Operational fluctuations are common in manufacturing units; Production processes may be faster or sluggish; Machines may work faster or slower, or may face a complete breakdown; Suppliers may send materials earlier or late in more or less quantity; Workforce ready to produce on day-one, might need more training, or sick at home; Customers may also behave randomly by ordering more or fewer units or even by modifying or canceling existing orders. Overall, there are numerous potential fluctuations in an enterprise-wide production process.

Big Manufacturers, like Toyota, put enormous efforts to minimize production-related fluctuations, but they too counter variations in their manufacturing processes. Experts, therefore, believe that for an efficient output; organizations must strive for lesser fluctuations in their production methods.

This post will discuss in detail about the three fundamental strategies to decouple fluctuations: Inventory, Capacity, and Time. Each of these methodologies has advantages and disadvantages of their own. Depending on the situation, a mix of the three may work well to eliminate process fluctuations of a manufacturing enterprise.

Inventory

Proficient management of the inventory is probably the first step that organizations initiate while considering fluctuating customers’ demand. Process owners must plan to create an appropriate buffer stock throughout the processes. It will help organizations to use the buffer inventory if they temporarily need more products than their production capacity. And, enterprises can add to the buffer stock in case they temporarily produce more than what is required.

Effective utilization of the inventory is, therefore, considered to be the popular strategy for decoupling process fluctuations in a structured manner. Process leads can also add this methodology for almost every process.

The Downside

Experts believe the cost of the inventory to be the most prominent snag while applying this strategy. Conventional cost accounting methods take into account the overall cost of the capital. There are, however, various other cost elements, like insurance, storage expenses, handling costs, administration, defects, stock deterioration, increased lead time, and others. The cost accounting system ignores these cost components, as they cannot be calculated reliably.

Inventory can, however, fairly help in managing the short term fluctuations in the demand. If customers consistently demand more than the actual production capacity, the inventory shall eventually get consumed. The inventory will, however, explode in case of lesser demand than the output. The solution to the process fluctuation is, therefore, lies in demand and supply scenarios.

Capacity

Appropriate capacity adjustment is another way to decouple fluctuations. This methodology is quite easy to understand and apply. During higher demands process leads shall ramp-up the production hours to produce more. Organizations shall, however, halt or reduce the output if there is less demand for their products.

The Tricky Side

The primary and the most obvious challenge with the capacity adjustment is the delay between the decision to increase or decrease capacity, and its actual implementation. Production managers, therefore, must hire and potentially train more people if they plan for larger increases than possible with the existing workforce.

It could, however, take months before enterprises observe a noticeable change, while with machines or new facilities these delays can further extend. With appropriate industrial tool storage options, advance workstations, smart material handling solutions, and other productivity enhancement tools, organizations are more likely to hold larger capacity changes for long.

Flexible enterprises set working hours a week in advance, while less flexible organizations set operating hours a month in advance. Sometimes smaller changes on short notice are possible with the operators’ keen to work.

The Comparison

Inventory can pile up goods during the processes or at the end of the value chain. Capacity, on the other hand, can help process heads in adjusting the entire value chain according to the desired capacity. Therefore, capacity alterations may cost less than creating inventory buffers. Because, asking operators to work a few hours more shall not add much to the product cost, as most of the labor charges are variable. It may, rather, make the output economical as the fixed costs get dispersed over more products.

Time

Time management is the easiest way to decouple fluctuations, as it happens automatically. It is, however, the least popular strategy most times, as processes have to wait if an inventory buffer or capacity change does not work as expected. This may be either the customer demand is larger than production capacity or operators and machines produce more than the demand.

The Challenge

Decoupling process fluctuation through time is tricky because of the cost factor associated with it. To explain it better – it is easier to calculate costs if workers have to wait. Additionally, process managers can save production costs by cutting the work hours or utilizing the idle time to perform value-added activities, like training, within the organization. The cost linked with customers’ demand is, however, more complex to assess. Unless the organization is a monopoly producer, knowing the result of its relationship with customers is difficult to understand.

The Comparison

Most production units use a blend of the above three tactics (Inventory, Capacity, and Time) to decouple fluctuations. Inventory is best used for decoupling the short-term fluctuations due to its heavy cost aspect. Sluggish but economical, the Capacity strategy is often used to cover massive or longer duration fluctuations that possibly are predictable. Decoupling through Time is, however, the default resort for enterprises whose market situation cannot afford it, and helpful for financially stable organizations.

To Sum-Up

Apart from the above-discussed strategies, there are numerous ways for reducing process fluctuations in the first place. For Instance – initiating with managing smaller order sizes, coordinating and cooperating with suppliers, and much more. Before going out and organizing the industry, process managers must think of relevant questions like – How is the situation in the organization; Where to implement inventory or capacity tactics and where to apply time methodology?

At JSixSigma we provide industrial-grade learning modules that help businesses not just to train their staff, but assist them to organize, manage, and control their manufacturing plants as well as shops at the highest levels of proficiency and profitability. It is our mission to work hand in hand with our valuable clients to develop smart learning solutions that meet all of their business needs.