In any manufacturing or food processing industry, the goal is to make a profit. That’s a given. Without a consistent profit, the company will quickly go out of business. That’s pretty much Business 101, right?
But, how profits are calculated or derived is changing for many industries. The old rule of thumb for calculating price was fairly simple:
Cost (to manufacture) + profit margin (usually in percentage) = the price of the item
This was particularly useful for handcrafted products. Even automobiles were built this way in the early days of that industry, circa the early 1900s.
Called craft production in many circles, the process was quite involved and time consuming. A buyer would contract with a shop owner to have a car built. Following the buyer’s specifications, the shop would build the automobile, often farming out certain aspects of the manufacture to other specialty small machine shops.
Eventually, the car would be assembled. The buyer would road test the vehicle accompanied by the shop’s mechanic. Tweaks and adjustments were made—often on the spot—to satisfy the buyer’s demands. In almost every step, the buyer was intimately involved in the manufacturing process to one degree or another.
Imagine doing that in today’s competitive market!
There are still some luxury cars built in similar fashion—Aston Martin, Ferrari, and Lamborghini, to name three—and that personalized touch comes with a hefty price tag.
But you’re not manufacturing high-end automobiles. Instead, you produce consumable goods used in everyday life or durable goods used by consumers.
In times such as the present, particularly in light of the recent pandemic, the profit calculation has changed for many industries. Consumers have more control over price. It’s the buyer who determines, to some degree, the cap on the price paid for many products.
To wax a little poetic: If the price is too high, the consumer won’t buy!
Sure there are exceptions where the laws of supply and demand still rule. The toilet paper scare during the pandemic was proof of that. But even then, companies that raised prices too high were met with penalties, particularly from governmental agencies.
For many companies now, the profit calculation has changed. With consumers more involved as a factor in determining price, the profit equation is:
Price (fixed) – Cost = Profit
Therefore, a manufacturer must pay more attention to the inner workings of the manufacturing process by monitoring all the important key performance indicators.
Two of the factors that absolutely demand closer inspection are cycle time and throughput time. Both are important measures of manufacturing performance. They’re related, governed by time (among other factors), and are both measures of machine and process line effectiveness. And both have an effect on profitability. Let’s look at each individually, then wrap up by looking at tools to increase productivity in light of cycle time vs. throughput time.
Basic Cycle Time Defined
Simply put, the amount of time it takes for an object to move from point A to Point B is its cycle time. This can be the interval between the time in which a raw product is first introduced into a machine until the finished part or product exits the machine.
Cycle time can be expressed in several different ways:
- Effective cycle time: The time to complete a cycle, including the load time, unloading time, applied changeover time per piece, and processing time per piece
- Equipment cycle time: The time to process the piece, excluding support steps
This can be a single machine or a group of machines in an assembly line, but the concept is the same. The item moves from Point A (introduction to the process) to Point B (exiting the process). Arguably, the only way to decrease cycle time is to speed up the process. However, it’s possible that defects will increase, and that can lead to wasted time in the form of recycling.
Throughput Depends on Cycle Time, Plus ...
Throughput is the number of units processed or produced during a defined time period. It can be for a single part of an overall product, used to determine machine throughput, or for the more complete calculation of an entire completed product from start to finish—for example, W number of ball bearings produced during X time period or Y completed bearings produced during Z time period. This can also be a calculation of time from receiving raw materials, processing those materials into a product, and getting it ready to ship.
Throughput can be used for granular or mass calculation purposes. But it is, simply defined, the number of units per a defined time period. The time frame is usually expressed in minutes or hours.
Depending on its application, throughput volume can also be expressed in several different ways:
- Theoretical throughput is the maximum throughput possible if the equipment is running at top speed and making only good parts.
- Total throughput is the total number of units that pass through the process, including scrap, rework, and good units. This value shows the potential for production volume improvement by improving quality.
Effective or actual throughput is the number of good units that pass through the operation during a prescribed period. This value represents the processes' ability to satisfy customer demand because only good parts can be shipped to customers.
However, there is a correlation between cycle time and throughput time.
How Cycle Time and Throughput Time Work Together
If throughput is the number of products produced during a time period, and cycle time is the time needed to produce an item—either part of or a complete item—it’s easy to see how they relate. They have an inverse relationship.
Throughput can be increased by decreasing cycle time. One way to do this is by speeding up the machine. While this can and does work, it does have obvious limitations. A machine can only work so fast, for example.
Another possible drawback is the number of potential defects made and the inability to catch them quickly enough to shut down and make adjustments or repairs.
Another way to increase throughput is to increase the number of units made at one time. I saw this in action at a food processing facility, and it’s quite common.
Miniature quiche cups were being processed. The dough was batch fed into a hopper, then squeezed out and stamped into cupped trays moving down a conveyor. The filling was injected into rows of these formed quiche cups, and the entire line of trays was fed into a massive oven. At the end, the quiche cups were ready for packaging.
So, whatever method you use, throughput can be increased within reason. However, it’s important to monitor the entire process to ensure the smooth operation of all the moving pieces. And that’s how we’ll wrap this all up.
Continuous Monitoring for Continuous Improvement
In light of today’s market, it just makes sense to improve your manufacturing process. Under the new profit model, decreasing the cost of manufacturing is the intelligent thing to do. And intelligent manufacturing requires one key element: a smarter factory.
Smarter factories combine three major elements to enhance production:
- Collection of data on key processes and equipment
- Analysis of that collected data
- Reporting of that analysis to find patterns and areas for improvement
At Worximity, we help companies design smarter factories with Industry 4.0 technologies. Our Tileconnect sensors can be installed anywhere you need a view into your processes. When added to your production line, real-time data is gathered directly from your machines. The collected data is sent wirelessly to a real-time dashboard for viewing and analytics. Don’t just think your machines are operating efficiently—see it.
Transform both real-time and historical data into a competitive advantage for increasing productivity and overall equipment effectiveness with our analytics software, Tilelytics.
The manufacturing and food and beverage landscape have changed. Stay ahead of that change by monitoring cycle time, throughput, and quality control. Other manufacturers are doing just that, and you can read their customer success stories for yourself here.
Looking for help calculating OEE? Check out this free template.