Optimise and automate manufacturing processes

Many production companies are familiar with the oscillations of output and order backlog known as the “pig cycle”. Gradually, production backlogs build up, leading to extended delivery times. These cause lower incoming orders, which cause the order backlog to melt away and eventually lead to under-utilisation of production. Now orders can be won again, which ensure capacity utilisation, but instead of the business stabilising, the vicious cycle starts all over again. Production processes are massively affected. Companies lose capacity, money, reputation with customers and the motivation of their employees.

As a rule, this vicious circle can only be broken through careful work on process quality, involving all operational functions.

Identify reasons for chronic delivery backlogs in production.

A backlog in production is often accompanied by chain stress: capacity problems are compensated for as far as possible by overtime and external work. The employees are more stressed and feel increasing conflicts at the interfaces in the company; the nervousness of dissatisfied customers is also transferred to the workforce. The first step towards a solution is a clear view of the problem situation: as a rule, the causes of the backlog lie deeper in the organisation – and often there are various causes that trigger failures and backlogs in mutual interaction. These do not even have to be located where the symptoms occur, and can even be decoupled in time. The complexity that can be recognised from this requires a careful analysis that adequately takes reality into account. All operational activities are interconnected in a reciprocal interdependency via the processes. Therefore, all relevant operational functions must be included in the analysis in order to recognise the dysfunctional impact structure of your company and to influence it constructively. A methodically trained and unbiased view of where the essential interfaces in the business process lie and to what extent communication at these interfaces is dysfunctional is critical to success and therefore necessary. Quick fixes only deliver pseudo-solutions that fall short and trigger cascading problems in production and in the company as a whole. A comprehensive process optimisation, not only in production, but including all operational functions in the company, the customers, the suppliers and the service partners is necessary. This is a very complex task, but well worth the effort.

Recognising the importance of dynamic complexity in the company

Assembly and shipping are merely the last links in a company’s value chain. However, problems are usually triggered much earlier and in other places. These may lie in unrealistic deadline commitments by the sales department; specifications may be incompletely agreed with customers and lead to later changes; there may be capacity bottlenecks at certain stages in production; there may also be procurement problems; in addition, rough production planning may not match the capacity and utilisation situation in certain production areas and can no longer be compensated for by detailed production planning. Utmost care must also be taken with release changes of ERP systems or production planning applications, which can have devastating consequences.

Production can still cushion individual difficulties through improvisation and extra work. But if the effects of several causes overlap, catastrophic situations such as a backlog can occur completely unexpectedly. This is a consequence of uncontrolled dynamic complexity. And it is precisely this dynamic complexity that needs to be controlled. There are proven methods and solutions for this.

Strenghtening the operational cycle in the company

What can you do? Do not rely on supposedly simple solutions for production. Instead, create sufficient stabilising complexity in your organisation by encouraging employees who work together across interfaces to negotiate their expectations and possibilities with each other, following the principle of subsidiarity. The workforce must emergently organise and optimise itself bottom-up in order to achieve operational circularity. In complex environments, emergence is the key to success, not the reliable execution of top-down instructions. It is important to ensure that decisions are made at the grassroots level in the interest of the organisation as a whole and to avoid individuals unwittingly or out of personal interest trying to supposedly strengthen their own position in the structure. The task of management is above all to create organisational conditions for operational circularity and to promote appropriate patterns of behaviour in their organisation. In order to avoid both misperformances and duds, attention must be paid to the connectivity of activities across all interfaces.

An often underestimated influence on concentricity is the appropriateness and clarity of the specifications from work preparation for production. Often, experiences from the shop floor regarding working times or production details do not flow back to the work preparation department. The feedback is invaluable for setting more realistic specifications in the future, which helps production planning, and to avoid repetitive errors. Make sure – especially after an ERP system change – that all empirical values – even those noted by hand – are reflected in the work cards after a release change.

Therefore, do not regard certain redundancies in critical functions as a waste, but as a quasi insurance premium for stability.

Capacity bottlenecks in operational processes determine the possible throughput. Therefore, it is worth eliminating such bottlenecks. Besides the option of investing, the involvement of external resources should also be considered. When assessing costs, not only the direct comparison with imputed internal costs plays a role, but above all the comparison with the situation of lost throughput without removing the bottlenecks.

Increase adaptability: the right balance of change and routine.

Promote feedback mechanisms in the processes so that cross-process coordination takes place continuously and necessary corrections can be initiated quickly. Allow your organisation sufficient degrees of freedom to be able to react agilely to changing conditions. With the authority to make decisions in uncertain situations, people take on responsibility. Paradoxically, defined and routinely executed processes alone do not necessarily lead to the stability of an organisation, but a successful combination of routine execution of standard tasks and ongoing adaptation to changing requirements. The right balance of routine and change depends strongly on the VUKA character of your markets (VUKA = volatility, uncertainty, complexity, ambiguity). In any case, regulation in the company only works if agility is possible at all.

The view for the need for coordination and not only successive but also quite disruptive strategic and operational change should be sharpened in the entire company, and the constructive exchange about sensible adjustments requires a communication culture in the company. All these aspects should unfold directly in their operational processes on the work front, where the necessary expertise is distributed – and not be handled by staff functions, for example. Stability results from many such continuously and agilely implemented corrections that ensure continuous process optimisation for production.

Decoupling production and delivery dates

In production, production is often carried out specifically to meet delivery dates agreed with customers. In order to meet these agreed delivery dates, experience shows that batch sizes in production are often shortened at short notice and plants are retooled at great expense. However, there are conflicts of interest between the customer’s willingness to pay for short delivery times, high delivery reliability and high product variety on the one hand and the operating costs incurred for this on the other. Your teams will already have come to the conclusion that many retoolings in production consume capacity and motivation and tend to worsen rather than improve the situation for the company in the long term.

In spite of the just-in-time philosophy, it has become a tried and tested practice among machine and plant manufacturers to decouple production as far as possible from the delivery dates agreed with customers. This starts with planning sufficient lead time for procurement and production planning according to criteria that optimise production figures. Moving away from just-in-time production has been shown to be effective in cushioning the adverse effects of interrupted supply chains.

One method that has proven effective is the introduction of a so-called “frozen week” – or two – during which production planning may not be changed by sales or customers. Changes may only be incorporated into the planning after this fixed period. This can lead to a higher operational round trip, higher production efficiency and ultimately better profitability and also higher customer and employee satisfaction. On the debit side, there may be longer order lead times and higher inventory levels. The optimum, as is often the case, is a compromise and can be calculated by an experienced production controller.

Putting the maxim of short-term turnover into perspective

In operating group companies, there is typically a “hockey stick” pressure in manufacturing to meet a defined sales target at the end of each month. However, this sales target is usually achieved at the expense of profitability – every month. Changeovers to orders that can still be invoiced cost productivity. Each subsequent month then starts at a weak turnover level, because a lot of work has to be done in advance again first. Free your organisation from this expensive spectacle and relieve it of this pressure. Instead, create the necessary conditions to expand production lot sizes regardless of the change of month and, if possible, work with production networks to optimise the relationship between production and set-up times. Of course, this requires the availability of the necessary input material. Consider which input materials you should stockpile in which quantities or keep ready for call-off at the supplier’s as a consignment quota. This important change shifts turnover and cash into the next period once. Afterwards, however, you will profit from this change in production in the long term. Here, too, it is important that the additional costs can be justified by a round trip in production. Create an understanding in your company for these hidden causes of costs that are not directly visible from the lines of a business management report (BWA). Much more effective effects result from sensible networking than from the optimisation of individual cost items.

Specialise and standardise

Consider to what extent you can and want to specialise in groups of production machines for certain types of orders. By specialising, you not only standardise work processes and spur learning curves in the plant; in addition, it will be easier to implement and/or automate the concept of multi-machine operation in production. This can further increase efficiency.

The topic of “standardisation” starts well before production, namely with the specification of the products. To start with product development as well would be too short-sighted. Encourage your product management to deal with the standardisation of your products and the components used as far as possible. The implementation of this demanding and multi-layered task in product development must then be done in close coordination with sales, manufacturing and customer service. Reducing the variety of parts not only pays off in manufacturing, but also in warehousing and aftersales. Take your product developers on a tour of the pre-material warehouse and show them the variety of parts and the stocks, which often already have several inventory stamps…

Automate your production processes with a sense of proportion

Automation in manufacturing can fundamentally help to reduce production costs by replacing manual processes with automated processes. In addition, automation can also lead to higher quality and consistency, improving customer satisfaction. Try to automate repetitive processes. This is where the link between standardisation, process optimisation and the ability to automate manufacturing opens up. The more you can standardise, the more orderly your processes are and the greater the volume of the same or similar operations in your production, the more likely it is that automation will be economically worthwhile.

If you automate, you will also have an eye on pre-equipping workstations outside the production lines, in order to utilise the capacity of the machines and lines as much as possible with production time and not with set-up time. Possibly, with the decision for automation, a decision for tools with a significantly higher service life also makes sense. Optimise the overall process costs, not the costs of each individual component.

When deciding on automation, also keep in mind not to lose your flexibility in production. It is often economically more advantageous to operate two smaller systems than one large one. This allows you to plan more flexibly, you may have less set-up work and you have an alternative in case one machine breaks down.

Automation of production processes is generally recommended, but must be analysed carefully. Because with automation you can also destroy efficiency if the manufacturing equipment does not fit the business model, as the following example illustrates.

Example: A furniture manufacturer who produced box furniture for the German premium segment wanted to increase efficiency in his production by automating manufacturing processes. He invested in CNC-controlled woodworking machines, which he assembled into complete production lines. The decision would have been the right one for a large-scale manufacturer, such as a supplier to IKEA. However, the business model of this furniture manufacturer was different. The high price for the furniture was justified not only by the striking design and the excellent quality of workmanship, but above all by the customised production, in terms of dimensions and fittings. This business model requires a completely different production process than that of a large-scale manufacturer. The company was actually a large joinery, where individual production is carried out with a certain degree of prefabrication. The automated lines took an exorbitant amount of time to set up and were unable to exploit their advantages because of the short production batch sizes. The decision for extensive automation was wrong for this company with this business model.

Make sure that automation is a good fit for your business model and the scale of your business. If necessary, automation is recommended on the premise of adapting your business model so that you can really benefit from the advantages of automating production.

Conclusion on process optimisation and automation in production

Both process optimisation and automation are demanding tasks, especially since there are no personal responsibilities assigned for most aspects in the organisations; rather, the quality of the implementation results from the harmonious cooperation of several operational functions.

With a coordinated mix of these measures, you can gradually eliminate existing capacity bottlenecks without significant investment in additional production facilities and without additional personnel. The capacity gain and process optimisations mean that production backlogs can be worked off and safely avoided in the future, which your customers will appreciate. Profitability can be sustainably improved and your employees gain new motivation. Done well, this triggers a spiral of success in the company.


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