Creating spare capacity – part 1

By Pascal Pollet – Sirris, Belgium

Intuitively, we all know that lead times increase if you receive more orders. To understand the magnitude of this effect, we need to look at the utilization level. The utilization level is the ratio between the demand and the effective capacity. Or stated otherwise, if your utilization level is for example 90%, then your resources will be busy during 90% of the time, and be available for additional orders during just 10% of the time. As a rule of thumb, the lead time is inversely proportional with the available spare capacity. So, if you can double your spare capacity, your lead time will typically halve. This effect can be quite dramatic. For example, suppose you have a utilization level of 95% and a lead time of four weeks. Now, if you could lower your utilization level to 90% by creating some additional spare capacity, then your lead time would halve to two weeks. If you could lower your utilization level further to 80%, then your lead time would drop to just one week. So, by simply adding 15% spare capacity, you could reduce your lead times with a factor of four!

There are many techniques to create additional spare capacity at a minimal cost. In this series of blog articles, we will provide you with several tips on how this can be accomplished. These tips often boil down to making your resources more productive. It should be stressed that making your resources more productive is not the same as reducing costs. To reduce cost, you would need to make your resources more productive, and then fire the surplus resources. However, this would lead again to a high utilization level, and a long lead time.

Tip 1: Invest in training 

Investing in training your work force is crucial to increase the productivity. We often underestimate how poorly trained some people are. For example, we’ve recently had an encounter with a planner who didn’t know that Excel has a search function. As a result, he had to manually search his planning list row by row to answer questions about specific orders. Similarly, it is unfortunate that many office workers are unable to make a pivot table or create a macro in Excel.

One study found that employees of companies who provide sufficient training (ca. 40 hours/year) are approximately 20 percent more productive. Training is therefore one of the biggest levers for increasing productivity. So, start by mapping out the training needs in your company and train your employees. And yes, all Excel users who can’t create macros will probably benefit from some training.

Tip 2: Use two screens

Employees who process a lot of data can increase their productivity by 5-10 per cent by using two screens. By splitting different applications across the two screens, it becomes easier to use data from one source (e.g. e-mails, Excel) into a second system (e.g. ERP). Using two screens can also reduce data entry errors by a third.

Tip 3: Eliminate pallet trucks

Hand pallet trucks are a popular means of transport on the shop floor. However, a lot of time is often spent searching for the pallet trucks or for returning the pallet truck. There are two solutions for this: give your pallet trucks fixed parking spaces, or even better, eliminate the use of pallet trucks all together. You can often do this by using alternative means of transport, such as roller conveyors or by simply mounting wheels under the material bins or by using pallet under carriers.

Tip 4: Don’t release production orders with missing components

A lot of time is often wasted when orders are released prematurely before all the necessary components are available. Employees search endlessly for the missing components and supervisors lose time trying to find out where the components have gone. This can easily be solved by only releasing orders once all the components are effectively available. In one case, we have seen a productivity increase of up to 15 per cent as a result.

In each of the following blogs, we will present some simple tips to boost productivity in the office and on the shop floor. Do you have any tips? Please let us know, so that we can share them and create spare capacity together!