Optimizing Manufacturing Operations


Introduction: This series of articles is directed toward companies who have or are planning manufacturing operations. The topics explored will be focused on optimizing those operations and maximizing the cost/
benefit aspect.


Automation is Not Alwaysthe Best Choice

To automate or not to automate, is that the question? As with a great number of things it just is not that easy. There are several levels of automation ranging from a “press GO and turn the lights out” system to a modest inclusion of semi-automated segments in some portion of your overall manufacturing enterprise. Right now we’ll focus on thinking about a fully automated operation.

Before we get all excited about automating our manufacturing processes we need to consider why we want to do this. So, why should any manufacturing processes be automated? There are two chief reasons: one, so that we can control or reduce costs and two, so that we can attain a level of consistent production. (by consistent production we mean consistency in quantity produced and product quality).

Let’s talk about the goal of cost reduction. The consideration of automating production processes for the purpose of cost reduction is an involved analysis. It is largely dependent upon the anticipated production volumes, the estimated cost reduction as a result of automation and, of course, the capital cost to implement that automation. Sure there are a number of ancillary considerations and some perhaps unique to a given operation, but in general these are the biggies. 

How do you know how much automating a process will save? It is usually best to start from the savings realized by eliminating the entire operation and then add back in amounts for maintenance, setup, downtime, and so on. We have found that you are generally safe in taking a savings of 50 percent-60 percent of the pre-automated task.
We have over the years been in the middle of automation projects that covered automated storage and retrieval installations to automated manufacturing processes and when the smoke cleared the 50- percent-60 percent figure was valid. However, a detailed study of this can and should be done by a process/industrial engineer to have something to hang your hat on.

OK, so you’ve gone through your process and have a good estimate of the direct labor you will save. Let’s look at the other sources of cost savings. What costs are you incurring as a result of improperly made product (parts missing, not assembled correctly, and so on)? What revenue are you not realizing because your existing manual operation is not capable of the volumes you need or simply is not flexible enough to deal with intermittent larger order volume?  What can you anticipate as a potential cost reduction?

To determine this, your first step is to establish a base determined by your current process. Without that you have nothing to measure against. The best place to start is by calculating the Overall Equipment Effectiveness, or OEE, of your existing process.  The OEE is a lean industry-standard Key Performance Indicator (or KPI).  The equation:  OEE = Availability x Performance x Quality.  Where availability is a measure of equipment uptime and can often pinpoint issues in scheduling.  It is calculated using the formula Availability=Available Time/Scheduled Time. 

Performance is a measure of the equipment or work station’s actual speed versus designed speed, calculated as Performance=(No. Parts Produced * Ideal Cycle Time) / Available Time.  Finally, Quality is a process yield measurement and is calculated as Quality= No. usable parts/No. initiated parts.  Finding your base OEE will give you a good indication on where your process weaknesses lie.  Deciding where and how to automate is often a balance between improved performance and quality. 

Determining the Return-On-Investment (ROI) for automation involves many components, one of which is calculating the future OEE.  How high can you get your OEE ratios without making any automation investments?  Does getting the extra 5-10 percent increase in OEE directly relate to sales?  These are among the questions that should be explored before making the jump into automation.  Do you have to fully automate to save significant amounts and improve quality? Nope. We’ll cover specific automation options in a future article, but now it is time for a story to highlight what we have been talking about: We had been looking at sourcing a certain type of sensor from a U.S. company, but found that no U.S. company could compete with the quotes we were getting from overseas.

That is until we came across Company B who was indeed a U.S. company and had all of their operations in North America. We visited Company B’s manufacturing facility in Mexico and spent time with the plant manager. Our first question was how they were able to compete with overseas costs. The plant manager explained to us that originally they could not. Even though they had lower cost labor than the typical US located plant, they still could not match competitors in China. He then showed us how he had gone through his entire operation (which were largely manual processes) and identified those tasks that had high labor times and/or poor quality (rework). He automated just those portions.

As a consequence he had to reduce staffing, but improved product quality, increased output and lowered his cost per unit by over 30 percent. In many cases you would be surprised how much improvement can be made by judicious automation.

Heather MacKinnon has over eight years experience in Engineering R&D,  product design, manufacturing operations and facilities commissioning and management. She has a degree in mechanical engineering, an MBA and is pursuing certification as an energy manager.  She owns her own consulting/general contracting business, focusing on lean and green development projects and product development.  She can be contacted at h.mack.eng@gmail.com.

John Herrick, has over 30 years experience in manufacturing industries .He has a degree in engineering, an MBA and is a certified six sigma blackbelt. He is also a member of the Product Development and Management Association and a member of the board of directors of Inventors NorthWest. He is a principal in a Bend firm that provides product development services. He is also the author of the CBN series “The Product Entrepreneur”.
Herrick can be contacted at john@herrickprodev.com)


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Founded in 1994 by the late Pamela Hulse Andrews, Cascade Business News (CBN) became Central Oregon’s premier business publication. CascadeBusNews.com • CBN@CascadeBusNews.com

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