Monthly Archives: November 2017

Solving Problems and Improving Production with Behavior Science

By David Oeters, Corporate Communications with CIMx Software

While many make-to-order manufacturers are highly successful at guiding the economic side of their businesses, most have yet to discover the secret to managing production. Errors, inefficiency, and waste still plague the shop floor. Orders ship late, scrap and waste drain profit, and non-productive time is a constant drag on output. These fundamental flaws and missed opportunities hold back the business.

While known problems in production hold the business back, many companies remain reluctant to face their obstacles head on. However, studies have found that there may be a very human reason for this reluctance according to economic theory and decision science.

Prospect Theory and Manufacturing

In 1992, Daniel Kahneman and Amos Tversky wrote a paper on the science of decision making called, “Prospect Theory: An Analysis of Decision under Risk.” In it, they describe the method people use to choose between alternatives that involve risk – a process called prospect theory.

According to prospect theory, people organize the potential outcomes of a decision. Each outcome will be sorted as a gain (positive outcome) or a loss (negative outcome). A value, determined by the favorability and likelihood of the result, is placed on the prospective outcomes. The outcome with the highest value, according to this mental algorithm, is selected.

In studying and evaluating prospect theory, Kahneman and Tversky noted humans don’t always act rationally during decision-making. Fallacies and irrationality, especially when determining the value of outcomes, have a profound effect on the decision. For example, we weigh the avoidance of negative outcomes over the acquisition of positive outcomes. Even when there is a significant benefit to a selecting a gain, we still choose to avoid loss rather than pursue gain.

Some companies see any cost factor or potential process change as a potential risk (or loss). For these companies, the option to avoid loss by doing nothing is inherently more appealing than actually solving the problem and improving the business. This is why many businesses wait until the last possible moment to embrace a manufacturing solution to a critical issue – when the cost of scrap is too high to ignore or a failed audit is about to shutter operations – despite growing need and an ROI.

For many manufacturers, scrap, late shipments, inefficiency, and waste are the cost of doing business. They accept problems rather than embracing change to increase profit and success. Even though these problems have the business in a stranglehold, and affordable software solutions with a low-risk and high ROI are readily available, some companies still prefer to wait. It may not be logical, but as Kahneman and Tversky explain, we don’t always let logic guide our decision-making processes.

Embracing a Shop Floor Solution

According to prospect theory, this is simply human nature. We fear loss more than we crave the benefit from a solution.

The problem is amplified for manufacturers because the decision maker is rarely directly impacted by the problems the solution will address. As the decision maker groups the possible outcomes, they are obscured from the complete picture. They may see the scrap on an expense report, or initiate customer contact to explain a late shipment, but they don’t feel the struggle against inefficiency. They aren’t the one wandering the shop floor looking for a critical specification that’s missing or waiting in line at a machine because of a scheduling bottleneck.

This results in the company focusing on other initiatives, which puts production on hold. Continuing to wait puts the entire business at risk. Waiting to address these critical problems leaves money and profit on the table, and hurts the long-term health of the company.

Fortunately, once a problem is identified, there are simple, manageable steps that can be taken to overcome human nature, reduce risk and embrace a shop floor solution:

  • Build a Team: Look at involving both the front office and production in the decision-making. There needs to be open, honest communication early in the process so the impact of production problems can be properly understood.
  • Identify Core Requirements: Project scope can quickly balloon and become unmanageable as input is collected for the project. Costs can escalate and the project collapse without a list of core requirements providing the project basis and ROI focus.
  • Utilize a Pilot Program: Build excitement for the project and test the deployment using a low-cost pilot program. Many companies see so much benefit and savings from the pilot; they will rapidly roll out a full deployment.
  • Partner with a Provider: Find a manufacturing software company you can trust, and partner with them on the project. See if they can offer timeline and cost guarantees, and learn how they work with your team to deliver the project.

Taking Production and Business to the Next Level

There is a high price for manufacturers who ignore shop floor problems. Companies that wait, doing nothing as scrap, inefficiency and waste negatively impact their business, put success at risk, especially as competitors continue to improve and modernize. Ignoring problems and hoping a solution magically appears is a decision based on a logical fallacy, and no company should let a fallacy guide their business. Learn from prospect theory.

Recognize the problem and take strategic actions toward a solution. Build a team, set goals and find a software partner you can work with to implement a strong solution.

If you’d like to know more, or see a demo of what modern manufacturing software can do for you, contact CIMx Software today and see how you can eliminate scrap while accelerating production.

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A Rapid ROI for MES and Manufacturing Software

By David Oeters, Corporate Communications for CIMx Software

Today, with improvements in software technology and lower hardware costs, Manufacturing Execution Systems (MES) and software platforms such as Quantum are viable solutions for manufacturers of any size and industry.

However, companies are still reluctant to embrace software mostly founded on a mistaken perception of the cost. Even as companies struggle with the critical problems, bleeding revenue and creating inefficiencies that hinder business growth, there’s reluctance to implement, or even investigate, software as a solution. They don’t see an easy ROI, or believe a different software solution will drown their processes in complexity, so they turn to their ERP for an expensive module or create a homegrown spreadsheet solution.

These temporary, flawed solutions add business costs without fixing anything. A spreadsheet or an add-on for your accounting software isn’t going to solve a critical production issue, eliminate scrap or stop production errors. Implementing a solution that doesn’t solve the problem adds cost with no return.

Solving Production Problems with Manufacturing Software

Solving manufacturing problems requires a solution focused on the specialized needs of modern production.

The foundation of modern production is workflow. The workflow-based solution found on Quantum solves problems and supports modern production. The software attacks the root cause of problems using the natural rhythm of manufacturing workflow, reducing complexity rather than adding it. With a manufacturing-focused workflow solution, companies using Quantum enjoy a rapid ROI that generates revenue for the business, adding profit rather than expense. Consider a few ways the solution fuels your rapid ROI:

  • Eliminate errors. Paper-based processes cause errors. The Quantum digital solution eliminates those errors. Every problem prevented during production, or rapid solution implemented, accelerates manufacturing output. Keep the shop floor focused on revenue-generating activity for a rapid ROI.
  • Production accuracy. Guesswork creates waste and increases cost. If your production team doesn’t have access to accurate (and timely) production data, they rely on guesswork for estimates, scheduling, and disposition plans. Production visibility in Quantum increases accuracy and output.
  • Embrace efficiency. Inefficiency is costly. Paper build books and travelers, manual production reports, and missing or faulty information are constant expenses. Anything that pulls a worker away from production has a negative impact on the bottom line. Companies need to see homegrown solutions and ERP add-ons for what they are – centers of workflow inefficiency.
  • Increase output. As Quantum eliminates problems, the business runs better. The company increases output without adding new workers or machines. Over time, as additional waste and unnecessary costs are identified and eliminated, output will further increase adding to the ROI of the solution.

Analyze Your Savings

To better grasp the expense of problems, you need to analyze both the current cost and the savings that accrue once the solution is in place.

For example, analyzing the true cost of quality blindness requires the manufacturer not only consider the cost of scrap and late shipments, but also the time and resources required to solve each quality escape. How long does it take the shop floor to report a problem?

For most manufacturers, problems result in a double-hit for the company – added costs and lost profits.

Once Quantum is in place, the company benefits not only from lower scrap and on-time shipments, but also increased output as the shop floor focuses on production rather than fixing problems. This accelerates the ROI, constantly generating revenue and adding to the bottom line.

Want to learn more, or see how quickly you can benefit from manufacturing software and Quantum in your business? Contact CIMx today about the Quantum manufacturing platform for manufacturers.

How to Lower Costs and Eliminate the High-Price of Doing Nothing

By David Oeters, Corporate Communications with CIMx Software

Profitable revenue growth and increasing the bottom line is the goal of every business. Any company, especially a manufacturer, not focused on growth is dying (even if they don’t know it yet).

Many manufacturing companies ignore the problems and inefficiencies hindering revenue growth. By embracing a “wait-till-next-year” solution-strategy the company ends up doing nothing, losing money and sacrificing revenue.

Ignoring problems is not a business strategy.

Analyzing the Cost of Doing Nothing

Let’s take a look at the cost of “doing nothing” for manufacturers.

Many companies struggle to ship on-time. Problems with production control and management leave the business vulnerable to late shipments. Without shop floor visibility or accurate production data, shipping estimates are guesswork. Without production control, a single problem can leave the shop floor behind schedule.

The result is late shipments. Companies might rush ship the order or discount to “fix” the late shipment, but the real cost is much deeper and more painful.

For example, paying operator overtime can double labor costs. As the exhausted shop floor rushes to complete work, errors and scrap increases. Pushing machines increases repair and maintenance costs. Without production control, accommodating a rush shipment leaves a tight production schedule in tatters, further adding production costs.

If you can’t guarantee a ship date to a customer, then the customer will find a manufacturer who can, further eating away at the bottom line.

The cost of doing nothing, measured by the impact of late shipments and a lack of production management and control, is lost revenue, fading profitability and a tarnished reputation. Doing nothing isn’t a viable option.

The Benefit of a Solution

Eliminating late shipments through manufacturing software like Quantum will not only capture the lost revenue and increase profitability, but deliver additional benefits.

For example, providing accurate shipping estimates makes it easier to secure additional business. The shop floor can better handle this increased business by maximizing shop floor uptime and OEE with schedule accuracy. Accuracy leads to better bids and lower costs as you identify opportunities for sustainable process improvements. By maximizing your workforce and labor, the company can minimize the need for skilled labor, solving a problem many companies struggle with today.

The True ROI of a Manufacturing Solution

The ROI for Quantum is the elimination of obvious costs, like late shipments, and the hidden costs of problems and inefficiencies in production. With the solution in place, companies realize a rapid ROI for the production software solution.

Over time, benefits continue to increase; allowing the company to further invest in the business. The shop floor can better handle the change and increased output that comes with a growing business.

Companies need to stop seeing problems as a cost center, but a potential source of revenue. Solving problems will not only cut expenses but will add to the bottom line. Quit accepting errors, scrap and inefficiency as the cost of doing business.

Want to learn more, or see how manufacturing software can help your business, then contact CIMx Software today to talk to an Application Specialist about Quantum.