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(+)+(+) S.M.I.L.E(sm)
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(+)+(+) Setup Minimization Improves Line Efficiency
(+)+(+)
(+)+(+) The Quick Changeover e-letter
(+)+(+)
(+)+(+) Published monthly by Changeover.com
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(+)+(+) Written by John R Henry, CPP
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### MARCH 2005
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=============================================================
Last month I did a web seminar "Pitstops in Your Plant" for the IoPP and
Packaging World Magazine. We had a number of attendees from several
countries and it went very well. For those who missed it, I will be happy
to offer it, or any of my other presentations, to your organization. All
you would need is an internet connection. If you have a group, an overhead
projector would be helpful.

For more information, please contact me at john@...

The 5th annual Forum for Innovation is coming up in a couple weeks (April
6-8) in San Juan PR. Lots of good conferences and exhibits. I will be
kicking off a full day track on product surety (counterfeiting, track and
trace, tamper evidency, RFID and more) with a presentation giving an
overview of the problem, trends and solutions.
For more info, visit http://www.induniv.org/content.asp?PageID=116

ALSO: It's a bit short notice but if you can get to San Juan, I will be
speaking on changeover at the Colegio de Ingenieros. This is part of a
conference on Pharmaceutical Plant Optimization presented by the Instituto
de Ingenieros Industriales de PR. This will be Wednesday, 3/16 at 6:30PM at
the Colegio. . There will also be presentations on Failure Analysis and
Process Mapping. Admission is free and no advance registration is required.
It looks like it will be a fun evening. Come if you can.

SOME THOUGHTS ON...
INVENTORY

Many readers here are familiar with inventory. This familiarity is often
because they use it or supply to it. It is not always clear how complex and
important factor it can be in the modern manufacturing plant. I thought
that this month I would present a brief overview of some of the issues
involved with inventory.

Inventory can be defined simply as a reserve stock of materials. There are
3 basic inventories that concern most manufacturing plants. These are raw
materials inventory (RMI), finished goods inventory (FGI) and work in
process (WIP). RMI consists of those materials, components, products and
anything else that is required to make the product. FGI is finished
product, ready for shipment to the customer.

WIP can be a bit more difficult to get a handle on. Let's use
pharmaceutical plant which manufactures and packages tablets as an example.
Once the tablets are manufactured, but before they are packaged, what are
they? The quick answer would be WIP but they could also be viewed as FGI
(Ready for shipment to the "customer", packaging) They could also be viewed
as RMI (raw material input to packaging) or as all three.

Inventories serve a number of purposes. Perhaps foremost, they are a hedge
against uncertainty. These uncertainties include fluctuating demand in the
market or possible interruptions in supply. Inventories can be used to even
out production. A company that has a high seasonal demand for their product
may choose to produce at a constant rate through the year, building
inventory in the winter and depleting it in the summer. It can allow better
prices from purchasing in quantity. One very negative use it has is to
cover up the failings of planning and management.
So inventory is necessary. Nobody will dispute that. The question is how
much is optimal? While inventory has it's benefits, it also has it's costs.
Typically, it will cost about 25-35% annually to carry inventory. Of
course, as they say "your mileage may vary". This means that keeping an
inventory valued at $1,000,000 will cost $250-350,000 per year. These costs
come from interest on the capital tied up in inventory, cost of warehouse
space, administrative & handling costs, shrinkage, deterioration and
obsolescence, to name a few.

In other words, it is not cheap.

WIP can be viewed as a special type of inventory. The effects of excessive
WIP is even more insidious than those of either RMI or FGI. This is because
of it's nature and how it is handled. FGI and RM are almost always stored
in warehouses, under control properly identified and easy to find. WIP will
often be found sitting on the plant floor on pallets or in bins. There may
not be a good handle on where it is or even what it is. In an uncontrolled
environment, it is more susceptible to damage. Perhaps most important, it
may get in the way of normal production causing delays. For an excellent
in-depth discussion of the problems of WIP, read "The Goal" by Eliahu Goldratt.

This is a newsletter about changeover. So what does inventory have to do
with changeover? Or, more to the point, what does changeover have to do
with inventory?

Everything.

As readers here know, changeover is tremendously expensive. In consumer
goods, costs are frequently in the $10-20,000/hour range. One way to reduce
the impact of these costs is to do fewer changeovers. If the cost per
changeover is fixed, spreading it over a longer production run will reduce
the cost per unit of production. Longer production runs/larger batch sizes
for the same total production will result in higher inventory levels.
Inventory modeling is a complex science and will vary from company to
company. It is probably accurate (generally) to say that a doubling of lot
size will cause approximately a doubling in average inventory levels. This
doubling will occur not just in FGI, you will also need

For an interesting exercise, call your accounting department right now. Ask
them 1) What is you average inventory value? 2) What is the average cost of
carrying that inventory? Now, figure out what it would be worth to reduce
that cost by 15%.
If you didn't have a good reason to reduce changeover before, you have one now.

TIP OF THE MONTH...
BOLT BINS
When disassembling machines or change parts there are often loose pieces
such as nuts, bolts, pins and so on. Typical practice is for the mechanic
to place these on any convenient surface until they are ready to reuse
them. A problem is that frequently, the pieces may not be immediately to
hand when reassembling. Another is that, if more than one person is working
on the changeover, the second person may not be able to find where the
first person put the pieces. If the pieces are placed on top of the
machine, there is also the possibility that they may fall either on the
floor or, worse, inside the machine.

One way to solve this problem is to mount a small metal or plastic box on
the machine. The pieces are placed in the box and are always together and
always in the same location. One idea I have seen in auto parts stores is
boxes with magnetic mounting bases. If it is inconvenient to mount boxes
permanently, these might be helpful to the mechanics.

Best,

John R Henry CPP

Visit the Quick Changeover website at http://www.changeover.com