In previous blogs, we’ve focused on some of the pitfalls and issues manufacturers encounter. While these can be frustrating and disheartening, there are ways for manufacturers to step ahead of the pack, avoid these issues, and find long-term success in an ever-changing industry.
One of the core ideas powering manufacturing success that needs to be understood and prioritized is the idea of flow.
What is Flow?
Debra Smith and Chad Smith quote George Plossl in their book, Demand Driven Performance, to explain the basic idea of flow:
“The essence of manufacturing is the flow of materials from suppliers, through plants, through distribution channels to customers, and of information to all parties about what is planned and required, what is happening, what has happened, and what should happen next.”
The First Law of Manufacturing
From this idea, Plossl and the other founding fathers of MRP, Joe Orlicky and Oliver Wight, developed the first law of manufacturing:
“All benefits will be directly proportional to the speed of flow of information and materials.”
So, benefits to a manufacturer are directly proportional to flow: specifically, the flow of information and materials that are RELEVANT to current market expectations. What specific benefits can manufacturers expect from maximizing the flow of their organization? Again, Debra Smith and Chad Smith’s book, Demand Driven Performance, gives us some insight into the benefits of increasing the speed of flow of information and materials:
Service
Reliability of delivery and quality increases when systems flow well.
Revenue
Market share grows or is maintained when service is consistently high.
Inventories
Inventories will be minimized and proportional to the time it takes to flow between stages and the complete system. According to Little’s Law, the less time it takes to flow, the less the total inventory, which is captured money.
Expenses
Poor flow leads to additional activities which are manifested in expenses. Think about how much money your organization spends on expedited freight, overtime, rework, cross-shipping, and unplanned partial ships? These are all symptoms of poor flow and inefficient systems, and the cost of such activities are often underestimated or not completely measured.
Cash
Purchased materials are converted to cash in quicker and more consistent ways when flow is maximized, making cash flow easier to forecast and manage.
The Incomparable Value of Time
The biggest truth that emerges from the acceptance of the first law of manufacturing and the benefits of maximizing flow is:
Time is the most important resource used in the manufacturing process.
Time cannot be bought or extended; it is constant and limited. When we waste time, it is an irreversible loss. The importance and limitations of time is reinforced by the constant shortening of customer tolerance times. What manufacturers need to accept is that the most important metric to measure and shorten is the time it takes to move through the system. When this is understood, and time is viewed as a resource, smart and strategic investments become easier.
Key Factors of Maximized Flow
Besides the understanding of time as a paramount constraint, two other principles must be understood to maximize flow:
The system needs to be clear and understood.
The ideal movement of materials and information must first be clarified and understood by team members in order for that movement, or flow, to be maximized.
Movement between system points must be smooth and unimpeded.
Friction or obstacles between points in a system must be minimized and/or removed for flow to be maximized. Flow relies on the smooth passing of information from one point to another.
Flow: The Big Idea
Debra Smith and Chad Smith make an excellent point after outlining some of the above points in their book. It is:
“A company’s ability to better manage time and flow from a systemic perspective will determine their success in relation to ROI.”
That means an organization cannot look at flow in pieces or separate departments, but rather must look at flow through their complete system encompassing all of their operations. ROI is directly related to the ability to better manage flow: the flow of materials from suppliers to plants to customers, and the flow of relevant past, present, and future information to all parties.
One issue that companies run into in the pursuit of better flow is not using the right tools and partners to help them accomplish better flow.
They either invest in multiple disparate tools that don’t facilitate the flow of materials and information throughout their entire system, utilize software that operates with outdated rules that don’t take into consideration the complex needs of the modern manufacturing industry and therefore impedes flow, or they work with partners that don’t understand the core ideas behind flow and its importance to ROI.
If your organization recognizes the necessity of maximizing flow and is interested in working with a software company that recognizes the same and builds their products to accomplish that, our team at Repathis is ready to hear from you.
Our products, including our all-encompassing manufacturing software called Revive, are created to maximize flow and help your organization achieve long-term success. We’ve done the research to understand flow and have the experience to put it into practice, and we’re committed to understanding the unique needs and operations of your organization to make our solutions the best fit for you. Interested in starting the conversation? Contact us here.
