This is the third in the 9 part series of conversations on the maximizing profitability of job shops and machine shops the Theory of Constraints way!
Brad: “If a job shop or machine shop business owner could start (1) by improving company productivity, or (2) by improving the company’s offer to its market segment, which would you recommend first?”
Dr. Lisa: “I can make the case either way, depending on the specific situation a company faces. But my vote is usually to improve productivity first. Increase the velocity of the flow of jobs through the shop, and a big improvement in productivity will be the result.”
Brad: “Let’s explore this concept of velocity further.”
Dr. Lisa: “Most job shops quote relatively long lead-times (relative to the touch time of the job) and still suffer from poor due date performance. It is a problem for their clients who suffer damage from this vendor unreliability. These clients go to extraordinary measures (babysitting orders, changing suppliers, qualifying back-up suppliers, etc.) to try to improve the situation, but normally to no avail.”
Brad: “Yes, a job shop can be a very difficult environment to manage. Their high mix low volume environment can result in the constraint moving week to week or even day to day. And there are people involved. That almost always complicates the situation further.”
Dr. Lisa: “Many job shops are truly unique. Almost all job shops think that they are unique, and they certainly are when compared to a company that makes the same thing over and over. But there are processes that can be implemented that cause a dramatic improvement in velocity and productivity quickly – in less than three months.”
Brad: “By improvement, you mean improved productivity, better due date performance and less chaos?”
Dr. Lisa: “Of course. And reduced overtime, and increased shipments. All of that with substantially the same resources (people and machines).”
Brad: “That’s pretty impressive. How can this be possible?”
Dr. Lisa: “Well, there many steps that must be implemented in a synchronized way. That is why my go-and-do Velocity Scheduling System Coaching Program takes 14 weeks for a company to go through.”
Brad: “Come on; give us some insight on what happens during the program. What is some of your best stuff?”
Dr. Lisa: “Well, the first step is pretty scary to most people: cutting work-in-process on the shop floor. Another step is to ensure full-kit before any job is released to the shop floor. Another is to focus on finishing what has been started rather than starting another job.”
Brad: “That is all counter-intuitive and definitely not common practice.”
Dr. Lisa: “But it works, quickly. And almost painlessly, although implementing such things would be nearly impossible without guidance. There would be too much resistance to change from management as well as employees.”
Brad: “In my opinion, what makes all of that hard work implementing such a program to improve velocity and productivity is the opportunity to increase sales. And our experience is that is easier to demand better margins if you are highly reliable, too. And to attract other new clients that are looking for a truly reliable supplier.”
Dr. Lisa: “It is a great first step on the path to Maximizing Profitability the TOC Way.”
To be continued.
Dr Lisa Lang and Brad Stillahn
P.S. Feel free – please- to leave comments and questions on this post.
P.P.S. To find out more about improving productivity in highly custom job shops and machine shops, watch our How to Get More Jobs Done Faster webinar or check out the 9 Challenges to Scheduling Your Job Shop and Why Your Schedule is Dead on Arrival.
P. P.P.S. If you have plenty of capacity, but can’t sell it, visit www.MafiaOffers.com.
P.P.P.P.S. For help putting YOUR financials in throughput accounting terms, pricing and making decisions, visit www.VelocityPricingSystem.com for one on one help or TheoryofConstraintsCPE.com for self study courses.