Absolute Benchmarking is a groundbreaking technique developed by Factory Physics Inc. It provides powerful, practical analytics for production and services flows as well as for raw material or finished goods inventory stock points. For production or service or project flows, there are two types of absolute benchmarks:
1) Flow Optimizer, described below or the
2) Quick Flow Benchmark for very rapid analysis of flows
The figure below illustrates performance curves on a Flow Optimizer graph for a value stream, e.g. pharmaceutical tableting, coating and packaging, semiconductor production or bearing manufacturing. In addition, this can be applied for services where the "WIP" are tasks or projects in process. The Flow Optimizer is a powerful, graphical representation of Little's Law—the fundamental relationship of operations science. It provides benchmarking information about vital financial and customer service measures such as:
- Working capital
- Return on assets
- Lead time
- Capacity utilization
- Labor efficiency
The Flow Optimizer takes into account all of the complexity of your operations including resources, products or tasks, and complex routings. A number of insights follow from this understanding. For instance, if your value stream is performing about as well as it can but you are unable to meet demand, a new value stream or an increase in capacity for your current value stream is required. On the other hand, if your value stream is capable of meeting demand but you are not getting the output you need, then improvements to your existing system are required.
Are your improvement opportunities primarily WIP and cycle time reduction opportunities or are there variability reduction opportunities you have to address or some combination of both? The Flow Optimizer provides a quick and effective method for you to determine the answers to these questions and get to performance improvement in a hurry.
The analysis ties directly to the income statement and balance sheet so you can be confident of the expected return from your investment in equipment and people.
Optimal WIP Control
WIP control is a primary element of manufacturing supply chain performance. Many companies have wasted precious time and resources on folklore discussions of push versus pull. It does not matter whether you call your WIP control push or pull, the point is that you are controlling WIP and too little WIP is as bad as too much WIP. Use flow benchmarking analytics to understand the mechanics of advanced WIP control and set optimal WIP levels for your processes. Optimal WIP levels provide maximum throughput with minimum cycle time.
As illustrated below, application of Little’s Law (Cycle Time = WIP / Throughput) and other Factory Physics principles demonstrate that there are three regions of performance for any system.
1) The WIP Overload Zone - throughput is essentially independent of WIP so increasing WIP in the system only increases cycle time and has little or no effect on throughput. This is where implementation of a classic "pull" WIP control system will yield quick results on reduced cycle time without affecting throughput.
2) The WIP Starvation Zone - cycle time is reduced to a minimum limit by reducing WIP, but throughput is also reduced drastically. Companies often unintentionally put themselves here when they implement "one piece flow" production. WIP is minimized and cycle times are very short but there is not enough WIP to buffer variability so throughput can suffer drastically. Demand is not met in a timely manner resulting in poor customer service.
3) The Optimal WIP Zone - WIP levels provide best possible performance – maximum throughput with minimal cycle time. This takes into account the levels of variability in a process whether that process is discrete manufacturing or continuous flow. The same concepts apply in service processes and in project management.
To get best possible performance from your organization, use flow benchmarking analytics and Factory Physics principles to understand and apply both the mechanics of advanced WIP control and the scientific principles that provide predictive descriptions of the interactions between WIP, throughput, cycle time and variability.
To use Absolute Benchmarking to understand how to set optimal inventory levels for Finished Goods or Raw Materials, click on this link to Inventory Benchmarking.
Do you know if you have the shortest possible cycle times? The right amount of Work-In-Process? Should you be working on controlling WIP or reducing variability or both? What's the best way to schedule work? Can you improve performance in a hurry? For an answer to those questions, contact us at (415) 510-2681 or send an email to firstname.lastname@example.org.