Why is it critical? The cost of unmanaged production.
The mismanagement of production rarely manifests itself as a dramatic collapse. It usually progresses as a silent leak: a little extra waste, a little overtime, a few delayed deliveries, a little inflated inventory. Each is small on its own; but the sum represents a significant portion of the business's profit.
Symptoms
A plan is just a piece of paper. A weekly plan is made, but it becomes invalid at the end of the first day. The field begins working according to its own priorities.
Product trees do not reflect reality. The recipe in the system differs from the application in the field; operators know the "real recipe".
Capacity is unknown. They say "we can do it"; only on the day of production does it become clear that it can't be done.
Stoppages are not recorded. When asked why the machine stopped, the answer comes from memory; the biggest cause of the loss is never measured.
Waste is absorbed into overheads. It is unknown in which product, in which operation, and for what reason it occurred.
Costs are determined at the end of the year. Product costs are revealed through the accounting department's end-of-period analysis; until then, pricing decisions are based on estimates.
Work-in-process inventory swells. Intermediate inventories are not planned; they are a result of bottlenecks and tie up working capital.
Critical knowledge resides in individuals. When a master craftsman retires, a portion of their production knowledge goes with them.
Hidden losses in production
Production losses are not limited to scrapped materials. Losses that are not systematically measured include:
Downtime: Malfunction, adjustment, material hold, operator hold. Speed loss: The machine operating below its design speed. Quality loss: Waste, rework, initial run loss. Installation loss: Time and materials wasted in product replacement. Energy loss: Idle equipment and inefficient work areas.
When these losses are measured, the picture that emerges in most facilities is surprising: instead of investing in increasing capacity, reducing losses in existing capacity is a far cheaper option.
The right question.
"Our capacity is insufficient, should we buy new machinery?" is not the right question. The right question is: "What percentage of our current machinery's theoretical capacity are we using, and what losses are we incurring with the remaining portion?" A significant portion of businesses that can answer this question gain substantial capacity without making investments.
The fundamental principle: The goal of production management is not to supervise the field, but to base decision-making on data . A well-designed system doesn't complicate the operator's job; it makes recording a natural byproduct of the work and, in return, demonstrates its own performance on the field.