Tangram Technology Ltd. - Manufacturing for Window Fabricators

Big and sexy

There seems to be an industry fascination with big super machines and automation that goes beyond the simple ability to justify these financially. Is it because small machines are not as exciting to have in the factory? Is it because we believe that technology can solve all the production problems and if we invest in enough of it then they will all go away?

The traditional approach has been to buy large, complex and highly computerised machines and to seek high utilisation times to try to pay for them. A cell based pull approach (see previous article) decreases this drive towards high technology and encourages the use of small machines that can be copied easily as they are needed.

Capital investment in large new machinery is almost always justified on the basis of a reduction in labour costs but these are rarely achieved in practice. When did you hear of a company sacking somebody after their super machine was delivered? Normally the staff are simply moved somewhere else in the factory! The financial justification rarely considers the additional overheads that are inevitably incurred with expensive new machinery. These extra overhead costs appear in the product price of every product (not just those being produced on the large machine) and affect the overall profitability of the company.

Unfortunately, the complexity of the large, complex machinery (super machines) means that maintenance and continued operation becomes a crucial issue, in both time and available skills. In-house servicing and repair are more difficult when the high technology machines arrive and there is a need for either improved and costly in-house maintenance skills or even more costly external maintenance. In some cases, the extra skills needed to service the new machinery are cost more than the direct labour that was allegedly reduced by the purchase of the machine.

When the super machines in the serial production line fail (as they must do) the line stops immediately. These failures are always on a Friday afternoon, the service technician can't get there (from Germany) until Tuesday and it is fixed on Thursday. Just in time to fail again as the technician's flight leaves from Heathrow on Friday afternoon!

How familiar does this sound:

'This new super-machine has twice the output of the older machines.'

'That's good because it's not working half the time!'

Conversely, when a small machine in a parallel line fails, the other cells can keep on running without being affected and sometimes can even take some of the load from the failed cell. Production continues for the majority of the factory.

Linearity of capacity and sales

The biggest benefit of small machines is that they allow a closer linearity between capacity and sales. This means that the capacity of the factory can be directly increased in line with actual sales increases rather than in line with sales forecasts. Large machines invariably mean that capacity outstrips sales until the actual sales catch up with the increased capacity. The major problem is that 'costs are certain, but sales never are'. The truth of this is self-evident - it is always easier to prepare the cost budget than the sales budget. If sales have been increasing over the past then the forecast will generally say that this will continue. The 'forecast' says that there is sufficient volume to buy a super machine that will be fully utilised. The money is borrowed from the bank to fund the purchase. But sales are never certain, if they tail off then you are left with an overdraft, a machine that never gets into it's stride and possibly a failed business.

Super machines have little linearity between capacity and sales.
The purchase of a large super machine generally results in over-capacity immediately after the purchase. This is often based on the theory that sales will increase. If sales do not increase because of rising costs (which can sometimes be associated with the super machine) then the over-capacity will become detrimental to the business. In this company, there is no linearity between capacity and sales.

Small machines give closer linearity between capacity and sales.
The purchase of many small machines is easier to fund, allows closer linearity between capacity and sales and allows investment to match the real needs of the business as opposed to the forecast needs of the business.
'Costs are certain but sales never are'.

Small machines require much less investment at any one time and the investment can be staggered as sales increase and finances allow, no overdrafts and a healthier business.

This close linearity between capacity and sales gives a well balanced factory capacity and a business with the lowest possible debt servicing load.

Hidden benefits

Linearity between capacity and sales is a strong reason for using small cheap and flexible machines but there are a multitude of other benefits:

They are easier for operators to maintain - small machines are simple to repair and keep productive. Multiple copies means that staff can become familiar with the machines being used.
Multiple standard machines can be made to give quick changeovers and multiple machines working on the same product can maintain the same overall output as a super machine.
Many work cells can be developed to allow parallel flow to take place with increased production reliability. A super machine that is not running produces precisely zero parts. Several small machines will never totally fail.
Work cells can often be rapidly developed and deployed internally using small machines parts to meet specific needs, e.g. a 'Door Shop' to tale pressure off the main production.
There is a lower emphasis on individual machine utilisation and more on total factory capacity related to sales.
Overall company requirements can be steadily increased rather than with a huge jump.
Simpler controls and control systems can be developed to cope with the expansion rather than being forced to go for the great leap forward. The introduction of high technology is often painful and rarely as trouble free as the suppliers would have you believe.
Small machines have a lower capital cost at any one time.

These benefits show why some companies with relatively crude equipment can out-perform companies who have invested heavily in super machines. The one drawback with small machines is that they are not very sexy and you can't boast about them at the pub but that is sometimes the price you must pay for survival.

Caveat Emptor

Whenever buying new machines remember the following:

Never budget on an immediate increase in production. With new machines there is always an initial decrease in productivity during the learning and debugging curve, the length of the decrease depends on the complexity of the machine.
Always deduct about 20% from the rated output of any machine to give a realistic long-term output.
Always consider small machines.
Never invest in non-bottleneck areas as these do not increase the output of the factory and do not increase your ability to make money.

Manufacturing Strategy for Window Fabricators 6 - Machines

Download Adobe Acrobat file of complete series to date

Big and sexy

Linearity of capacity and sales

Hidden benefits

Caveat Emptor

'Manufacturing Strategy' Series.

The 'Manufacturing Strategy' series is designed to give window fabricators a set of ideas for managing production. The series is being published in Fenestra on a monthly basis and published here after the Fenestra publication. The series is:

Last edited: 17/05/05

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