toward higher productivity and profitability. You can reach me anytime at 314-303-0612. I look forward to a very productive discussion.

About George Friesen

George Friesen serves as Business Practice Leader - Lean Manufacturing for the Workforce Solutions Group of St. Louis Community College. He has led the College's Lean business practice area since 2000. Prior to joining the College, George worked for Maritz Performance Improvement Company. Over the past 35 years, he has served a wide variety of Fortune 500 companies, specializing during the past eleven years in Lean Manufacturing, focusing especially on the 5S System, Lean leadership and thinking processes, Value Stream Mapping, and Lean team building. George is a graduate of Washington University (AB), Webster University (MA), and United States Air Force Flight Training.

You must be logged in to post a comment Login