QRM (Quick Response Manufacturing)
Because there are just not enough acronyms in the world, I'm going to throw in the QRM philosophy! LOL!
David Dodd my question is what you think about Rajan Suri's Quick Response Manufacturing philosophy in relation to the printing industry. I bought the guys book and read most of it, until it got a little scary when he was talking about running at 70-60% capacity for manufacturing.
Hmm, now if there ever was a scary concept for printers (particular when you fork out a couple of million on a press) is running capacity so low.
I like the concept of 'lead time reduction' that he talked about, however. Reducing the time the job is in the factory. Such as reducing the space between the processes to get the most dramatic reduction in lead time. So for example, it's all well and good to get a 10 minute makeready, but if the job has to sit on the floor for another day between the next process, then your 10 minute makeready makes little difference.
I've misplaced my book so I can't brush up on it, but it was also interesting when he was talking about the spiraling of time waste. Where departments will generate estimates of how long it will take to complete a job. Those time estimates are built into estimation software etc. Then when the department gets the job, they see how much time is specified and they only aim to get it within that time frame. Instead of thinking innovatively how to reduce the time.
Then the average time to completion of that task goes up. So new estimtes are given back to the software that it now takes longer. So then they have more time to do it...Prices go up, but so does waste.
It was something along those lines.
POLCA was another interesting concept too. Like an autonomous scheduling methodology based down stream to prioritise tasks done by upstream departments so that when a press or lathe is not busy, work for that press/lathe is prioritised higher in the upstream department. Instead of preparing work for a press/lathe/machine which is already over-capacity. But autonomous.
It's interesting, but I'd like to know what you think about it - how it relates to the industry.
Is QRM the Answer?
I read Suri's book on QRM a few months ago, and I need to reread it more closely before I come to any firm conclusion about how well Suri's approach would work in a printing company. Suri argues that QRM is "different" from lean. For example, early in the book, Suri writes, "Whereas JIT (or lean manufacturing) focuses on the relentless pursuit (continuous improvement) of eliminating non-value-added waste to improve quality, reduce cost (and reduce lead time), QRM focuses on the relentless pursuit of reducing lead times throughout your operation to improve quality, reduce cost, and eliminate non-value-added waste" I agree that what you set as your primary objective can affect the actions you take. But it seems to me that reducing or eliminating non-value-added activities will, in many instances, reduce lead times.
Suri also contends that QRM is better suited for custom manufacturing operations than lean. As I've said before, many of the "classic" lean tools and techniques were developed to address issues found in repetitive manufacturing operations, and some of those tools do have to be modified or adapted to work well in a custom manufacturing environment. But that's very different from saying that lean can't work in a custom manufacturing business like printing.
Although the name of this forum is Lean Manufacturing, our idea was to make this forum the place to discuss other business improvement techniques as well as lean. When I've reread Suri's book, I'll post a more complete response to your question.
G. David Dodd
Point Balance, LLC
Thanks for your response. Yeah, that was his main point which I forgot, which was lead time reduction in order to achieve the improvement in quality and reduction in costs. That was the bit that appears 'counter-intuitive'.
Value of QRM
One of the primary arguments made by Rajan Suri to support quick response manufactuing (QRM) is that reducing lead times can produce an external competitive advantage for at least some companies. In other words, Suri argues that the ability to deliver faster can produce increased sales for some firms in some markets. Many of the success stories that Suri describes in his book involve operations with significant lead times - lead times measured in weeks, not days. So, I have a question for Dwane and anyone else who is following this thread. Would a significant improvement in your lead times alone - say on the order of 25% or so - enable you to capture a significant amount of new business? In other words, if QRM enabled you reduce lead times by 25%, but did not significantly improve quality or reduce costs, how much improvement would you see in the performance of your company?
G. David Dodd
Point Balance, LLC
Yes, I think this is a very important issue if addressed properly by a manufacturer. It is related to the idea that Fixed Costs are variable and Variable Costs are fixed. Unit Burden Cost is a Fixed Cost but it actually goes down when you increase the amount of work going through a plant.
Originally Posted by David Dodd
If one can improve throughput, one can gain a reduced unit cost without investing any money. This also relates to the well known idea that is taught in engineering schools and probably in business schools, that the point of maximum efficiency is not the same point as the point of maximum profit. This is lost sometimes by people who think the most efficient point of an operation is the best one to aim at with regards to a business goal of profit. It is not.
If one can increase the throughput, even if done with less efficient labour use, then there is room for more work. The trick is that one has to lower prices to get that extra work. The benefit comes from having the extra work not needing to absorb burden. Overall it reduces total unit cost. In a small market where small printers are competing against each other for limited jobs, taking away a job from a competitor, reduces your unit cost and increases theirs. If they have less work, that remaining work needs to absorb their burden. This allows you to price lower and they can't. It creates a tipping point where your position gets better and theirs gets worse. Bill Gates did this with Microsoft in the early days. He gained some work at below cost so his competitors would not get it.
Add cost saving improvements and this just adds the icing on the cake. The game here is not to just reduce costs but to get into a position where you can take business away from competitors. You grow at their expense. The rules have changed. Since growth will not help all poorly managed printers anymore, the smarter printers need to take steps to tip the balance. Yes, throughput is very critical. Get it through your plant quick and get paid quick. Turn your money over a fast a possible.
Someone once explained to me that overheads are your biggest expense. As soon as you pay them off with say the first 5-6 or six jobs for that day, the other jobs gross profit turns into net profit. Meaning the overheads no longer eat into your profit margin, since they've been paid off for the day.
So if you have $2000 worth of overhead for a machine (or perhaps you gang all the factories overheads onto one 'top performer' for simplicity's sake) and you have 6 jobs which have paid off that $2000 from their gross profit of 40%, leaving the net profit for those jobs at say 20%. (ok these figures aren't precise)
The next job's after that are instead of 20% profit, are now 40% profit, since all the overheads have been paid off.
So from that perspective, moving lots of jobs through the factory is a good thing. I'm not so sure QRM with it's 60-70% capacity is the way to do it.
Again, what is sacrificed at the cost of speed?
However another thought I've had. If you look at speed as a goal, obviously quality is important. Putting out garbage day in-day out has achieved 0% productivity. So it's about achieving quality at speed. Something I wonder about is, how much waste can we justify to get a job out sooner. Better to use fresh sheets instead of runners to save on re-loading of runners, feeder stops related to heavy inked runners. Blanket cleaning from dirty runners. Or is it worth waste fresh sheets to save time.
On the flip side. How much time should we waste in order to save using fresh sheets?
I remember years ago finding an article in American Printer about printers are opting more and more for use of fresh sheets over runners, due to the problems introduced by dirty runners etc. I'd be interested to know how many printers actually do that now.
But yes I believe speed is very important factor and it may help to prioritise what is really needed to be performed in a makeready and how to eliminate redundant tasks or streamline tasks. I suppose if you KNEW exactly what you needed to do in order to get to quality, how many sheets you exactly needed to waste you could strip out perhaps more waste?
Or is it 6 or half a dozen of the other.
Erik and Dwane,
Thanks for your responses. I agree with much of what both of you wrote. However, I was really trying to get at a slightly different issue. So, let me take another crack at it.
In his book, Suri argues that, at least in some markets, shorter lead times can be the factor that CAUSES increased sales. For example, suppose that you're a widget company. In your industry, the average lead time for widgets for all companies is six weeks. Now, suppose that your company implements QRM and is able to reduce its lead time for widgets to three weeks. The quality and selling prices of your widgets (before and after QRM) don't change and are closely comparable to your competitors. Suri argues that your company's sales will increase because of your ability to deliver faster.
So, the thrust of my question was: If you were able to achieve a significant reduction in your lead times - say 25% or so from where you are today - would that ability to deliver faster cause customers to buy more from you, assuming that your quality and prices don't change?
G. David Dodd
Point Balance, LLC
Sorry missed that before. I read the post the other day and then replied today...
I suppose it's hard to measure whether we would get more work. So it's an excellent question.
I know that happy customers tend to return. People are usually notoriously un-organised and delivery times are pretty important to them since they are usually late. We've found in some cases where we've met the customers needs and made it easy as pie for them that word of mouth work has come in within 2-3 weeks.
Now, not everyone has a friend who needs printing straight away. But we've seen that the friend buys the equivelant amount of printing in those cases. Snappy turn around times is usually a big part of the equation. I know that no-one likes to wait - even when they say 'time is not important'. It's still important.
"No rush, 4.00pm this afternoon will be fine" - lol.
As I remember Edward Demming said something along the lines of, "it's the immeasureable effect that can be the most damaging or beneficial".
But back to your question. If we were to reduce our lead times by 25% would we get extra work. No - I don't think I would bank on it. Too immeasureable. Which is intangible and probably not a fast enough Return-on-Effort.
Reducing prices by 25% is something that I would say could bring immediate extra sales. That is tangible. People already assume they'll get the job quickly even when they pay close to nothing for it.
QRM and Capacity Utilization
In his book "Quick Response Manufacturing," Rajan Suri states that the following is a key QRM principle: "Plan to operate at 80 percent or even 70 percent capacity on critical resources." Suri goes on to say that operating at higher utilization levels will substantially increase average job lead (turnaround) times, and he provides a pretty compelling explanation (based on manufacturing systems dynamics) for why this occurs. In his post that started this thread, Dwane Hollands observed that the thought of operating at this "low" level of capacity utilization was "scary." I think that most printing company managers would agree with Dwane. The conventional wisdom in the printing industry is that increasing the utilization of equipment and people is one way to improve company profits. That's certainly true to a point, but it doesn't always tell the whole story.
Any company's profit results from the interaction of three factors - costs, volume, and price. These three factors are highly interdependent, and there is almost always a trade-off among these factors. In most industries, volume means the number of products sold. In a custom manufacturing industry like printing, we can view volume as the number of production hours that are sold. Therefore, as equipment and labor utilization increase, the volume of production hours sold also increases. But does this mean that increasing capacity utilization always leads to higher profits? And conversely, does low capacity utilization inevitably lead to low profits? A high level of capacity utilization is generally a good thing, but it is not always essential to high profits.
Back in the mid-1990s, I had the opportunity to work with one of the "pioneering" digital printing companies. This company had two high-end digital presses, and when I worked with the company, both of these digital presses were operating at about 50 percent of capacity. Yet the company was making very attractive profits despite this "low" level of capacity utilization. This business model worked because at the time, digital printing was new, and customers were very willing to pay high prices for short-run, print-on-demand work. The market prices were simply high enough to more than compensate for the low capacity utilization.
The point I'm making is that, while capacity utilization is an important productivity factor, it is not the only thing that determines profitability. Both lean and QRM use cellular manufacturing, which is a topic we need to discuss in this forum. One of the arguments that is often made against cellular manufacturing is that it will lower equipment utilization. That may be true in some circumstances but even when this occurs, the benefits of cellular manufacturing can still outweigh the disadvantages.
G. David Dodd
Point Balance, LLC
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