Genius ERP: ready out-of-the-box for custom manufacturing.
Here’s a pretty big and ugly example of what bottlenecks can do to a company: Tesla, the California-based electric car manufacturer, promised 1,500 Model 3 sedans in the third quarter 2017. It delivered 260.
The Model-3 rollout was the biggest moment to date for the fledgling auto company, and Tesla delivered 17. 3 percent of its promise. Nothing too epic about that.
In light of the news, the company’s stock price took a modest 3-percent hit, but damage to the brand could be far deeper: this misstep—along with higher-than-expected pricing for the Model-3 — makes Tesla seem unrealistic in its ambitions, much like other ‘tech startups’.
As any manufacturer can guess, Tesla’s Model-3 delivery shortfall didn’t happen due to slowdowns across the entire production line; it wasn’t that the supply chain and factory were 17.3 percent operational across the board. It happened because certain nodes along the production became bottlenecks. Station F might have been more than ready to pump out 1,500 Model 3s, but Station C was slowing everything down. So no matter how outstanding and prepared Station F was, it was only as good as Station C.
Because of ‘Station C’ in this scenario, the entire company has disappointed its customers, and lost millions of dollars in idle production time while scrambling for a solution.
Production systems providers and manufacturers have bottlenecks as a common enemy. Any ERP system worth its salt will help eliminate bottlenecks in production (and certainly not cause any new ones). Manufacturers should at all times be identifying bottlenecks and continuously remedying them. This is truly the way forward—the only real way forward for sustainable growth.
The first step to remedying bottlenecks is categorization—understanding that there are two distinct types.
As the name suggests, these bottlenecks are temporary, and will remedy themselves when things get back to normal. For this reason, short-term bottlenecks—when left uncompounded—are not usually a significant problem. They are business-as-usual.
Here are a couple of examples of short-term bottlenecks that manufacturers face all the time: a key technician or welder taking a vacation; a supplier missed one order by a week; one of your milling machines needs repair halfway through a big job; a couple of key employees leave and you need to rehire (which in this hot job market, isn’t always easy).
It will be near impossible to account for all potential short-term bottlenecks. Still, they can hit at a sensitive time and really mess things up, so trying to eliminate them from forming is still advisable.
The good thing is that a lot of short-term bottlenecks are visible from a mile away—so long as you know what to look for. You should know a couple of weeks in advance when your employees are taking a vacation. You can then make sure that the work-in-progress that needs to be completed before this short-term bottleneck will form is done. This takes a bit of proactivity, project clarity, and realism.
And other short-term bottlenecks will be easier to handle so long as your operations are adaptable and flexible. This means encouraging employees to understand the sum of their parts, to not work in silos and to invest themselves in the full execution of projects. Project engagement should be encouraged to help with short-term bottlenecks when they pop up.
With the right ERP system, all of the above becomes easier. With scheduling that reflects reality and upcoming shortages, as well as inventory practices that anticipate potential shortages when you might need stock, many short-term bottlenecks can be avoided, and when one or two do occur, your operations will be ready to pull together, adapt and account for them, instead of merely waiting for them to pass.
Long-term bottlenecks are the bane of any manufacturer. This is what makes a car company like Tesla perform on production targets at 17.3 percent when it should have performed at 100 percent, given its investment capital (just imagine all that shiny, new equipment sitting idle: such a shame…).
Here are some examples of long-term bottlenecks that many SME manufacturers might recognize: a machine is not efficient enough and as a result has a long queue; assembly is routinely waiting for long lead items before proceeding; engineering takes upwards of a week to turn designs into an actionable MRP file; a supply overstock for in-process jobs always builds up between two specific nodes (requiring wasted work-hours and space storing and moving WIP items).
The first thing is to identify and prioritize how to go about addressing long-term bottlenecks in a way that will truly achieve greater throughput in operations.
When tackling this issue, one analogy we can all relate to comes to mind. Imagine the worst bridge in your region, and how it acts as a bottleneck on fluid traffic movement. On the surface, the remedy is obvious: build a bigger and wider bridge so that more cars can enter and exit it every hour. However, this is not a true solution. The point of this improvement is to get cars from point A to point B faster, and the bridge doesn’t span this whole trajectory. So in practice, the increased flow on the bridge might simply cause more congestion further down the route—in the city streets on either side of the bridge. So if this street infrastructure is not able to absorb the increased flow, then you would have built a very expensive bridge for no good reason since your problem persists.
This is where efficiency doesn’t translate into effectiveness. Instead, this is where efficiency translates into very expensive idle equipment.
It’s for this reason that the first step in addressing long-term bottlenecks is bringing all your existing resources up to capacity, and then making meaningful, incremental investments in addressing the most egregious bottlenecks. This approach sets the stage for maximizing your return on equipment upgrades, additional hiring and expansion. It’s what ensures you’ve bought a cash-cow, and not a white elephant, when upgrading.
And this is where a manufacturing ERP like Genius ERP can make the most meaningful impact for SME manufacturers. Through the communication, tracking and oversight along entire product life cycles, manufacturers have a clear and actionable picture of what’s going on, and—most importantly—what should be done next!
Well, it should be noted that Tesla performed at 17.3 percent of their target production during the first batch—the first run-through—of an entirely brand new and state of the art production line. They had a dream-like scenario for auto production, and still the result was nightmarish—but only at first. By being able to effectively assess and address problem along production, they have steadily increased output ever since. They are addressing their long-term bottlenecks, since their viability, reputation and ability to turn a profit (still not there yet!) depends on it!
Well-established car companies like GM and Ford are surely not surprised by Tesla’s production woes. They are undoubtedly familiar with how one bottleneck will hobble an entire production run, and they have spent billions of dollars over more than a century trying their hardest to avoid precisely this. Let this only speak to the importance of addressing long-term bottlenecks if a company is to be competitive. A lot of very shiny equipment has been underutilized because of it. And in the broadest consumer sense, a product is only as good as its production line.
Genius ERP is excited to announce our new partnership with CEI MTL. Together, we are working to promote and support the digital transformation of manufacturers in the Montreal region toward industry 4.0.
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