Production system design for high-mix, low-volume manufacturing

Production system design for high-mix, low-volume manufacturing

ISE Magazine January 2020 Volume: 52 Number: 1

By Shahrukh A. Irani

An assembly line, as defined by, is “an arrangement of machines, tools and workers in which a product is assembled by having each (stage) perform a specific, successive operation on an incomplete unit as it passes by in a series of stages organized in a direct line.”

In contrast, a job shop is defined by as “a manufacturing business in which small batches of a variety of custom products are made. In the job shop process flow, most of the products produced require a unique setup and sequencing of process steps. Job shops are usually businesses that perform custom parts manufacturing for other businesses.”

An assembly line is a low-mix, high-volume (LMHV) manufacturing system. In contrast, a job shop is a high-mix, low-volume (HMLV) manufacturing system.

An assembly line is designed for single piece flow. In contrast, a job shop is designed to produce an order with a lot size of one (single-piece order flow) or orders with lot sizes that could be in the hundreds or even thousands.

An assembly line is inflexible but efficient because it does not have to produce a large variety of products. In contrast, a job shop is flexible but inefficient because it must produce a large variety of products.

Make-to-stock vs. make-to-order

A Toyota assembly plant operates in a make-to-stock (MTS) production mode. If it were not for the 1,500 Toyota dealership lots spread across the U.S., every Toyota assembly plant would have millions of dollars of finished goods inventory (FGI) at the end of every model year. Instead, the carrying cost of the hundreds of thousands of automobiles produced every year by each Toyota assembly plant is paid for by the dealerships that get rid of their end-of-year inventory with discounted sales.

In contrast, a job shop operates in a make-to-order (MTO) production mode. Taiichi Ohno, the creator of the Toyota Production System (TPS), said, “The more inventory a company has, the less likely they will have what they need.” An MTO manufacturer will not produce a larger quantity of a product than the quantity the customer ordered. Nor will an MTO manufacturer fill a customer’s order from FGI stored for months in their warehouse.

Having FGI indicates that the MTO manufacturer needlessly wasted capacity (machine hours, labor hours and overtime), inventory (materials, consumables and tools), overhead (ware-house staff, electricity, gas and security) and supplier capacity (steel service centers, outside vendors and logistics providers) to produce unsold products. In turn, that wasted capacity probably prevented capacity being used to process other jobs that missed their delivery dates and had to be expedited.

Waste elimination vs. lead-time and delivery by due date

Ohno also said, “All we are doing is looking at the timeline, from the moment the customer gives us an order to the point when we collect the cash. And we are reducing the timeline by reducing the non-value adding wastes.” According to Ohno, order flow time = order shipment date – order start date; or-der flow time can be reduced by eliminating the waste in the order’s timeline.

But unlike Toyota, a customer of any MTO manufacturer does not ask it to report how much waste was eliminated to deliver the product(s) that were ordered. Instead, the customer assesses the manufacturer on age-old, time-tested metrics for customer service such as price, quality, lead-time and on-time delivery (OTD) against a due date.

Management bestsellers like The Machine That Changed The World by James P. Womack, Daniel T. Jones and Daniel Roos (1990) and Lean Thinking by Womack and Jones (2003) have misled make-to-order manufacturers to believe the Toyota Production System is a good fit for their manufacturing environments. In reality, machine shops, custom fabricators, shipyards, construction companies and maintenance, repair and operations service companies that claim to have implemented lean have only succeeded at implementing the lean tools that are listed in the left had column of Figure 1. The lean tools listed in the right-hand column will not work in the dynamic high-mix, low-volume make-to-order environment of any job shop.

Adapting a system for HMLV manufacturing

A job shop simply does not operate like an assembly line. Here are some of the operational characteristics of a job shop:

  • It fulfills orders for a diverse mix of hundreds of different products.
  • Manufacturing routings differ significantly in their equipment requirements, setup times, cycle times, lot sizes, etc.
  • The shop layout is usually comprised of functional department (aka, “process villages”) that each have equipment with identical/similar process capabilities.
  • It is a challenge to identify the part families in the product mix in order to implement manufacturing cells, standardize tooling, etc.
  • Demand variability is high.
  • Order quantities can range from one to hundreds and may-be thousands.
  • Production schedules are driven by due dates, which are subject to change and are often non-negotiable.
  • Production bottlenecks can shift over time.
  • Finite capacity constraints limit how many orders can be completed on any given machine on any day.
  • Production control and scheduling is more complex. Lead- times quoted to customers must be adjusted based on knowledge of the production schedule.
  • The diverse mix of equipment from different manufacturers makes operator training, maintenance, etc., more challenging.
  • Customer loyalty is not guaranteed. In fact, customers may “threaten” to pursue other suppliers in order to negotiate unrealistic due dates.
  • A job shop must serve different markets. In fact, a job shop expects its product mix to alter as its customer base changes or it hires new sales and marketing staff who bring with them their past business contacts from other sectors of industry.
  • It is a challenge to recruit and retain talented employees with a strong work ethic, a desire to learn on the job and become cross-trained to operate different machines.
  • There are limited resources for workforce training.
  • It is hard to control the delivery schedule and quality of suppliers.

A 1989 Harvard Business Review article, “Time to Reform Job Shop Manufacturing: Organize Your Factory for Quality and On-Time Delivery,” by James E. Ashton and Frank X. Cook Jr., could serve as a foundation for developing a pro-duction system for any high-mix, low-volume make-to-order environment (see article above).

Members of the ISE community may be able to identify a viable set of practices and tools similar to those in Figure 1 that could be used to design, operate and manage a flexible and lean production system.