Sales are on the rise, backlogs are growing, and additional capacity is needed before late orders start piling up. The team should be able to fulfill all orders on time but is only completing about 75% of the daily schedule on average. More overtime is scheduled, and more promises are made that the overtime will cease as soon as the late orders are cleared up.
Commonly, when businesses are struggling to meet order demand, it is because their plans are not realistic in the first place. Continuing to schedule mandatory overtime is analogous to telling the team that “the beatings will continue until morale improves!” The most crucial step we can take in a situation like this is to reset and provide the team with a schedule that we are confident they CAN make.
When we are not capable of producing at our “set” production rate for an extended period of time, we need to dig in and understand what has changed and where improvements can be made. Increased product complexity, reduced machine efficiency, or a less tenured workforce are just a few of the possibilities.
Releasing a schedule based on the demonstrated, achievable production rate conveys that leadership has realistic expectations and opens the door to identifying genuine issues and potential countermeasures. Sure, the order shortfall will still need to be made up, but even scheduling additional overtime at the achievable rate beats chasing an unachievable rate that inevitably pushes the team into overtime. In fact, often we see an initial increase in production rates as the scrambling to meet an outdated number is reduced.
In one case, I worked with a client whose baseline efficiency was calculated at 47%. The production standards were set in the early-1960’s and we were kicking the project off 50 years later. How could it be that in 50 years, the demonstrated production rate dropped by more than half? It turns out that the CNC machines, which were state of the art when installed, had been poorly maintained and were lucky to produce at half of their design rate. There were not enough welding machines to go around, so some employees were waiting for others. Enhanced safety regulations had impacted workflow on the floor and increased product complexity was resulting in a shortage of certain consumables. And with all of this and more going on, employee morale was at an all-time low.
We based new production targets on the recent, achievable baseline and started soliciting and executing upon improvement ideas. A TPM (Total Productive Maintenance) program was initiated for machines. Investments were made for new welders. We collaborated with employees on a new shop floor layout. Kanban and Vendor Managed Inventory were implemented for consumables. Most importantly, we began celebrating the little wins and rewarding employees for identifying and driving improvements. This is by no means easy work, but it is rewarding work, and it begins with realistic expectations.