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Time is money

Rajan Suri and Chuck Gates

Chuck Gates (right), president of RenewAire Inc., in the company's Madison facility with Rajan Suri, director of the University of Wisconsin-Madison's Center for Quick Response Manufacturing. (large image)

In the fall of 2002, Chuck Gates, president of RenewAire Inc., was facing some tough choices as orders were increasing for the company's residential and commercial lines.

"We had grown by 37 percent that year, and we weren't sure how we were going to take the next step," says Gates.

Gates' Madison-based company, which manufactures energy-recovery ventilation systems that solve indoor air quality problems while simultaneously saving energy, had received increased orders for both its residential and commercial lines. But this welcome "problem" of growth also presented some tough choices.

One option was to expand the plant, purchase more equipment and hire more staff to meet future growth. But there wasn't time for that, and besides, this would have been costly and potentially risky. After all, if RenewAire's growth spurt ended up being short-lived, pursuing a major plant and staff expansion would have been a grave error.

Another option was to continue operating at current capacity, yet avoid taking on new business — in essence, saying "no" to further growth. But for most companies, actually turning down business is simply unthinkable.

There was a good alternative

Fortunately for Gates, he found an alternative that allowed him to say "yes" to more growth by increasing capacity while using his existing staff and manufacturing facilities.

How did he do it?

With help from the faculty and students of the University of Wisconsin-Madison's Center for Quick Response Manufacturing, RenewAire's operations were revolutionized by the principles of quick response manufacturing.

"We dramatically increased our production capacity, yet we did it all within the same footprint, without having to expand our facilities or make additional investments," Gates notes.

Since 1993, the Center for Quick Response Manufacturing (QRM) has provided a forum for learning about the concepts of quick response manufacturing, enabling companies to bridge the gap from the theoretical to the practical, from the classroom to the enterprise.

"In a sense, factories and businesses are our 'laboratories' for testing and proving the theories of QRM, says Frank Rath, QRM associate director.

Changing the face of manufacturing

Through student team projects involving the analysis of businesses' real-life challenges and problems, as well as seminars, conferences, case studies and publications, the Center for QRM is dramatically changing the face of manufacturing at large and small companies around the world.

Just what is quick response manufacturing?

"There are many continuous improvement systems out there that focus on reducing waste and non-value-added overhead, but this system is unique in that it focuses on relentlessly reducing lead times in all aspects of a company's operations. This in turn results in the elimination of waste, improved quality and reduced costs," explains Rajan Suri, director of the QRM Center and author of the book "Quick Response Manufacturing: A Companywide Approach to Reducing Lead Times."

Speed and the ability to adapt quickly are the keys to competitiveness in today's marketplace. For companies that have production volumes that vary or possess a high degree of customization, quick response manufacturing can be just the ticket.

Central to the theory and practice of quick response manufacturing is manufacturing critical-path time, or MCT, which is the typical amount of calendar time from when an order is created, through the critical path of designing, engineering, fabricating, assembling, packing and shipping, until the first product is delivered to the customer.

The key to cutting waste

The longer the MCT, the greater the amount of waste. But the key to cutting waste is to measure each step of the manufacturing critical-path time to determine when people are actually working on the product and when it is laying idle, awaiting the next phase of production.

In the case of RenewAire, students from the Center for QRM carried out time-based studies of the company's operations to pinpoint different types of idle time.

"The students conducted 'job tagging,' in which they attached tagging sheets to individual jobs, in order to determine the manufacturing lead times and individual processing times associated with each operation," Gates said. "For example, we found the average manufacturing lead time for high-volume units was over two days."

The QRM student teams also conducted "multi-observational studies" of what RenewAire workers were doing at any given time to identify non-value-added activities, such as walking around looking for tools or parts or waiting for tools or parts to be delivered.

As each of these non-value-added activities mount, lower productivity results and lead times get stretched out. In turn, longer lead times cause companies to stockpile larger inventories, adding warehousing costs to the mix. Longer lead times also result in increases of cancellations or order changes or obsolescence due to warranty changes. All of these scenarios can be costly to companies.

But by eliminating idle periods in manufacturing critical-path times, companies such as RenewAire in turn can remove waste and unnecessary costs and can bring products to market more quickly.

Spotting room for improvement

When RenewAire received the results of the student teams' studies, it found that much wasteful idle time resulted from technicians walking around gathering parts and tools or looking for them. The biggest room for improvement was in RenewAire's commercial business. To remedy the problem, RenewAire decentralized its production flow into production cells, in which technicians have parts and tools right at their fingertips, so they don't have to walk back and forth to get them. By organizing tools and materials into a more efficient production configuration, idle time spent retrieving them from different plant areas was eliminated.

However, these improvements were just the tip of the iceberg. RenewAire has implemented more sophisticated QRM techniques, such as better planning methods for their workload, as well as POLCA (Paired-cell Overlapping Loops of Cards with Authorization), a method to manage capacity and space on the shop floor. As Gates points out, the results have dramatically improved RenewAire's operations.

"The university students' studies and recommendations, and the overall conceptual structure of QRM that we learned from the center — these were the tools we needed to build a more efficient, flexible business," Gates reflects. "The Center for QRM gave us a focus, a starting point to improve upon."

QRM has partners worldwide

Indeed, the UW Center for QRM has given focus to its many industry partners around the world, including the Trek Bicycle Corp. in Waterloo; Varco B.J B.V. in Etten-Leur, The Netherlands; and Irving Shipbuilding in St. John, New Brunswick, Canada.

One of the center's largest industry partners, the John Deere Worldwide Commercial and Consumer Equipment Division, has embraced the concepts of QRM, and even has built QRM concepts into its supplier relationships. The results of this enterprise-wide effort have been astounding. Manufacturing critical-path times were reduced by 94 percent for wiring, by 93 percent for hydraulic valves and by 87 percent for consumer garden tractor blades.

"The center provided training for John Deere's engineers, who in turn passed on the knowledge and concepts to the suppliers," Rath explains. "It began at the John Deere plant in Horicon, Wis., and has been implemented throughout the entire Commercial and Consumer Equipment Division headquartered in Raleigh, N.C."

Paul Ericksen, division manager of supply management services at John Deere Worldwide, was the key leader of Deere's supplier development initiative that focused on QRM and is perhaps one of QRM's most eloquent and persuasive proponents. He notes that John Deere's Commercial and Consumer Equipment Division has gained tremendous manufacturing flexibility from QRM.

"If you can flex up your production above what was forecast, that's almost like gold," Ericksen says. "And that's what our division is known for. When forecasts come in, if we need to flex up, we can boost 20 percent with two weeks notice. And if we need to change the model mix, flexing up in one model and flexing down in another � if something is selling and something else isn't � we can do that, too."

An edge over low-wage countries

While the UW-Madison Center for QRM is having a quantifiable, positive impact on companies large and small throughout the United States, Suri contends that it could give American manufacturers an edge over low-wage countries that have been absorbing manufacturing jobs in recent years.

"With this QRM approach, companies have reduced lead times by more than 80 percent and product costs by 20-40 percent," Suri states. "These reductions eliminate the labor cost advantage of overseas competitors, showing that local manufacturers can recover their competitive edge and retain significant numbers of jobs in this country."

Courtesy UW Business News Wire
3/7/2005