The Beauty of Velocity
In a manufacturing plant, it’s important that your product moves through the factory at a high velocity.
What is factory velocity? Velocity in a factory represents the time that it takes from the moment your raw materials hit the dock doors, and move through storage, conversion, inspection and then finally the “velocity” clock stops the moment that the truck pulls away carrying your finished product to your customer. The faster the velocity, the better the metrics and the higher the profits. You want your product to get from the receiving dock door to the shipping truck as quickly as possible.
Think of it like a high-speed interstate highway. If you are traveling on this highway, you want the traffic to move along quickly. Slowdowns in the form of traffic jams are a waste of time and gas. Additionally, start and stop traffic puts more wear and tear on your car. The same principle applies in a plant or in any business model. The slower that a product or service progresses through it’s various process stages, the more it costs the business.
Creating good factory velocity is what lean manufacturing is all about. Zoom zoom!
What are the specific benefits of high velocity? Let’s explore.
Safety
Plants that have high velocity have less stuff in the building at any given time. Think about that highway. The faster the traffic is moving, the less cars that are on each mile of road surface. Also, in a high velocity factory, products travel less overall distance too. High velocity plants are more organized and less chaotic. These two aspects alone make for much safer work environments.
Quality
A high velocity plant lends itself better to the concept of building quality into the processes rather than inspecting it in. Having worked in both high velocity plants and low velocity plants, I can say with certainty that high velocity plants have excellent process controls. Because managers who require velocity also prioritize process management to support that objective. Quality systems and process controls are fine-tuned and yield excellent quality results.
Meanwhile, low velocity plants tend to “muscle-through” quality management. Product gets produced, product gets inspected, product gets put on quality hold and finally product gets dispositioned. This results in extra meetings, extra testing and extra sorting. It seems like in this culture, the clock strikes 7:00am and every employee comes in fighting the good fight trying to conquer daily quality issues. Process controls don't improve and the chaos of quality management reoccurs endlessly.
Service
When a plant is operating at high velocity, they operate on the front end of customer lead-times. In other words, they operator “ahead of the volume curve” and so they consistently deliver product on-time. Service levels at these plants are high, typically 95% - 99%.
Low velocity plants are always behind the eight ball. There’s simply too much work within the walls of the plant and the chaos of juggling so many orders, just leads to failed execution and thus customer due dates get missed. The customer ultimately pays the price for a plant’s inability to juggle the complexity that coincides with low velocity.
Cash flow
Of all the metrics, cash flow correlates most directly with the velocity. The faster the velocity, the lower the inventories. This includes Raw Material Inventory, WIP Inventory and Finish Good Inventory. Reducing inventory, frees up cash. Having more on-hand cash allows companies to invest in capital equipment and process improvements. Without a doubt, these are much better investments than inventory holdings.
Profit
High velocity plants require less Indirect Labor (IL), than their low velocity counterparts. That’s because there are less inventory picks, less handling, less travel distance and fewer inventory transactions. The more efficient the product flow, the less IL that is required to move the product from location to location. Additionally, the Direct Labor becomes more efficient too. In order to create velocity, work assignments are level-loaded. This means that work is equally distributed among the production employees. Ideally, no employee has a backlog of work and no employee runs out of work. Every Direct Labor employee is 100% utilized. This high velocity model optimizes DL costs.
Staff Effectivity
Engineers and other salaried staff are more focused in businesses that operates at high velocity. Because there are less balls to juggle on any given day, the focus narrows. There will always be problems that need solving, but the speed at which problems can be addressed improves along with the focus. This is all happens because there is less product in the plant. Less product means fewer problems and fewer problems means better focus.
The Lean Tools
The Lean Tools that improve factory velocity include Single Piece Flow, Kanban, Milk Runs, Total Productive Maintenance (TPM), Visual Factory, Single Minute Exchange of Die (SMED), Level-Loading, 5S and Poka-yoke.
Implement Lean. Improve Velocity. Get Results!
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