Modeling the impact of rework and defects on throughput, cycle time and cost
Working with The McLean Group, WholeWorks created a visual simulation for a durable goods manufacturer that vividly illustrated the benefits of eliminating rework and defects throughout their process - from design to final assembly. The ability to visualize increased throughput, shorter cycle times, and reduced costs helped generate the support needed to implement change, which achieved dramatic financial results.
- A 100-year-old equipment manufacturer was struggling to attract new customers and satisfy existing customers because of long lead times and incomplete deliveries.
- The McLean Group's analysis revealed that incomplete orders were due primarily to a company mindset of setting aside problems rather than fixing them. The result was a plant full of partially completed orders and a lack of flow.
- Based on their analysis, The McLean Group developed a strategy to help their client learn to eliminate waste and defects. However, to win buy-in for these changes, they wanted a simulation that showed visually how the proposed changes would impact the flow of projects through the plant.
- They also wanted to use the simulation to test various "levers" for improving throughout and cost.
Develop a visual process simulation that could depict the effects of streamlined processes on the flow of projects through the entire plant, and help estimate throughput and cost benefits of different types of changes.
- As we modeled the entire process, it became clear that delays in the back end often originated from defects earlier in the process. The need for rework also impacted upstream processes, and often created deeply inefficient circular rework pathways.
- We used a simple system dynamics model to first validate the process and assumptions.
- Subsequently, we applied a discrete event simulation to enable animation and estimate statistical ranges for the impact of various changes.
- Rather than represent the factory literally, we created an information-rich visualization of the "swim lanes" through the plant. Arrays of colored lights depicted the flow of work, creation of defects, and rework loops. Gantt charts and statistical charts showed the distribution of costs and cycle times. Sliders allowed various parameters to be easily changed.
- By running a range of simulations with various assumptions, we were able to determine the impact of various process interventions ("levers").
- The simulation verified that failing to correct problems at the source produced costly delays and rework downstream. The striking animation made the analysis compelling by showing how the flow of work would become less chaotic once process improvements were made.
- The simulation also showed that the proposed process changes wouldn't produce the disruptions that were feared. Rather, they freed up plant capacity, thus creating new opportunities for growth. This helped gain the support of senior management, accelerating the process transformation.
- Over the next year, with the help of the McLean Group, the client achieved these impressive results:
- Average time to complete an order reduced from 28 weeks to 16 weeks.
- Late or missing parts delaying assemblies reduced from 1,800 per week to less than 100 per week.
- Revenue increased from $58 MM to $82 MM (up 40%).
- Profitability increased from breakeven to 7%.