Organizations often have more than one manufacturing site, and each location might have its own specific strengths. For example, a manufacturing facility with low-cost, well-trained talent may have less capital equipment costs. This manufacturing line will be more labor-intensive. Conversely, the company may have manufacturing sites where the labor cost is too high for the product, necessitating a more automated approach to production. From my experience, large organizations often have both strengths, just not in a single manufacturing line.

Which line to go with is typically defined at the start of a product development project. But, what happens when demand changes?

Product demand is not static. Ideally, development of the product and the manufacturing line coincide. It does no good to create a great product that cannot be built effectively on our line. We need to mature the product and the manufacturing process at the same time. The days of dumping a design over the metaphorical wall are long gone. However, developing product and process simultaneously is more challenging than it sounds.

The ramp-up volume may not generate much income, but as volume increases, ideally, so too does profitability—to a limit. The line should not be designed for an open-ended production volume. There is a connection between lifetime production capacity and the cost of a line.

Configuring the line for high-volume production will incur costs in equipment or talent. The design of the line should balance the number of parts that can be produced with the cost to develop the line and the price per part.

At the time of a product development project, we will have a defined range of potential product volumes, costs, and quality expectations from the customer. These requirements will constrain both the product design and the manufacturing process. These factors, along with the product’s design attributes, will go into the stew that will become our manufacturing line.

Water Hose

Whether our manufacturing site favors manual labor or automation, there will be some limiting processes in the entire line. You may be familiar with the theory of constraints from Eliyahu M. Goldratt. The manufacturing line is viewed as segmented hoses of various lengths and bores. The bore represents the volume of flow. Each step in the manufacturing process has a maximum throughput. This throughput restriction is by design; it was part of setting up the line to reach the original desired volume.

If we need to increase that throughput, we start by going through each of step in the manufacturing process. The slower throughput steps will need to be improved. These are constraints. If we enhance the capability of these steps, we can produce more parts per unit of time.

An established line will have had these considerations at the start of product and process development. The line volume was built to create a specific volume of parts, with some margin for extra capacity. Excess capacity costs money, so the line was designed to handle the optimal capacity.

But, what if things change, and we have more customers vying for our product? This additional volume will exceed the line capacity. What do we do now?

There are many potential solutions at our disposal. The key is to not to select a solution without understanding the limits and the range of possible options.

One option is to redesign the process. We may find that improving a step in our process will increase throughput. Consider a manual operation to screw down a lid on a housing. We could increase throughput by moving to semiautomatic or fully automatic screwdriving process. However, this may require more than just a change in the work instructions and the tools to do the job. We might also need to modify the product to allow the new process to work. For example, the product design may not provide room for an auto-feed screwdriver to access the joint. We will either need a tool to accommodate the existing design or rework the design so the tool will work.

Product demand is not static.

Another option is to redesign the line layout. Only some manufacturing lines are set up in a linear form. We may choose to set up a cellular layout instead. Besides optimizing floor space, we optimize how the talent works within the cell. A cellular layout can reduce wasted motion, amounting to a reduction of process time from assemblers.

A third option is to add talent and time. If we already have a cell set up, perhaps we can have one operator working the cell with a run time of six hours. We can add more hours of operation to increase the volume of parts produced. Labor costs would increase, but no tooling or process modifications would be necessary.

Yet one more option would be inventory. We can produce volumes beyond the customer’s needs. For example, if we usually run a single day of six-hour production for the customer order, we can run parts during off time and manage production volume increases via inventory. But, this solution comes at a cost.

Generally, keeping inventory is often not the best solution. Inventory might seem cost-effective until you realize the costs of holding stock.

Carrying inventory requires space that is not used to make the product, but to store it. This adds handling costs and space considerations, usually defined as dollars per square foot. There’s the cost of capital. The money we have tied up in stocked parts is not money available for more profitable investments like new product development or marketing. Carrying inventory has a tax liability and insurance needs. We would not want to lose the value of the material in the event of facility damage.

Finally, there’s the cost of change. What happens if we need to change the product—for example, if we find a latent defect in the field or the customer requests an alteration. This will incur cost to rework the parts or even scrapping them entirely. If the customer does not agree to use up the inventory before transitioning to the new design, our company will have to find other ways to manage the cost. We can divert this inventory to other customers or outlets, or we will need to pay to scrap the excess inventory.

There are many alternatives to meeting increased demand. The best solution will meet the circumstances at hand. Selecting the first of a list of possible solutions, from experience, is not necessarily the best. Every decision we make limits alternatives and confounds some future options. For example, selecting a long-term approach, such as reworking the line at large or perhaps tooling changes, can be costly and time-consuming. We will need a sufficient volume of parts at an acceptable cost to justify the change financially.