Now that the economy is stabilizing and may gradually improve, it may be time to evaluate your plant throughput…

There is no doubt about it - times have been rough in US Manufacturing. However, the economic indicators in early 2004 point to a manufacturing rebound. The Institute of Supply Management's index of manufacturing conditions has been above 60 in both January and February. Anything above 50 indicates expansion. The Institute's employment component rose to 56.3 from 52.9 in January - the highest it's been since 1987.

Are you ready to meet the challenges ahead? Manufacturers have spent much of the last three years cutting costs, increasing efficiencies, and making do with less. Companies that have survived this process are now leaner and more competitive than ever.

However, as demand grows and manufacturing output rises, the pressure on manufacturers to cut costs will ease, and the pressure to increase throughput will grow. Well-managed companies will find ways to increase production capacity while maintaining their lean cost structure.

Less vigilant companies may take a haphazard approach to increasing output that can lead to uneconomical choices. These choices will leave them less able to maintain or grow market share. Poor decisions can also leave a company ill-prepared to survive the next manufacturing downturn. Experienced managers know that these decisions concerning how to grow and expand are the most critical decisions to an organization's health and longevity. They are not easily undone.

To ensure that you're expanding your capacity in the wisest fashion, ask what will happen under different market scenarios. Will the plan accommodate optimistic growth scenarios? What will happen if production increases don't meet projections or drop off again in another year or two? Have you added overhead and sunk costs that will cripple the company?

Best management practices generally call for pursuing lean manufacturing techniques to accomplish the dual goal of accommodating capacity growth while minimizing risk. An example may be the best way to illustrate this point.

Consider a manufacturer who has three processing lines but only ran two of them for the past few years. As demand picks up, they look at the possibility of re-starting the third line. An astute production supervisor indicates that there may be a way to increase production speed from the two operating lines and leave the third line mothballed. If this is indeed possible, one might expect significant savings in labor, maintenance and energy costs. The production supervisor points out that these variable costs per unit will go down. Further, as they upgrade technology (say improving online inspection or packaging), they will only have to upgrade two lines instead of three. Fewer sunk costs in new equipment mean less burden to be recovered in product pricing and less risk to the corporation if sales falter. There are some compelling reasons to consider what it will take to run only two lines.

Other more dramatic examples include companies who have avoided purchase of additional manufacturing lines or avoided the cost of new bricks and mortar. These companies have had an even more significant impact on holding down their cost per unit and their future risk. These companies have learned that it is well worth the time to explore the alternatives with an open mind.

How can you ensure that you are getting the most from your active production equipment before you add more capacity? Here are a few techniques that will allow you to pursue increasing production from the same or fewer resources.

• Bottleneck mitigation
  
  Focusing attention and technology on areas that are bottlenecks in the manufacturing process can pay large dividends. If an investment in one or two areas can measurably increase the production of the entire plant, you may have a winning project. Process heating steps - drying water, drying inks and coatings, curing glues, curing plastics, etc…- often turn out to be bottlenecks. Look closely at these. Also evaluate any place where there is a large work-in-process inventory. These often build up just before a bottleneck process. And always make sure that the bottleneck processes are producing as effectively as possible. They are the limiting factors in your plant - they control plant output.
• Defect reduction
  
  Scrap and rework represent lost capacity. Of course they also represent wasted material, labor, etc that must be covered by sales of first quality product. It may make sense to inspect products just before bottleneck processes to ensure that the bottlenecks aren't handling product that will become scrap.
• Automation of labor-intensive tasks
  
  Labor-intensive tasks (such as packaging or assembly) can often be sped up with automation. Once again, if an investment in this area means increased production from the entire plant, evaluate it closely.
• Quick-change techniques
  
  For processes that have frequent style changes or re-tooling changes, consider quick change techniques. These techniques can often reduce change-over times by 75%. In other words, if product changeovers are costing you 10% in production downtime, an effective quick-change program might increase production output by 7.5% - a sizable gain!

There are many opportunities to add capacity while improving your processes at the same time. Many of these opportunities can reduce cost per unit, reduce risk and ensure that your company is in the best position possible when the pendulum swings back the other way.