Cellular manufacturing—an alternative to a larger warehouse

by Wes Merryman, CIRAS

When faced with increasing customer demand, in the past most companies planned an expansion to their factory and warehouse. Now many Iowa companies are looking at an alternative to a plant addition called cellular manufacturing. focusedfactory,JIT, demandQow, synchronous manufacturing, lean manufacturing, and pull systems are other techniques that can be applied to manufacturing to help eliminate waste and provide more responsiveness to customer orders. Many company managers have become dissatisfied with having warehouses full of raw material and finished products with the floor full of in-process inventory. Often they still can't produce the particular models that are selling well that month.

Making the change to cellular manufacturing can be a relatively low cost, low-risk undertaking compared to other alternatives such as buying a new high-speed CNC "do-it-all" machine. Most companies find they can convert to cells with only modest equipment purchases. Many companies just need to rearrange their existing equipment. Sometimes they bring older equipment out of storage that works well at the rate a particular cell is producing.

Other members of the plant team besides the plant manager need to be involved in the change to cellular manufacturing. Examples of functions that need to change include production planning and control, purchasing, and cost accounting:

  • Production control needs to change their focus to identify the finished goods that will be needed and launch orders for specific finished items. Orders for sub-assemblies typically aren't required since the material flows from sub-operations to finished products without having to be tracked back into the warehouse.
  • Purchasing concentrates on developing supplier partners that will help assure that they can keep their parts in stock. Sometimes this can include filling bins in the factory but not invoicing until parts are used or moved to the line.
  • Cost accounting needs to focus on the efficiency of the overall cell and not spend time analyzing sub-assembly standards. The cell members will work to increase the flexibility and output of the cell for each labor unit in the cell.

At the core of cellular manufacturing is the elimination of waste by linking each step in the manufacturing process to the following step. Waste is considered to be any resource not adding value to the product being manufactured. Using this description, waste includes all inventory that isn't being processed and also the time required to move processed material from one operation to the next. In a cell, most work stations are close together so that little or no time is required to move pallets of parts from one work station to the next. Reducing the time to flow material through the cell or factory usually reduces the cost to make the product.

Improvements in efficiency table.

To assure that excess inventory is reduced between steps in the process, many firms create Kanban spaces or pans that limit in-process inventory. Kanban is a Japanese word for "signal" or "visual record." A full pan or space signals the operator to stop and move to help at the station that is not keeping up. To do this, operators in an effective cell must have the cross training necessary to perform multiple tasks.

The advantages many companies derive from linking processes in cells include improved quality and reduced rework costs because the material produced in one operation is tested for fit or operation in the next process. For example, if a hole is drilled undersize and the next step in the cell inserts a screw in the hole, it is quickly apparent what problem exists before several hundred pieces have the wrong size hole.

Some managers who adopt cellular manufacturing to improve direct labor efficiency are disappointed because labor improvements are usually modest compared to other reductions in waste (see the table). One reason direct labor efficiency is difficult to improve is the traditional way factories measure efficiency, using criteria like how many parts are stamped out per hour. Once the machine is set up and running, it can produce parts at capacity for long periods of time even though many of those parts may not be needed for weeks or months. The cell can't possibly improve on the output from the machine producing at capacity. What it can do is reduce the waste associated with storing parts for long periods of time. Another reason direct labor efficiency doesn't appear to improve is that often the direct operators take on some of the indirect work such as material handling. This often allows converting more of the indirect operators into direct operators. Typical improvements after three months of operation in a cell conversion are shown in the table.

For help establishing cellular manufacturing processes in your business, call your CIRAS agent.

CIRAS News, Vol. 31, No. 4, Summer 1997