Logic PD’s CEO explains how to increase your profits by making improvements in a new product’s transition to production.
I love the Rocky movies. Every plot is the same and predictable, and in the end we know what will happen. But it always takes Rocky at least a few rounds to get his head in the game before he showcases his real “Rockyness.” It may seem like a stretch, but the “transition to production” process for a product has some similarities to a Rocky title fight; it can take a few rounds to get your Rockyness going. Here are two big tips on how to achieve your Rockyness sooner and expend less energy in winning the “transition to production” title fight.
First, preparation and training for the fight is critical!
The best way to lower the cost of your production inputs and increase your chances for profitability is to get in the best possible shape to start. The key is to start as low as possible on the following curve. If your first unit time (cost) is too high, then you’re already wasting time before you even start building.
Lowering the average time for the first unit comes with discipline! This is what will allow you to set a production line that delivers consistent, quality output throughout the manufacturing process. Without a disciplined approach, the new product starts at too high a point on the curve with little chance to realize the benefits of learning. Starting too high may have little impact on manufacturers that specialize in large quantity runs, but the drawbacks of a lack of discipline definitely show themselves in low volume manufacturing. In the low volume/high mix world this could be a knockout punch for the relationship.
This is where that preparation and training can really pay off and allow you take key steps designed to decrease your starting costs, including:
- Ensuring that a “Design for Manufacturing” process is included in the early design gates of product development. The early work of alignment with manufacturing to reduce both the BOM and the time to assemble will be the largest driver in reducing start costs.
- Developing an initial set of production tools for the operators as they begin their work. Using low cost 3-D modeling tools is an easy way to get started and modify on a daily basis.
- Establishing an initial set of robust work instructions that have been validated by engineering.
Second, make each round count!
Don’t just take the time in your corner to spit out blood and dress your wounds. Make it a routine part of your process to go over what just happened and come up with a plan for the next round to ensure that you lower your cost per new unit by the maximum amount possible. Look at the production curve again. If your fifth unit time (cost) is too close to the cost from the 4th unit, you are not gaining a great enough advantage from your learning.
Maximize your learning between each unit with process rigor and discipline. Incorporating a culture of learning with facilitated reviews between the first handful of units drives cost down faster. This is most appreciated in smaller lot builds where “every unit counts.” The key steps in maximizing the benefit gained in each round include:
- Putting in place a process and culture that fosters widespread communication and understanding with a group brief. All involved in the launch need to rally around the end goal, the delta goal per unit, and most importantly how every idea helps build toward the team’s common objective.
- An established “corner process” that guides the same team through a set of questions on instructions, tooling, and other issues between each of the initial rounds, then every few rounds as the fight continues.
- Work instructions that can be modified between rounds to incorporate new learnings.
- Quick hand tooling prototyping that can respond between rounds.
What determines winners and losers?
In every Rocky movie the winner is very clearly determined. In the end there is one fighter who is down for the count of 10 and another standing with the referee, glove raised in the air. In low volume/high mix manufacturing it might seem that the winner isn’t so easily determined. So, so wrong, Adrian!
Every product transitioning to full production has a defined total budget accompanied with a defined budget for the first lot. Many times firms prematurely declare success in the transition yet lose in first lot. This is akin to winning the first round but losing the fight. No one cares about the first round. The winner can only be declared when the total cost (the area under the learning curve for the first “X” number of units) is lower than the budgeted area.
You may be saying that the time invested in preparation, process, and training has to be included! And you’re absolutely right. But the initial cost for set up is generally counted in unit 1, while the full cost to include revisions and between round process are included in subsequent units. True cost accountability has demonstrated to us that taking the time up front and maintaining discipline between rounds is the most effective way to reduce the overall area under the curve. Keeping these costs low to each unit drives the desire to make each step effective AND efficient. The reuse of process and standardized disciplined approach between different products adds to our ability to successfully transition with each new experience.
Your first fight may last longer than you want it to, and you may be bloodier at the end of the round than you had hoped. But if there is solace in anything, just know that each time you get in that ring to transition a product to production, you will be stronger, smarter, and ready to take on each new challenger. In the end it will be you standing up with the championship belt raised victoriously above your head.