Job Shops: Custom Solutions for Custom Shops

Long lead times, missed delivery times, demanding or nonpaying customers, too many unsuccessful quotes, too much shop overtime-life isn't always smooth for job shops.

The term "job shop" refers to custom manufacturing and make-to-order businesses. These firms share some common characteristics that differ from repetitive manufacturing settings, for example using a quoting process to secure work, and producing work on an order-to-order basis to meet customer specifications. While some job shops do purely custom work, many manufacturing firms have a mix of custom and repeat orders.

"Job shops are distinct from repetitive manufacturers," says Larry Baker, a WMEP manufacturing specialist. "Because there is variation in what they do, job shops think there is no systematic approach that's going to help them see patterns in their operations and improve their processes. However there are tools that job shops can use to achieve sustainable improvement.

Value Stream Mapping

One of the most valuable improvement tools for job shops is also a simple one. Called "value stream mapping," this technique involves drawing a visual representation - a map- of every step in the product's path, or "value stream," from "quote to cash"- from quote/bid, through engineering, to the shop floor and out the door. Given the significance of front-end processes in securing orders, it is particularly critical for job shops to include them in their value stream map.

The resulting map helps companies scrutinize each aspect of their operation and identify areas for improvement.

One very important outcome of value stream mapping is to illustrate where a job shop has distinct types of product "streams", each with its own customer and production requirements. Defining the right value streams for products can prevent priority conflicts and answer the question of what gets produced in what sequence.

Many companies produce a mix of repetitive and custom work utilizing the same plant processes, which can cause confusion on which job goes first. Often there are bottleneck or constraining processes, and in many cases duplicate equipment is being used to do the same work. Recognizing the different product streams may result in dedicating one piece of equipment or one welder to a specific product line versus attempting to schedule everything on every machine. Maintaining a first in, first out sequencing and limiting the number of jobs for the custom work also can result in better flow for both custom and repetitive work. To accomplish this requires recognition of the different product streams.

Effective Costing

When a shop discovers that it has different product streams, it can look very closely at its costing strategies. Many manufacturers have both custom and standard work, but they've got one flat rate; they're undercharging on one side and overcharging the other. They might have a $50 per hour rate across all products, when it takes much more overhead to support the extra design and engineering work required for custom products.

One solution is to have different costing strategies, splitting the job shop's operations and its costing systems to acknowledge how its resources are really being used. As an example, for a custom job requiring considerable design work, the shop can charge for one-time engineering/design services, instead of automatically absorbing those costs into the shop's overhead and reducing or wiping out the job's actual profit margin.

Reducing Lead Times

When trying to reduce lead times, people tend to focus on where the action seems to be, which is in the shop. In fact, for most job shops the majority of the time is spent getting prepared to start making the parts, not in the shop itself. It's the front-end processes.

For example, one business Baker worked with had a 16-week lead time on a very large semi-custom product, and they tried to reduce that time on the manufacturing side. "But when they looked more closely, they found that the order only spent three to four weeks in the shop. The rest of the lead time was on the administrative side - the quote process, the engineering, and so on," he explains. Focusing on improving these functions reduced the front-end lead time by half.

If the customer hasn't fully decided what he wants, or parts of the order aren't specified, or materials are delayed, everything drifts along- and yet the delivery date stays the same. By mapping the entire product path, problems can be pinpointed, and solutions designed to help meet scheduled delivery times, such as making the order intake process mistake-proof, or ordering special materials ahead of time.

The benefits By reducing lead time, a shop can be more competitive and gain more customers. And it can charge premium rates because it can deliver faster than its competitors.

Know the Customers

Knowing your customer, and even your customers' customer is extremely important for the job shop operation. This helps ensure that you will provide what your customer, and ultimately the end user, needs and expects. Job shops provide a service to their customers and, in most cases, not the end product. The better they understand how the product is eventually used, the better they are able to meet the customer's need.

Winning the Right Customers

Looking at the entire product path-from the customer request to the time the product is delivered-can also help a job shop determine which of their customers and jobs are profitable for the company.

A good customer knows and communicates their complete product requirements, pays their bills on time, and understands that changes made just before delivery impact cost and delivery time.

A good job fits well with current machine and process capabilities, and provides an acceptable profit margin when costs are allocated accurately.

In one job shop that Baker worked with, after defining the best customer and best type of work for the shop, they reduced their customer list down to a manageable size, keeping the better customers and most appropriate jobs for the shop's capabilities.

"With half the customers, they doubled their profits and doubled the business," he notes. These practices and tools are elements of the continuous improvement process for job shops.

Many of these improvements require either no cost or low cost to implement. To learn how lean manufacturing principles can help your company become more competitive, call WMEP at 877-800-2085.

© Copyright 2003 by WMEP.org

WMEP provides technical expertise and hands-on implementation assistance to small and midsize manufacturing firms on advanced manufacturing technologies and business practices includinglean manufacturing, ISO, value chain management, and strategic repositioning services for manufacturers and manufacturing facilities located in Wisconsin.