In my previous post I explained how keeping people busy can lead to issues such as increased WIP, decreased cash flow, increased lead time and parts shortages. This time, let’s talk a little bit more about the mechanics of how these issues are created by “keeping them busy”.
It is common knowledge among operations managers that some resources are bottlenecks and some are not. The problem is that they typically are not managed differently. They should be. Keeping these two types of resources busy have different consequences.
Generally speaking, keeping your bottleneck resource(s) busy is a good thing because they are already capacity limited. You don’t want to waste any time allotted to these resources. But how you keep a bottleneck busy matters. If you keep it busy by running whatever part is available instead of the part that is needed, this can actually be worse than leaving it idle! The bottleneck resource(s) is the lifeblood of your business. The more you run through it, the more money you make. That is, if you make things you can sell! If you are using your bottleneck resource to produce things that just sit around, this is actually counterproductive to your bottom line. So, keeping a bottleneck busy making something you can’t sell right away hurts two ways. First, you’ve invested time and material in something you have to hold in inventory. Second, you’re losing out on an immediate sale. Both affect your company’s financials.
On non-bottlenecks, the pressure to keep them busy is greater because, by definition, they have extra capacity. Suppose that, in order to keep them busy, you run a part that is not needed for a while. “ I’m getting ahead of the game”, you think, “how can that be bad?”. Well, you’ve just created WIP that is guaranteed to hang around for some time. Things can only get worse from there. While visiting a machine shop, I learned that they performed the first operation on a part weeks before it was scheduled to run on the next machine. Normally, they would just do it a few days before. So, the part sat much longer than usual. Somewhere along the line, an employee noticed that the parts had turned a weird brown color that wasn’t rust. Evidently, they didn’t wash the parts after the first operation and processing agents oxidized. They tried to clean them and couldn’t. The parts were scrapped. Now they’ve wasted the production activity from the first process, they’ve wasted the material, and they’ve wasted time. A triple whammy! But hey, it did keep them busy.
Other issues these behaviors can cause are unneeded overtime, addition of unneeded additional capacity/outsourcing, and expedited freight charges. I’ll save these for part 3.
Don’t keep them busy,
Dave