Almost every segment of manufacturing is being affected by the downturn in the economy. Some are in a full crisis. I was at the site of a prospect two weeks ago. Their demand is low and their warehouse inventories are high. The manufacturing facility is running at about 25% of the capacity that is was only a year ago. Is this the time to put your head down, nose to the grindstone, work and tough this thing out saving every penny? Well I have to admit that is what most of us should do with our own personal spending – but is a manufacturing facility the same as your personal household?

I think not. A manufacturer makes money by producing and selling something. The manufacturer should be selling the unit for more than it cost to make it to be sustainable – but a manufacturer cannot save their way to profits. Cutting and saving leads to antiquated methods and the inability to adapt. A manufacturer must make their product and sell profitably in bad times as well as good. The opportunity that presents itself in lean times is to get good at producing exactly what will sell, when it will sell, at a cost lower than the selling price.

Let’s go back to our manufacturer that is at 25% of last year’s production levels. This manufacturer is doing a lot of things right. They are reducing the warehouse inventory, bringing work back into the plant from contract manufacturing, and they are running less and taking “Dark Days” where they shut down the factory for a week or more per quarter. But can they increase company profits by better manufacturing performance management to real-time metrics?

Probably. We can say yes or no definitely with a short study of a few items but here are three of their opportunities:

The company bought a new injection molding machine to bring work back into the plant. They need to get this machine working at nominal ratings for speed and quality as soon as possible and make it sustainable. A real-time performance system will do this very effectively and allow the manufacturer to sustain their performance.

The company can increase the efficiency of the manufacturing operation to keep production at its highest and take more down days saving labor and energy costs.

Finally, the manufacturer has a very good chance to use real-time performance management tools to measure and reduce change over times with the constraint machines on the line. This will allow the company to profitably schedule a higher mix of products on the lines. This is the ultimate solution for a manufacturer – produce the product that can sell quickly at a profit.

This is lean manufacturing. It is profitable in lean times and incredibly profitable in good times.

The question is will the ones trying to save their way to profits be able to compete with Lean operations when the economy picks up again?

 

Kevin Totherow is a Business Development Manager of MES for Schneider Electric and a consultant for helping manufacturing clients manage their operations better. Kevin has been a controls engineer, consultant and president of Sylution Incorporated. He can be reached at (864) 252-6819 or by email at kevin.totherow@schneider-electric.com.

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