Why Layout is the critical factor in Operational Excellence?
Most lean interventions are done on existing operations that have been built up over a period of time and added product lines, technology and people as per the business goals of the time. In such legacy processes, we have the luxury of looking at things from a fresh (lean) perspective under paradigms of “Value” and “Muda”. It is easy to find Waste and look at ways of eliminating / minimizing them. However when it comes to practical implementation of effective solutions, the degree of success varies from site to site. In fact, it can be said that the perfect waste free process flow that we want to achieve is tempered by the reality of legacy constraints, some frequently seen ones being:
• Existing building / factory shed/ land layout cannot be modified due to structural and legal impediments
• Large machinery that are hard to move, often old equipment are better left undisturbed
• Technological limitations in the current process (for e.g. manual paint booth vs automated)
• Mindset of the people working in one way over years or even decades and in some cases further complicated by Union agreements
We therefore implement Lean flow to the best of our abilities working around constraints where possible and compromising in areas where we are unable to do so. But we continue to learn every day from the problems thrown up after implementing this flow; documenting repeated problems and visible constraints. This understanding becomes powerful knowledge when the next opportunity arises – this could be a plant expansion or shifting operations to a new location or setting up a new green field operation due to business growth or even technological advancements. We now have a great chance to design and implement that perfect process flow that makes up world class operations.
Importance of Process Design and Layouts
“Do it right the first time and every time”. this oft quoted saying for quality holds true in this case. From the lean perspective, we can delineate four distinct stages to set up operations and each one can be measured independently:
1. Process Design – how much Waste have we designed into the process itself
2. Layout Implementation – how true could practical implementation remain to the design
3. Actual Productivity – how effectively is the implemented layout actually used
4. Continual improvement – is there a process in place to keep identifying waste and improving the layout to deliver more value
The effectiveness of implemented layout is measured in terms of productivity parameters and is a product of the the first three measures – hence, if our process design itself has a lot of inherent waste, the productivity is bound to be low. Impact of Process Design on the investment and operating costs for a new set up can be measured directly (see below).
1. People Productivity by % of time spent in VA and reflected in People cost per unit
2. Space utilization by ratio of VA Space/Total Space and shows up in both operating cost of space as well as impacts the initial Cost of construction
3. WIP Inventory holding by Number of days/turns and reflected in the Working Capital cost
4. Material Handling by the Distance moved by material (horizontal & vertical) as well as by the Ratio of number of touches to VA Operations and reflected in the investment on material handling equipment and their operating expense.
Lean Process Design therefore has a significant positive impact on both the investment to be made as well as on the operating costs once the new set up is fully functional. In addition, there are some important qualitative measures which are also impacted by the process flow design – safety and strain reduction of operating employees, quality defect levels and improvement in delivery performance (OTIF).
Industry Case studies
A few examples of the impact of process design and layout from varied sectors are shared below.
Hospital layouts – a patient moves through several floors and hundreds of feet to complete consultation and tests. In spite of all the IT based Hospital management systems, a discharge process even today takes the entire day. The doctor gives the clearance before 9 am but patient cannot till 4 pm. Process observation at a large corporate hospital threw up the fact that the ward sister has to move over 400 feet and 2 levels to handover the case sheet for discharge summary. After this the file moves another 200 feet to the IP Billing before the patient is called for final settlement. The documents are therefore waiting to be moved to the next process for 80% of the time.
Food Processing – in a leading pickles brand, a material flow diagram was made and showed the total movement to be 200 m spread over 3 floors within one plant. In addition, the small and low cost pouch packing took place in another location 500 m away – the cost of transport, people involved in loading and unloading, material movement was approx. 10% of the total cost of manufacture.
Battery manufacturing – a global player in this sector was reviewing the layout for an expansion project. It was seen that each product traversed a distance of 1 km inside the single shed factory, there were 75 touches to 20 value adding operations or approx. 3.75 touches per operation and 60% of the people employed there were not directly performing value added work
Textile Unit – in a newly set up line from which products are supplied to one of the world’s most admired home products company, a piece was found to move about 1000 feet horizontally and between 3 different floors on an average to complete about 10 value adding operations during which it was touched about 39 times and had 13 intermediate storage points.
Fabrication facility – heavy iron structures weighing over 50 kgs each are moved manually between 3 sheds and then onward by truck to a separate FG shed – total distance moved is in excess of 1 km. One helper can be seen moving the material for every two operators working on the piece.