In Reliable Plant, we spend a lot of time discussing reliability. It makes sense since reliability is part of the publication's name. For our purposes, "reliability" refers to an organization's ability to rely on the various manufacturing processes by which it delivers value to shareholders and other stakeholders. The picture, though, isn't that clear or simple. To be effective, manufacturers must, in unison, focus on all of the interactive "abilities" and the cross-functional business processes that create them.
Ultimately, a manufacturing organization seeks to maximize return on net assets (RONA). In other words, the board of directors provides the management team with resources - a plant and its machines, working capital, brand value and other intangible assets - to create a profit. RONA is simply the profit produced divided by the assets required to produce the profit. To drive RONA up, the organization must maximize its overall business effectiveness (OBE). It does so by eliminating marketing-, production- and/or equipment-related problems that adversely affect manufacturing system availability, yield and/or quality. If the manufacturing process is running, it's available. If it's not running, it's not available. Yield is the speed at which the manufacturing system runs. Quality is the percentage of production that conforms to specifications (no scrap or rework needed). Reliability is one of the "abilities" required for the firm to succeed (Figure 1). When compromised, the lack of ability affects the firm's profitability and competitive position. Let's explore all of the abilities on which the firm depends.
Figure 1. Cross-functional business processes create the abilities required to maximize returns for the firm.
Marketability: This is the ability to produce, package and deliver a product that the market will buy. Poor marketability results in unavailability (the machines aren't manufacturing because of low demand, or they may be artificially slowed below their maximum speed due to low demand). Poor marketability requires management to modify the firm's product offering, change the promotional mix or reduce the footprint of the organization by closing plants or lines, thus reducing the net operating asset in place in order to drive up RONA.
Capability: This is the manufacturing system's ability to actually produce what's required. Often, the sales and marketing organization, in response to market demands, sells and commits the organization to deliver a product, packaging and/or distribution solution that is beyond the firm's capabilities. This leaves the organization either dealing with costly increases in unavailability, yield reductions and/or a high defect rate. To solve this issue, the firm must add equipment, which increases the net operating asset in place and drives RONA down.
Flexibility: Consumers are demanding and receiving more flexibility from manufacturers. As a result, firms offer more products (SKUs) that are packaged and distributed more ways than ever before. The trend won't subside. Customization equals differentiation equals competitive advantage. Marketing organizations are demanding the flexibility to do this. Most plants are designed to achieve scale economies, a philosophy that works best when the plant produces the same product in high volume. Prior to Henry Ford's production system, products were predominantly customized and made by artisan craftspeople. The future of manufacturing is to create plants and processes that can deliver customization and scale economies. This is a tall challenge for process and plant design engineers.
Operability: To be available, run at full speed and consistently produce quality product, machines and processes must be easy to operate. They must be easy to start, run, change over and shut down without creating failure. Minutes and hours are lost changing over from one product to the next. In some instances, it takes even longer to stabilize the process to the point that salable product is being made. Also, you require the ability to change operators without observing any change in performance (simplify, standardize and document). Likewise, your machines must have the ability to communicate effectively with the operators to facilitate a seamless and dependable man-machine interface. Process, plant and machine designers have the greatest influence on operability.
Reliability: This refers to the ability to describe and quantify dependability. Many factors influence reliability. If designers fail to design equipment to withstand the challenges of the manufacturing process and/or environment, the equipment and process fails. If you can't dependably source raw materials that meet your quality specifications, the process fails. Mistakes made by operators produce unreliability. Incorrect or poorly executed maintenance creates unreliability. Because so many factors influence reliability, you need to quantify it and effectively classify events where it is compromised so you can take appropriate actions. To do so, it's important to collect data. This drives your actions.
Maintainability: You must have the ability to maintain your equipment with minimal interference on product. To do this, you need to design equipment with accessibility, particularly for high-failure components and/or those that require frequent inspection, PMs and/or adjustment. As much as possible, convert downtime tasks to runtime tasks to minimize interference with operations. Likewise, minimize the skill required to perform routine tasks in order to maximize your flexibility to get them done.
Supportability: Processes must be supported over time. Production must have a dependable stream of high-quality raw materials, energy, machines and people with which to accomplish the firm's mission. Maintenance requires dependable access to parts, supplies and tools to assure that the equipment is reliable and capable of accomplishing its tasks. Supportability involves an array of process and design issues. By standardizing on design, you improve supportability by reducing the number of parts and tools required to maintain the equipment. Strategic supplier relationships help ensure that you have a reliable stream of materials and energy. Supportability also extends to closing gaps between skills required and skill available, an increasingly important concern as Baby Boomers retire. Likewise, it extends to customers. With negotiation and planning, you can improve production leveling and minimize the number of production changeovers and adjustments, both of which improve reliability.
Profitability: The ability to produce a profit may seem obvious, but research suggests that most organizations have products in their portfolio that aren't profitable. In some cases, firms continue to offer unprofitable products and wait for the market to strengthen, thus returning those to profitability. In other cases, firms are unaware that products aren't profitable because they fail to effectively allocate overhead and/or other costs. In still other cases, the sales and marketing organization oversells the capabilities of the manufacturing system. The unavailability, production slowdowns and high occurrence of quality defects that result renders the product unprofitable. Many factors can result in low profitability. The key is to have the ability to recognize when a product or process is unprofitable so the firm can make an objective and appropriate decision. To do this, you must focus on the true, fully burdened contribution margin generated by each product category.
Successfully and competitively running a plant requires abilities that are typically cross-functional. Success requires that you break down the silos that create waste and loss between functional teams. The problems that produce waste and loss are created cross-functionally and, as such, must be solved cross-functionally. With vision and focus, you have the ability to do it!