Flexibility driven customer service with S.M.E.D

Post date: Apr 28, 2020 3:57:08 PM

The customer service challenge:

In an ideal world, customers would all regularly order the exact same product in high volumes. The real-life trend for most company's existing customers is to order increasing variety, more frequently, in lower volumes. As for their new customers; unfortunately they often don’t order the same variants as existing customers. This leads to proliferation of sales references with detailed forecasts becoming increasingly unreliable. Customers’ own customers behave analogously, so even in commodity markets many customers require ever shorter order to delivery times with smaller batches.

Two strategies:

The classic commodity strategy of “economies of scale” from long production runs with big batches to "buffer" unproductive changeover time and high stocks of finished goods to serve orders quickly is now unfit for purpose with this proliferation of variants and reduction of order sizes. It also shows diminishing returns on investment, even in today’s economic environment of near zero interest rates, as stock holding costs may still be around 15% of stocked commodity value per annum, totally wiping out profit.

To dominate the competition a better “lean” strategy is to gear production to fast changeover. Taiichi Ohno # describes this as “small lot size and quick setup”  and implemented the idea at Toyota around 60 years ago with fast die changes on presses changing over from producing one part to the next part with a target of “single minutes”; less than 10, instead of previous changeover times of 2 or 3 hours. This led to the acronym S.M.E.D. for Single Minute Exchange of Dies. Ohno tells of production's resistance to change with this new strategy in production and had to change their “attitude”.

The power of SMED:

I first became aware of the power of SMED, 30 years ago, when a SMED workshop, which I led at the European production site of the leading global watch battery manufacturer, enabled the production cycle to be reduced from a monthly plan to a weekly plan for the production of about 100 different references. The increased reactivity to customer demand enabled a massive reduction in supply chain stock, reduced stock-holding costs including reduced obsolescence as batteries have strict sell by dates and enabled the cancellation of a European distribution warehouse investment all in all saving the equivalent of over 5 years profit from a single SMED workshop.

SMED facilitation by Business Excellence:

Business Excellence latest application of SMED was at a European producer of plastic master batches, an essential raw material in today's fight against the COVID19 pandemic. The task was daunting as the pilot production line is four stories high, making the co-ordination of team members’ actions out of line of sight during changeover a real challenge. To overcome the resistance to change experienced by Ohno we involved the team members who filmed and analysed the changeovers under our facilitation. The photo shows a helmet mounted camera used by a team member.

When the team members watched the video together, they collectively saw together the difficulties confronting each of them during the changeover and very rapidly a host of ideas were brainstormed to save time at every stage of the changeover. They showed maturity in seeking out the root causes of time being wasted and innovated effective solutions to eliminate or reduce time lost during changeover. The first round led to approximately a 30%-time saving. This is a typical result in well facilitated SMED workshops with every improved state becoming the new current state open to a further 30% improvement with a second workshop. The challenge with SMED is the ingenuity to find simple cheap ways to save time and not take the easy choice of expensive automation solutions. This is in line with Thomas Telford, the famous 18th century Scottish Engineer’s definition of an Engineer as “someone who can do for sixpence, what any fool can do for a shilling” (a shilling being 12 pence in those times)

The real "flexibility" gain from faster changeover is the ability to offer a quicker delivery than competitors with equal levels of infrastructure in machines and stockholding. Often short lead time deliveries enable premium pricing and fuel healthy profits. Additional production capacity from downtime reduction is also a benefit. Long live SMED.

© Frederick Portal - April 2020

# Taiichi Ohno : « Toyota Production System – Beyond large scale production » ©1978. 

Taiichi Ohno was the creator of Toyota's just-in-time production system, now known as "Lean Production"