A person can’t turn on the news or surf the web without hearing about labor shortages for office, service, production, and warehousing and logistics positions. As with any capacity and workload imbalance, adding capacity is certainly one solution to the problem. Right now, it seems like every firm is trying to add labor to increase capacity across skills and classes.
1. Eliminate duplicate data entry – We’re working with a client right now streamlining its procurement process. The current state process map shows, for example, that the material planner reviews the MRP output and then types up an email which he sends to the buyer listing the needed materials. The buyer then enters the needs in the ERP system by manually creating a Purchase Order, effectively the second entry of these needs that MRP already identified. The planner could, instead, simply convert the MRP recommendation into a PO that the buyer could approve and send to the supplier.
The same client uses a standalone label printer to print identification labels for its raw material inventory and for the finished products it ships. We showed them how integrating label production into its ERP system receipts and shipments would, again, save keystrokes.
These modestly improved, not even optimal, approaches could save the client’s buyer and warehouse staff several hours per day, not enough to save an entire employee, of course, but enough to reduce some overtime. There are dozens or hundreds of examples like this in this company and many other companies. Streamline them all, and a company can achieve the same impact as adding staff without the added headcount costs.
2. Automate notifications and approvals – Many companies’ processes depend on one person notifying another via email to advance the process. Similarly, approval cycles often move documents with physical signatures around the organization via email.
Notifications can and should be triggered automatically with workflow tools that are inherent, now, to most ERP, CRM, and other niche software systems. If your software solutions don’t have a workflow engine, tools like ServiceNow and KnowledgeSync can help. Similarly, approvals can be handled electronically and paperlessly with tools like DocuSign.
Again, these small process improvements won’t turn red ink to black ink, but they will save minutes per transaction and many hours over the long run for overworked, overtaxed middle managers.
3. Eliminate unnecessary data collection – In my 30-year work career, I’ve witnessed that manufacturing companies reflexively feel the need to capture actual labor costs through complex recording of labor time on Work Orders in the production facility. At the same time, I’ve witnessed that many of these companies do very little with the mountains of labor data they collect other than book journal entries.
Certainly, a case can be made to capture job cost data in some environments. Job shops, custom shops, and cost-plus manufacturers might be able to justify the efforts and costs of capturing detailed labor data. We recommend, however, that every manufacturing company at least consider the option of avoiding the costs of collecting labor data and simply backflushing labor and overhead costs at standard/estimate as production quantities are completed.
Manufacturing and distribution companies are full of similar examples. Many, for example, compound their inventory control activities tracking lots and serial numbers inside their ERP system despite never having had a recall or traceability incident. Like labor data, lot and serial traceability tracking is a time-consuming effort and, like labor data collection, traceability data collection may not be worth the effort.
4. Reduce production batch sizes – Overproduction is one of the eight fundamental wastes identified in the Lean Manufacturing lexicon. Overproduction wastes labor capacity currently in short supply making products that customers don’t currently need. It also wastes raw material wasn’t needed, and it wastes cash funding the unnecessary labor and materials consumed. Sure, interest rates are low right now, but so is labor supply, so large batch production may not even be feasible.
Companies often fear that reducing their batch production sizes will increase the unit cost of production by reducing the spread of fixed (setup) costs over few pieces. That’s a fair concern and a fundamental calculation in the old Economic Order Quantity (EOQ) formula; however, in today’s environment, the unit cost of production needs to be re-examined to include the cost of overtime being worked due to shortages of labor. If your company is working overtime to keep up with demand right now, reducing batch sizes may be more economical than perceived.
Of course, M&M always recommends reducing setup and changeover times in production. Setup reduction has been a tool in the Lean Six Sigma toolkit forever and yields many benefits including reducing the workload demand on currently constrained skilled labor. Setup reduction techniques such as videotaping and mapping the current process, converting internal setup tasks to external, and looking for other ways to eliminate time and waste in the setup process bring a myriad of benefits to companies including reduced costs and increased capacity. Contact us with questions.
