Long lead times, missed delivery times, demanding or nonpaying customers, too many unsuccessful quotes, too much shop overtime—life isn’t always smooth for job shops.
The term "job shop" refers to custom manufacturing and make-to-order businesses. These firms share some common characteristics that differ from repetitive manufacturing settings, for example using a quoting process to secure work, and producing work on an order-to-order basis to meet customer specifications. While some job shops do purely custom work, many manufacturing firms have a mix of custom and repeat orders.
Value Stream Mapping
One of the most valuable improvement tools for job shops is also a simple one - Value Stream Mapping - this technique involves drawing a visual representation – a map– of every step in the product’s path, or "value stream," from "quote to cash"– from quote/bid, through engineering, to the shop floor and out the door. Given the significance of front-end processes in securing orders, it is particularly critical for job shops to include them in their value stream map. The resulting map helps companies scrutinize each aspect of their operation and identify areas for improvement.
One very important outcome of value stream mapping is to illustrate where a job shop has distinct types of product "streams", each with its own customer and production requirements. Defining the right value streams for products can prevent priority conflicts and answer the question of what gets produced in what sequence.
Many companies produce a mix of repetitive and custom work utilizing the same plant processes, which can cause confusion on which job goes first. Often there are bottlenecks or constraining processes, and in many cases duplicate equipment is being used to do the same work. Recognizing the different product streams may result in dedicating one piece of equipment or one welder to a specific product line versus attempting to schedule everything on every machine. Maintaining a first in, first out sequencing and limiting the number of jobs for the custom work also can result in better flow for both custom and repetitive work. Accomplishing this requires recognition of the different product streams.
Effective Costing
When a shop discovers that it has different product streams, it can look very closely at its costing strategies. Many manufacturers have both custom and standard work, but they’ve got one flat rate; they’re undercharging on one side and overcharging the other. They might have a $50 per hour rate across all products, when it takes much more overhead to support the extra design and engineering work required for custom products.
One solution is to have different costing strategies, splitting the job shop’s operations and costing systems to acknowledge how its resources are really being used. As an example, for a custom job requiring considerable design work, the shop can charge for one-time engineering/design services, instead of automatically absorbing those costs into the shop’s overhead and reducing or wiping out the job’s actual profit margin.
Reducing Lead Times
When trying to reduce lead times, people tend to focus on where the action seems to be, which is in the shop. In fact, for most job shops the majority of the time is spent getting prepared to start making the parts, not in the shop itself. It’s the front-end processes.
If the customer hasn’t fully decided what he wants, or parts of the order aren’t specified, or materials are delayed, everything drifts along– and yet the delivery date stays the same. By mapping the entire product path, problems can be pinpointed, and solutions designed to help meet scheduled delivery times, such as making the order intake process mistake-proof, or ordering special materials ahead of time.
The benefits? By reducing lead time, a shop can be more competitive and gain more customers. And it can charge premium rates because it can deliver faster than its competitors.
