How manufacturers can manage a demand surge

Business has been rough, but now that demand is returning, is your manufacturing operation ready? Lean tools, including an analysis of cycle and takt times, can help you find out. Getty Images

Businesses have weathered quite a storm. Many fabricators have adapted to demand variations and external matters outside their control, such as customers being apprehensive about making commitments. All this has thrown many people off their game.

But as demand returns, the time is right to prepare to be in charge of your situation. Do you handle the surge methodically, or do you simply roll with what comes at you? The obvious answer is to approach the surge methodically, and lean techniques can help you to do this.

Planning for the Surge

As a major disruption hit, demand levels changed quickly, dramatically, and emphatically. You made quick decisions to respond, and external factors influenced those decisions. Maybe it was health mandates that took you in a new direction. Or perhaps it was financial incentives that drove decisions that were not particularly aligned with customer demands. In short, factors beyond your control spurred decisions you might not have made in normal times.

With those disruptive outside influences subsiding, you now have an opportunity to take control. As demand becomes more stable, increasingly predictable, and (let’s be optimistic) moving toward a surge, you can exercise many lean sigma methods and tools. Lean tools helped you weather the storm, and these same tools can help in the storm’s aftermath. Encourage everyone in your organization to be part of a renewed commitment to lean sigma as a way to run the business, whether it is re-evaluating how you deploy 5S, streamlining your flow, or shortening changeovers.

Keeping Pace

One especially relevant technique during this transition is takt time, which can help you methodically address the surge. Takt time is the pace you need to run at to meet customers’ demand. The mathematical value tells you “every x units of time you need to produce one unit of demand.”

The takt time could be in units of seconds, minutes, hours, or days, depending on the type of business and the volume of products. A plant making 800 oil pumps per shift might use a takt time measured in seconds. A plant making two electrical generation wind towers per month might measure takt time in days.

Takt time is not cycle time. Where takt time is the pace to meet customer demand, cycle time is the time it actually takes to produce the product or execute the operation. One is what is “needed” (a calculated number) and the other is what it “is” (an observed number). The two numbers are mutually exclusive, but when evaluated together in a takt and cycle time analysis, also tremendously powerful.

To make meaningful decisions, you must have a deep understanding of the ingredients comprising the takt time calculation. The ingredients in the numerator focus on resources and require decisions such as number of shifts, staffing levels, number of machines, and planned downtime. In short, you are making decisions about how much and how many resources are available.

The denominator focuses on the demand from the customer. For example, how many units do you need to make per day or shift or week to meet your customer’s needs? If a process is dedicated to one product for one customer, identifying the units of demand is simple. If, on the other hand, the process handles multiple products for multiple customers, identifying the demand on that process can be a bit more complicated.

The equation for takt time is available time divided by units of demand. This simple equation is rich in content and impact. Maybe the takt time is 35 seconds per unit for a repetitive, simple operation or 54 minutes for a more complicated assembly. In either case, the takt time tells you the pace the operation should run to meet customer demand.

Now compare cycle time to takt time. If the cycle time of an operation is greater than the takt time for that operation, you have a problem. You simply cannot make enough product to satisfy the demand, given the resources defined in the equation. If the cycle time is less than takt time, you are OK. But if takt time greatly exceeds cycle time, it indicates there is open capacity.

An effective way to look at this relationship is to divide cycle time by takt time. If the result is approximately 0.9, you are in reasonably good shape. You can meet the demand with a bit of room to handle minor disruptions, such as tool adjustment, switching out material containers, and performing quality checks. If the cycle time divided by takt time is 1.3, you have to make some changes (increase resources, shorten cycle time, or reduce demand) to meet demand. If the result is 0.5, you are at approximately 50% capacity utilization and can either produce additional products or reduce the resources (such as move a flexible worker between two operations or move from two shifts to one).

What-if Analysis

As you plan for variations in demand, such as a surge in optimistic conditions or a slowdown in pessimistic conditions, thetakt and cycle time analysis can help you conduct powerful what-if analyses. The discipline of the takt time calculation helps you think through resource decisions about people, machines, and shifts. It also enables sober consideration about the demand you can run through an operation or process.

Let’s analyze a press brake operation with one machine and one operator producing 200 units a day. Each unit takes 115 seconds to produce. Considering how rapidly the operator produces each unit, we’ll use seconds as the unit of measure.

The operator works an 8-hour shift, with two 10-minute breaks and one 30-minute lunch. Eight hours equates to 480 minutes. From that we subtract 50 minutes for breaks and lunch, and we get 430 minutes, which, because seconds is our standard unit of measure, we convert to 25,800 seconds (430 minutes × 60 seconds). That’s our available time.

The daily demand is 200 units, which the operator has 25,800 seconds to produce. Divide 25,800 seconds by 200 units, and we find that the required time—the takt time, or the pace the operator needs to maintain to meet demand—is 129 seconds per unit.

We know the operator can produce one piece every 115 seconds. So to uncover current capacity, we simply divide the cycle time (115 seconds) by the takt time (129 seconds), and we get 0.89. So, this press brake operation is currently running at 89% capacity. You are able to meet the demand on the press brake in the current situation with a small cushion to absorb minor disruptions.

What if demand increases to 300 units a day? Since your cycle time was already close to thetakt time, it is reasonable to expect that the 50% increase in demand will be a problem. The question is, how big a problem?

To find out, go back to your takt and cycle time analysis. We know our available time every day is 25,800 seconds. Divide that by 300 units per day, and we get a takt time of 86 seconds per piece. Divide the actual cycle time per unit (115 seconds) by the required takt time per unit (86 seconds) and we get 1.34—or 134% of available capacity.

Something has to give. You can add hours on another available press brake on the same shift or you can add hours on a second shift with the same press brake. You also could shorten the cycle time by reducing the non-value-added work or moving the work to a faster (perhaps more automated) machine.

Let’s assume the cycle time remains as is and you decide to add second-shift hours to the same press brake. How many hours? If your targeted cycle time/takt time ratio is 0.90 (your capacity utilization percentage), you then can back into the available hours with the same formulas.

Again, your strategy involves running at the current cycle time of 115 seconds but operating at only 90% capacity, giving you a cushion to handle variation. How much time do you need to make this happen? To find this out, divide 115 seconds by that capacity percentage (0.90), which gives you 128 seconds. That’s your new target for takt time.

Now you need to determine how much time you need to produce sufficient units while maintaining 90% capacity utilization. You need more available time, but how much exactly?

To find out, multiply the new demand—300 units a day—by your new takt time of 128 seconds per unit. This gives you the available time each day you need to meet demand: 38,400 seconds. Convert this into hours (dividing by 3,600 seconds per hour) and you get 10.7 hours per day. Now you have to figure out how to staff a partial shift on this press brake to handle the increased demand.

Thetakt and cycle time analysis provides a methodical way to calculate a specific target to handle demand variation. Rather than being subjective and fuzzy, the analysis gives you an objective way to plan for the demand increase. It puts you in control.

Lean Methods Lead to Sustainable Growth

As you emerge from the storm, you can expect variation in demand. Takt time is one of many techniques that can help you be in control of your business. If you have been on your lean journey for some years, now is a great time to energize and reinvigorate how you improve and execute your operations. If you have not started your lean journey, there is no better time than now. Put yourself in control of your destiny. Take on the surge and win!