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Tuesday, 23 August 2011

Quick Response Manufacturing For Custom Machine Builders
August 22, 2011

Lean Manufacturing methodology has been around for many years and has been successfully used by many manufacturers to eliminate waste and lower costs. But, in the 21st century there has been a trend in manufacturing towards high-variety, low volume products with options configured for individual customers and even custom engineered per client or plant.

A good example is packaging machinery that is built to plant specifications, and have a good deal of “one-off” engineering for each order.

This is an industry where I spent most of my career and I think that a methodology that is focused on reducing lead times may be a better answer then Lean. There are two compelling reasons:

1. First, lead times and customer delivery dates are a big problem for custom machine builders. These machines -- depending on the amount of custom engineering -- can take anywhere from two to 12 months to complete. Customers who buy these systems often have contractual obligations with other contractors on the project that dictate when machinery will have to arrive at the plant. Other times the delivery is based on payback formulas approved by the board, which are written in stone. OEMS cannot guarantee all of these dates and consequently lose orders and market share.

2. Second, custom engineered machines have a lot more labor hours than standard machines. A good example is a company I will call Arrow Machine. They build custom material handling systems for a wide variety of markets and applications. Their engineering costs are 10 percent of total cost but fabrication is 20 percent and assembly is 30 percent of cost. They found that saving 5 percent on assembly labor hours would increase their gross margin by 1.5 percent, and the savings of 5 percent of the hours would also translate into more production and shorter lead times to take more orders and increase market share.

For these kinds of manufacturers there is another methodology that focuses on reducing lead-times that may be a better answer. It is called Quick Response Manufacturing (QRM). It was invented by Rajan Suri who is the founder of the Quick Response Manufacturing Center at the University of Wisconsin. Rajan says that more then 200 manufacturers have used his QRM methods in the last 15 years. This does not mean that QRM is an alternative methodology that replaces Lean. Every manufacturer needs a good continuous improvement program regardless of the type of manufacturing. QRM simply compliments Lean, Six Sigma, and other popular methodologies. I just think that the QRM system is a better approach for custom machine manufacturers who need to reduce lead time and labor hours
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