Why and How to Develop Sustainable Production Standards
https://www.iise.org/iemagazine/2019-03/html/stansfield/stansfield.html
ISE Magazine March 2019 Volume: 51 Number: 3
By Timothy Stansfield and Luke Stansfield
Most businesses follow production standards, which are the amount of production expected by a single resource or group of them over a specified period. The actual planning and execution of these standards will meet a wide range of managerial efforts from being established based on past performance to micromotion design for all activities. The amount of production achieved is determined by the processes and products, timely planning and support and a wide range of production factors associated with the products.
Developing reliable work standards for contemporary production situations has been a constant challenge for management. With ever-changing product volumes, mix and designs, combined with the varied networks of material and finished goods deliveries, meaningful standards are a daily challenge. Mixed-mode production, including varied products and volumes, combined with changeovers, stochastic breakdowns, material delivery issues, required equipment maintenance and human interferences, can result in a complex computation of timely production expectations.
There are volumes of research and proven procedures on how to develop effective production standards, yet there is no one way to establish and implement standards for all situations. This article intends to establish an understanding for management that effective production standards are required and achievable. The key is to establish the appropriate priorities for the purpose of the standards and ensure simple and reliable adjustments as the production system evolves.
Secondly, the intent is to provide guidance to managers as to how to align their current standards system or re-establish an effective system to ensure sustainable production performance and improvement.
Effective standards: A fundamental requirement
we identify five consistent reasons why effective production standards are fundamental to successful business practices. It is typical that two or three of the following discussion points become the priority for any effective standards system and therefore drive their standards development and sustainable implementation processes.
Goal-setting and feedback. It is a proven fact that people with goals outperform people without goals. According to Longenecker and Simonetti, a common insight of production standards or goals is that they must be SMART: specific, measurable, attainable, results-oriented and attached to a timetable.
Standards that are easily achieved are considered loose; standards that are difficult to achieve are considered tight. Both situations can cause significant issues for production goal-setting, including lost production opportunity, defeating feedback and equity theory issues between production personnel. Professional standards include the time for the activity or process, which typically is relatively easy to establish. The standard time must also include appropriate and measured allowances for other activities including changeovers, maintenance, personal time or planned delays.
Work balance and planning. Standard times to establish a balance of work across an assembly line are critical to ensure work equity, safety, flow and effective and timely line performance. Work balance across varied production areas is also important to ensure flow, space allocation, inventory control and overall production control. A production team that has understanding and confidence in its standard times can quickly adjust to production requirement changes and ensure a balanced workload across all resources.
Standard times can provide the opportunity for labor planning across a varied product mix and ever-changing volumes. Labor can be flexed across operations, as well as the appropriate use of daily schedules, overtime and temporary labor assistance with predictability and confidence. This predictability can reduce the impact on attitude, fatigue and the general disruption of production as customer demands or unexpected process interferences occur.
Predictable logistics and support. All businesses have many complex and shifting functions to support the daily production operations. These include the purchasing and deliver of components and materials, inventory strategies and adjustments, line deliveries, containerization, space planning, maintenance alignment, engineering and design requirements and materials control, as well as the many other logistical and sup-port requirements to service their customers.
Most organizations have specific feedback systems or cross- functional line meetings to ensure that employees in all functions understand how their activities can affect production standards. The accuracy of the standard is critical to ensuring appropriate feedback and understanding of support function changes. Accurate production standards are essential to the effectiveness of these feedback systems and meetings.
Planning. A challenge for anyone involved with production management is to assess the implications of future products, volumes, run sizes, inventory strategies, flow designs, re-source adjustments or other planned changes. These situations are often modeled in spreadsheets, resource planning models or complex simulations.
These standards will also drive the business systems used to plan and direct all operational activities, including capacity resource planning, labor planning, budgeting, performance to budgets and management performance, in addition to many strategic planning efforts and measurements.
Production accounting fundamentals. Reliable work standards are also fundamental to the timely measurements of accounting for direct labor costs, indirect labor costs and of-ten overhead allocations across products and product families. Often the overhead costs represent significantly more than the direct labor factors used to allocate them. Misappropriation of overhead can lead to poor management decisions regarding future resource investments, space allocations, labor planning and other critical business resolutions.
The accounting functions often will update standards annually based on the production performance of the previous year. This is an attempt to minimize the variance of performance to standard in the next budgeting period. Explaining the variance from past performance is also a critical element to the updating process and will provide the insight to true improvement and sustained standards accuracy.
How to develop sustainable production standards
The following list of procedures is intended to be a systematic and likely sequential process including all five points. The discussion for each is meant to provide under-standing, direction and an overall strategy of standards system design and implementation.
Establish priorities and sustainable standards strategy. Five reasons are provided for the need for production standards. The management team should understand each rea-son and establish its strategic priorities based on the production situation. These priorities will determine the next steps for the standards strategy.
As an example, if the production system has high-labor content, the priorities for goal-setting and feedback, as well as work planning, are high. In this case, the activity time and the variance to activity time for production personnel is critical and must be designed for balance, repeatability, ergonomics and other critical workplace design criteria.
If the production system is a continuous process, such as for chocolate or brass tubing, the priorities may be predict-able logistics and support. The key is to ensure the process is running at rate and that the nonrun periods are minimized. Everyone should realize the wide range of production situations based on mixed-model, volumes and run sizes, varied interferences, contractual obligations, activity learning curves and other production factors.
Select the appropriate work measurement methods. The selection of the work measurement methods is critical to the long-term sustainability of the standards system. All standards need timely adjustments for the continual evolution of the characteristics of the products and processes. If the mea-surement system is too complicated, these adjustments to the standards become sidelined to the various other responsibilities of the production management team.
predetermined work measurement used if the work elements are relatively short in duration and highly repeated. Fixed interval and random work sampling are excellent tools for activities that are longer in duration, as in hours or days, and include a wide range of infrequently repeated activities. Work sampling is also an effective methodology to develop allowances for routine and repeated activities such as changeovers, breaks, maintenance and material deliveries. All of these tools have specific applications, and a one size fits all does not work.
There are also voluminous instruments and research in statistics that can be applied to these standard measurement tools to improve accuracy, understand variance and ensure confidence in the planned measurements. These tools should be applied cautiously to ensure team understanding. Too often, the experts are developing and measuring standards to improve the statistical accuracy of a specific standard time or element when the performance to that standard has a wide range of variance across the different production teams.
Measure and explain the variances. Once the standards are confidently assigned into the production system, they must be measured against actual performance in a timely manner. This is the opportunity to provide feedback to the production team and observe the effects of challenge and improvement. On the contrary, most production teams outperform the production system de-sign.
The variances must be identified and the production processes redesigned to the intended standard practice. Work sampling, check sheets, direct observation and employee feed-back can typically answer these questions and lead the management team to make the necessary adjustments to remove interferences from production performance.
Effective standards across an entire plant can offer an opportunity to compare production areas, shift and day-of-week performances and other appropriate differences in the business. These comparisons offer the opportunity for continued interference elimination, as well as friendly competition be-tween work areas. The effects of incentives have had a history of proven implications, a topic for a different commentary.
Broaden the base of the standards. Work standards are typically applied to the front-line people and process in the production processes. This makes the most sense from the standpoint of what can effectively be measured. These standards then become a basis for annual budget negotiations for all of the support activities throughout the organization. The fact that the standards development processes can be applied to these support activities is important since they often establish a significant portion of the total cost of production. Therefore, consider using an adjusted standards development process for activities such as material handling, maintenance, changeover teams, warehouse activities, quality control and process control. The same reasons standards are needed can apply to these activities, as significant improvement in these support processes will have an effect on the direct process performance.
Keep it simple. As the standards process is being developed and implemented, there will be all kinds of obstacles and challenges. One must be sure the team is adjusting and updating standards in timely manner so the system does not require a complete overhaul.
Also, understand the priorities for adjustments are based on the most significant standard time impact. Often a team is chasing the accuracy of a standard time for an infrequent activity, such as changeover. The reality often is simply adjusting the frequency of this factor, as opposed to understanding the variance of this factor. Keep the development, implementation and maintenance process of the standards process simple for all activities and ensure all team members understand their substance and importance to the business.
It is time to point out that production standards are rarely used to determine who is and is not working. If you need an answer to that question, simply ask anyone in the production area. If someone is not performing, others are aware; this has been an equity theory issue for some time. The standards will help identify the methods and practices that interfere with the production processes and lower the performance to standard.
Work measurement has traditionally been handled by the industrial engineering group in any organization, along with many other aspects of work design and measurement. Today, industrial engineering may take on other roles including continuous improvement, lean production, Six Sigma strategies and other production departments. The priorities for these departments can include lead-time reduction, inventory reduction, labor efficiency, equipment utilization, variance elimination and cost containment, as well as a variety of continuous improvement objectives.
The systematic approach to achieving these results includes many tools, procedures and methodologies. A fundamental requirement to achieving any or all of these objectives is an effective and sustainable standards program that provides the measurements for all appropriate performances.
