The Unseen Capacity

Hello,

I just read a good article in MMS about manufacturing capacity utilization in the USA. Long story short, per the Federal Reserve about 24% of the capacity in an average plant has been unused, but, some of this "capacity" basically consists of older or simpler machine tools that are waiting/not being used.

I'm interested in the commentary from the CNC Machining community. Is this similar to what you are experiencing in your shop?

Thanks in advance for sharing!

That is typically not the case in our facility (considering 5x3 work week). Right now is an exception due to program life cycle cycles.

Is 5x3 5 days 3 shifts?
If so isn't this a 120 hour week of 168 available which would be 28.5% unused?
8760 hours per machine available in a year or 168 hours per week. This is of course impossible as you need maintenance time somewhere.
I think the actual unused capacity would be way higher than 24% even if you removed a reasonable amount for maintenance/repair downtime and did not count old or obsolete machines that were run rarely.

What is mathematically for run and utilization possible is where young IE's get into trouble.
Bob

We have some older machinery that sits until you need it. We have an old J&L horizontal boring mill that may only get used 20 times a year but we can't do without it. Our NC equipment runs all day every day. I guess it depends on what kind of shop it is? If you average in all the machinery in the building then I'd have to agree with Bob it's more then 24% here.

Brent

I don't really understand the point of "unused capacity" relating to the tools in the shop.

Isn't the goal of a shop owner to have each employee producing products at a rate that when sold equals the going shop rate no matter what tool is being used?
As in, you sell your time, product/job is bid at X amount of hours and if all goes well, each man produces work within those quoted amount of hours rather he be running a 1968 boring mill, 2016 300K CNC mill or twisting a wrench on a pump.

Sounds like an article written with an agenda. If a shop is running at 100% capacity, they're screwed the first time something doesn't go as planned. I remember a manager from Boeing telling me there was no way in Hell he was going to send more work my way because if a machine broke down there weren't any spare machines to take up the slack. There has to be some cushion, both in machine and personnel utilization.

There are specialized machines that sit , and sit, and sit, and sit,,,, until you need it..... can't finish the job without it. Like a keyway shaper ( a lot of people use broaches, great option for a thru hole) in a blind key slot- that machine collecting dust pays for itself in a few hours.

CarbideBob said:

Is 5x3 5 days 3 shifts?
If so isn't this a 120 hour week of 168 available which would be 28.5% unused?
8760 hours per machine available in a year or 168 hours per week. This is of course impossible as you need maintenance time somewhere.
I think the actual unused capacity would be way higher than 24% even if you removed a reasonable amount for maintenance/repair downtime and did not count old or obsolete machines that were run rarely.

What is mathematically for run and utilization possible is where young IE's get into trouble.
Bob

Click to expand...

Yes, but what schedule is in your economic plan? In terms of absolute machine capacity, yes there is two extra days available, but you cannot realize that capacity without penalty (overtime or switching to a 4x3 shift schedule and hiring an extra shift worth of folks), so is it really economically viable available machine capacity?

Maybe the author had nothing to do that day (un used capacity) and wrote the article.

Quite clearly the author of this article merely looked at Practical Machinist CNC forum and saw that there are 29,754 posts since 2002. He then extrapolated the fact that each post averages 5 replies and 750 page views. He then correctly assumed that we all read at the 4th grade level (being un-educated blue collar flunkies); therefore; based on the example of reading a single Wrustle new machine post it takes us one hour to read each thread. He also correctly assumed that since we work with our hands we are not nearly affluent enough to have a computer and the internet at home. Using all of that data and his ivy league statistics book, he came up with the fact that we have wasted 22 million hours on PM since 2002. That comes out to 1.5 million hours per year of lost machining time. At an average wage if $9.50 (going rate for unskilled labor), that comes out to $15 million wasted every year. That is a bunch of unused capacity (and 40% of it is Wrustle's fault).

@ IronReb Great point!

@charlie gary Great input. There is certainly value in capacity.

Scruffy887 said:

Maybe the author had nothing to do that day (un used capacity) and wrote the article.

Click to expand...

HA! Awesome.

G00 Proto said:

Quite clearly the author of this article merely looked at Practical Machinist CNC forum and saw that there are 29,754 posts since 2002. He then extrapolated the fact that each post averages 5 replies and 750 page views. He then correctly assumed that we all read at the 4th grade level (being un-educated blue collar flunkies); therefore; based on the example of reading a single Wrustle new machine post it takes us one hour to read each thread. He also correctly assumed that since we work with our hands we are not nearly affluent enough to have a computer and the internet at home. Using all of that data and his ivy league statistics book, he came up with the fact that we have wasted 22 million hours on PM since 2002. That comes out to 1.5 million hours per year of lost machining time. At an average wage if $9.50 (going rate for unskilled labor), that comes out to $15 million wasted every year. That is a bunch of unused capacity (and 40% of it is Wrustle's fault).

Click to expand...

This is hilarious! Thanks for the laugh!!

ericn said:

Hello,

I just read a good article in MMS about manufacturing capacity utilization in the USA. Long story short, per the Federal Reserve about 24% of the capacity in an average plant has been unused, but, some of this "capacity" basically consists of older or simpler machine tools that are waiting/not being used.

I'm interested in the commentary from the CNC Machining community. Is this similar to what you are experiencing in your shop?

Thanks in advance for sharing!

Click to expand...

Do you have a reference or link to the article?

Cheers,

EricL

actually, I think @IronReb has it somewhat wrong. it's not just output per employee hour (though that is of course important) it's also output per capex and overhead. which would include things like floor space (paying rent on empty space?) and money spent on tools and machinery (machine sits around *all* the time?)

so what is capacity? 100% possible output given the floor space? 100% possible output for the given labor burden? 100% possible output given the investment in machinery?

oh it just got complicated didn't it - old long ago paid for machines, taking up "spare" floorspace because you can't ever have a perfectly sized building, allowing people you pay by the hour or equivalent to make output. that floorspace is nominally costly ($x/ft/month) but incrementally free (you can't move to a buildng exactly 187sq ft smaller) that machine would be uneconomic if you were making big payments on it, but if it's long ago paid for..... hourly skilled labor, on the other hand....

but wait, there's more. what's the capacity of the sales force? what's the capacity of the dealership network? of the engineering/programming/management staff? of the local road/railroad system?

is your plant at some EPA set limit (dust output at the Nucor plant in Seattle...)? have you used up your allocation of cheap electricity? free cooling water?

for things like some automotive plants, where management knows "if everything goes perfectly we can make and ship and deliver 475,463 F150s a year" then observing that in 2017 they will actually only ship 470,183 allows an "idle capacity" computation that has some meaning. economists study such measures because they help predict things like how much GDP and employment can grow before inflation sets in.

for most any other sort of plant, it gets intractable quickly. not running 24 hrs? heavens you are below capacity! have some empty desks? oh no!

in other words, it's a crude econometric number of limited import...

bryan_machine said:

actually, I think @IronReb has it somewhat wrong. it's not just output per employee hour (though that is of course important) it's also output per capex and overhead. which would include things like floor space (paying rent on empty space?) and money spent on tools and machinery (machine sits around *all* the time?)...

Click to expand...

I have been wrong before and will be wrong again, I am a human who is willing to learn.
If I understand things correctly and please correct me if I am wrong, this is important for me to understand..
Our shop rate at X dollars an hour is supposed to cover overhead like toilet paper and the electric bill with a set % going to profit?

Anybody actually read the article?

OK I found it ...

Modern Machine Shop - JAN 217

Page 20.

The article is written by Peter Zelinski [email protected]

Basically it's a plug for MakeTime (the company).

The premise is that (for some unknown reason) shop owners can't find "work" for their simpler machines that carry out 3 axis mill and two axis lathe work. This is where MakeTime comes in as a broker to connect people who want simple stuff made (In the USA) with folks that (for mysterious reasons) seem completely incapable of finding such work for their machines????? LOL. A lot of the work that I have seen carried out under the MakeTime banner is nice low precision/more prismatic artistic stuff. So I guess the idea is set up time, difficult prints and tricky materials and tolerances are not an issue?

There are several variants of this idea. I have seen on MTD cnc channel where apprentices (straight out of school) are put in a quasi (low rent) tool room environment and do small jobs on the side. So they get to learn a lot but also have a lot more variety in the work they can learn. Colin talks to Lyndsey - Swarf and Chips edition two - YouTube

(The above link has an interview on MTD's "Swarf and Chips" with Richard Blake from GW-Martin about how they connect apprentices /journeyman with their less used machines in a separate "Cell" as it were or area that they call the "Short Batch Rapid Response Area" (kind of thing). 10% of their staff are apprentices that they train in house. (Five out of a full staff of 45 (so they say)... But the deal seems kind of weird though... (Like cough up $150K first and we'll make random parts ?? But maybe MakeTime could do something like that? I.e. MakeTime should buy bigger blocks of time and space up-front of trusted machine shops.


Interesting for me as I remember in around 2008 I could score really amazing deals (for getting parts made) from really high end outfits based on the premise that it is was better to have machinists actually machining rather than having them push a broom around. So I always said that I was super flexible with time and that they could fit my work around other bigger (in-line work). Since then a lot of machine shops folded so there was a lot of "Contraction" in the industry and NOW a lot of the surviving machine shops are pretty much running "Balls to the Wall" in my opinion. That's why I have gone for developing in-house manufacturing capability as being the best option for our weird little outfit.

In my limited opinion its not the older simpler machines that are idle its "Staff" that actually have time to dicker around with them. That's expensive LOL.

Tonytn36 said:

Yes, but what schedule is in your economic plan? In terms of absolute machine capacity, yes there is two extra days available, but you cannot realize that capacity without penalty (overtime or switching to a 4x3 shift schedule and hiring an extra shift worth of folks), so is it really economically viable available machine capacity?

Click to expand...

Hopefully what matches your sales demand. Some places do the weird rotating day schedules to allow 7 day 24 hour running with no overtime.
As far as hiring an extra shift some run 1 or 2 shifts and would see adding a second or third as a huge cost added.
Often (if not most always) it is economical to have wasted machine capacity or under-utilization on the plant floor.
This at least gives you some buffer you can fill with OT when things do not go as planned.
You really can not run at 95%+ capacity to your customer's demand as when you fall behind due to good ole Mr. Murphy there is no way to dig yourself out of the hole without making some customers very unhappy.

Toyota is probably the best at this I've seen but they leave room. Some difference being they are good at finding other things for people to do outside the normal job when workflow is slower so they are fully staffed when load is high and capacity is at 100%.
Strange thing about lean and the TPS, you do not lay people off, cut staff or hours unless your company is in serious trouble of surviving.
Those that do can not be called lean.
You do do this if you are losing market share but this means you are on the downhill road anyways and it's only a matter of time until you go away altogether.
Bob

@IronReb - what you said was not "wrong" but merely incomplete - and I didn't mean to pick on you, merely mentioned you by name because what you said is *correct* but incomplete.

Yes, you would certainly try to arrange that number-of-staff times billable-hours covers all of the overhead costs. That is correct as far as it goes. But it's not necessarily a measure of capacity...

What's more, if you have S staff people each working 40 hours per week, S*40 is an important number. But it is NOT the ONLY number that measures capacity, or constraints on capacity.

Suppose your shop is in a pretty large building (for whatever reason) and has a good cash position. Further, suppose you are successful experts at hiring good staff. Then if there isn't some *other* constraint you could grow staff, and grow billable-hours and make more revenue - assuming you could find the business.

Suppose your shop building is 100% perfectly sized - there is no unneeded space - there may be backup space, staging space, machines kept in reserve, but nothing "just laying about." In such a shop, the ability to hire more great people or buy more great machines will not grow capacity. If you can't go to more shifts, you are in effect saturated.

Now consider the Nucor Seattle example - some years ago on a tour they flat out told me that their output was limited by EPA rules related to dust and such, to make more than X tons of steel per year would require an EPA change or more elaborate dust control (maybe impractical) or the like. They *could* actually produce more with existing floor space and equipment by running more shifts. The environmental limits were the issue. (At least in that discussion at that time.) So at least at that time, they were at 100% of capacity, regardless of whether the plant was standing idle some weeks.

Note that "what fraction of capacity are you running at" is a very different question from "does our revenue cover our overhead costs...."