Road to 2030 – Building the Glass Factory
Step One- Shop Utilization
The Midwest has always been a centerpiece for the manufacturing world, at one time accounting for 29% of national employment in the manufacturing sector1. However, with the dawn of technology and decrease in available workforce, our small- and medium-size manufacturing facilities are encountering an uncomfortable truth that large-scale companies like Amazon have already realized… in order to meet economic demand, something needs to change.
The 2022 Wisconsin workforce has 2.9 million people, by 2030 that number will be 2 million. Economic demand across all industries will stay the same, if not grow. If you have 50 employees and are doing $15 million in revenue, is $19.5 million feasible with the same 50 people?
This article marks the first in a five-part series which will be published in the Independent Business Association of Wisconsin’s newsletter providing insight into The Glass Factory, an innovative approach for small- and medium-size companies to navigate the transition that large-scale companies like Amazon have already made.
Glass Factory (noun)- Transparent manufacturing when viewed through the eyes of the customers, employees, and suppliers.
It is a tool and more importantly a mindset shift to help prepare companies for tomorrow’s competitive landscape.
Amazon is one of the most well-known clearly demonstrated examples of this: investing $700M in education over 6 years to retain a one third of their workforce by up-skilling.2 As a large-scale company, it is easier to see the importance of this switch. However, to maintain market competitiveness, small and medium sized companies will also have to adopt these practices over the next ten years.
The process of integrating data to drive efficiency, like any change event, will not be easy. Business owners see the finish line, but do not know how to start the race. Before the race begins, we need to slow to a walk, and before that, a crawl. There is a 5-step plan to follow that breaks out manageable chunks of continuous progress forward. The good news is that with each step that’s implemented, profitability will continue to rise.
Step One- Shop Utilization
Step one for manufacturing companies is to determine shop utilization rate(s). What is the overall equipment effectiveness of top revenue generating assets? The number must be clearly defined.
Defining what your capital assets are actually doing can be done in 3 ways:
The Business Owners’ Gut- Do I hear things moving? Great.
Manual Reporting - Bill counted 256 parts today. Why does the work order say 304 then?
Automating the process: Options 1 and 2 leave room for speculation. Implementing sensors that record machine performance in parallel with production increases accuracy and minimizes non-value add labor.
Shop Utilization is measured in Overall Equipment Effectiveness (OEE) which is a percentage calculated by measuring 3 facets:
Uptime- Of the ten hours per day you’re running, how often is there unplanned downtime? Let’s say it’s 65% utilized- machine is running 6.5 hours of a 10 hour day.
Speed- What is the rate of parts completed? This is measured off the estimated routings or machine cycle time- For this example- let’s say 85%. (A part programmed to be made in 5 minutes, actually takes 5.75 minutes)
Quality- Number of good parts made per 100. Let’s say that’s 92%.
When we multiply these three together- Uptime (65%) x Speed (85%) x Quality (92%) = 50.83% Overall Equipment Effectiveness (OEE).
In working a 10 hour day, your capital assets are generating revenue 50.83% the time. In reality, it is more like 30-40%.
This example shows the critical importance of gathering automatic data collection. This data will tell a story on why, where, and how downtime is happening. Doing so will create continuous opportunities to laser focus resources on improving that problem. Once that problem is solved, the OEE rises, for example, to 52.24%. An improvement of 1.41%. Isolate 6 more of these per year, and companies will be able to push 10% more product through their facility with the same head count and less overtime.
If a company is not measuring some version of OEE, this is where to start: By proving out a pilot program- Step 2 in the Glass Factory approach, which we will discuss in greater depth next month.
Moving Forward
Wisconsin’s small- and medium-size manufacturing companies can thrive with the addition of “The Glass Factory” – or total manufacturing transparency. These five steps will prep companies for the technology of tomorrow: The Internet of Things, 5G Connectivity, and Machine Learning, small- and medium- size manufacturing companies will maximize overall Equipment Effectiveness and thrive through the decrease in available workforce and strong persistent demand.
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1https://www.bls.gov/opub/mlr/2021/article/exploring-midwest-manufacturing-employment-from-1990-to-2019.htm
2https://www.wsj.com/articles/amazon-to-retrain-a-third-of-its-u-s-workforce-11562841120