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    Default Shop ops management planning resources

    I posted a couple articles in a separate forum for feedback, and folks suggested they might be better suited for a management forum.

    I wrote a couple pieces with frameworks to help with operations management. The idea is to introduce academic frameworks, and then dive into detail on specific subjects in upcoming posts. Goal is to provide shop owners and managers with A) industry-tested and B) actionable tools.

    The topics include:
    1. Production scheduling guide - The Ondema Guide to Production Scheduling. Contains dispatching rules, queue and batching rules, production scheduling models, and more.
    2. Process analysis and bottlenecks - Level Up Production Bottleneck Hunting With These Tips. Introduces process analysis, measuring process performance, and dealing with bottlenecks.
    3. Minimizing makespan - Minimizing Makespan, Explained Using Attack Helicopters. Introduces algorithms for minimizing the total time it takes to complete jobs.
    4. Managing queues - Manage Production Queues Like a Boss. Touches on Queueing Theory, how to measure queues, and techniques for managing them.
    5. Inventory management - Uncertain Demand? Not a Problem with the Newsvendor Model. Introduces one of the prominent models that super-expensive inventory management software is based on. Our next post dives into two more models for inventory management.

    The inventory management piece was fun to write as folks can use the info to build a spreadsheet that does 90% of the stuff that inventory management software costing tens of thousands of dollars a year (or more!) does...

    Feedback requests:
    1. Is this content useful for machinists/shop owners? What would make it more useful?
    2. What are other topics you'd like information on?
    3. Do technical frameworks help, or are they throwaway?

    FULL DISCLOSURE: I work at a startup building flexible production scheduling software for machine shops. I'm not trying to sell you anything. Just hoping for feedback on how we can provide better content that is actually helpful for shop owners and machinists and not just meaningless internet fluff.

    Many thanks in advance to those who check it out.

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    Two more for any shop owners & management keen on inventory management frameworks:

    1. Inventory Management Explained With Nunchucks - Part One
    2. Inventory Management Explained With Nunchucks - Part Two

    Upcoming post on the Q/R inventory management model.

    These are the basis for lots of inventory management software - even the ones that cost $$$. With the basic formulas in the articles a shop could build a spreadsheet model that does 80% of the same stuff as the expensive software...just sayin'.

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    Quote Originally Posted by dtbrown View Post
    ...folks can use the info to build a spreadsheet that does 90% of the stuff that inventory management software costing tens of thousands of dollars a year (or more!) does...

    Feedback requests:
    1. Is this content useful for machinists/shop owners?
    In a word, no. A startup owner/machinist is unlikely to have much time to devote to managing his or her inventory because he or she is too busy loading parts. And a successful one would not even have contemplated spending tens of thousands of dollars on software that doesn't involve cutting metal. Sorry to respond negatively but this is misdirected. Very few of us here have enough staff to include an inventory management position.

    Are you Scott Adams pranking us?

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    Quote Originally Posted by dtbrown View Post
    Two more for any shop owners & management keen on inventory management frameworks:

    1. Inventory Management Explained With Nunchucks - Part One
    2. Inventory Management Explained With Nunchucks - Part Two

    Upcoming post on the Q/R inventory management model.

    These are the basis for lots of inventory management software - even the ones that cost $$$. With the basic formulas in the articles a shop could build a spreadsheet model that does 80% of the same stuff as the expensive software...just sayin'.
    From my experience owning a shop with 65 people in the shop and full office staff, you are way over complicating everything. I can tell from what little I read on your attachments who ever has prepared these they have limited to no experience in a mid to large size shop.
    As you have pointed out there are continuous adjustments having to be made in a shop environment from rush jobs, tooling issues, materials etc.. but the time etc to enter and process them into your type software would require at least a full time person or more to keep it up to date. If a couple things don't get imputed the whole system is a waste..
    Its why in most cases someone is in charge of products and they are constantly adjusting on the fly. You can't just have machines and people idle while you input stuff and adjust the plan.
    This type software might work for a mfg of products that has a limited number of parts to do over and over but a job shop would probably never be able to keep it up to date for it to have any relevance.

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    Quote Originally Posted by Oldwrench View Post
    In a word, no. A startup owner/machinist is unlikely to have much time to devote to managing his or her inventory because he or she is too busy loading parts. And a successful one would not even have contemplated spending tens of thousands of dollars on software that doesn't involve cutting metal. Sorry to respond negatively but this is misdirected. Very few of us here have enough staff to include an inventory management position.

    Are you Scott Adams pranking us?
    Oldwrench, appreciate the candid feedback. And this is not Scott Adams (Dilbert, I assume) pranking you.

    Totally understand that resources for shops are constrained and focused on machining. My hope with the inventory posts was to provide frameworks that could be used in a spreadsheet so shops WOULDN'T need an inventory management position and wouldn't feel any need to purchase inventory management software. But I was off the mark. I'm new to the industry and learning every day.

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    Quote Originally Posted by McClure Machine View Post
    From my experience owning a shop with 65 people in the shop and full office staff, you are way over complicating everything. I can tell from what little I read on your attachments who ever has prepared these they have limited to no experience in a mid to large size shop.
    As you have pointed out there are continuous adjustments having to be made in a shop environment from rush jobs, tooling issues, materials etc.. but the time etc to enter and process them into your type software would require at least a full time person or more to keep it up to date. If a couple things don't get imputed the whole system is a waste..
    Its why in most cases someone is in charge of products and they are constantly adjusting on the fly. You can't just have machines and people idle while you input stuff and adjust the plan.
    This type software might work for a mfg of products that has a limited number of parts to do over and over but a job shop would probably never be able to keep it up to date for it to have any relevance.
    McClure, appreciate checking the posts out and the candid feedback. I agree, there's too much over-complicated "theory" and not enough practicality in there. I'll re-work.

    What are the topics/issues that are top-of-mind for your 65-person shop? What info in the form of an article or white paper would be most helpful?

    As far as the software goes, you are spot on. The pace that shops operate at makes it difficult to constantly input and adjust on the fly. We're working to build scheduling automation and "risk assessments" when things change (e.g., how a rush job might affect the existing schedule) so idle time is reduced to a minimum, but it's a couple months away.

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    Quote Originally Posted by dtbrown View Post
    Oldwrench, appreciate the candid feedback. And this is not Scott Adams (Dilbert, I assume) pranking you.

    Totally understand that resources for shops are constrained and focused on machining. My hope with the inventory posts was to provide frameworks that could be used in a spreadsheet so shops WOULDN'T need an inventory management position and wouldn't feel any need to purchase inventory management software. But I was off the mark. I'm new to the industry and learning every day.
    I concede absolutely that at some point inventory management requires a specialist. I once devoted about three months of meetings, organizing employee buy-in, database organization, etc., in order to implement an MRP program. It took awhile, but once the consultant realized that our company had evolved into a rapid-reaction custom-order business model, he decided MRP was not appropriate. I was frankly impressed by his honesty, to the extent that we relied on his firm for years afterward. My point was that a typical (say, four-person) job shop probably falls into the rapid-reaction, pivot-in-mid-stride class enough of the time that formalized programs just can't be sustained. Sooner or later somebody has to subordinate timely data entry to shipping and getting paid.
    Last edited by Oldwrench; 02-17-2021 at 10:34 AM.

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    Quote Originally Posted by Oldwrench View Post
    It took awhile, but once the consultant realized that our company had evolved into a rapid-reaction custom-order business model, he decided MRP was not appropriate. I was frankly impressed by his honesty, to the extent that we relied on his firm for years afterward. My point was that a typical (say, four-person). job shop probably falls into the rapid-reaction, pivot-in-mid-stride class enough of the time that formalized programs just can't be sustained. .
    So how do you manage it? For us, one side of the business is project management style production - big one of projects that can go for weeks or months. Inventory here is brought in as needed and managed by the project manager. With so many details to manage once, is there a win in codifying it....or just let a human cope with it? So far we've done the latter

    Where a system makes some sense is the PM has to type in all the details at some point, likely when they do vendor RFQs. So why not have a system do that then once the info is input, its there for PO's, receiving, routing, etc. I recognize I'm talking more MRP/ERP than purely inventory and stocking levels, but small manufacturing businesses facing a lot of variety I think that is where the biggest gains from a system are to found.,

    (The other side of the business is more like widget making and there we are actively developing our own ERP system.)

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    Quote Originally Posted by dtbrown View Post
    McClure, appreciate checking the posts out and the candid feedback. I agree, there's too much over-complicated "theory" and not enough practicality in there. I'll re-work.

    What are the topics/issues that are top-of-mind for your 65-person shop? What info in the form of an article or white paper would be most helpful?

    As far as the software goes, you are spot on. The pace that shops operate at makes it difficult to constantly input and adjust on the fly. We're working to build scheduling automation and "risk assessments" when things change (e.g., how a rush job might affect the existing schedule) so idle time is reduced to a minimum, but it's a couple months away.
    I have always had a low volume job shop most of our jobs require hours or days of machine work so my input may have very little application to high volume parts shops.
    For myself and lead people managing the shop we have never used a computer program other than for payroll hours and job invoicing and record keeping. I do speak with a lot of shop owners and mentor a few. The single biggest issue I hear is cash flow for start up and first 10 years in business. I think if you wanted to focus on a computer program for helping shops. I would focus on bidding through cash received. A lot of shops don't really know what it cost them to carry a customer and job costs for 30 to 120+ days. Shops need to understand what slipping a rush job in does to cash flow or profits.
    I read on here people talk about factoring their receivables, or having suppliers float them special terms. These things just kill businesses in the long run. Sometimes not taking work is the most profitable.
    Just my thoughts
    Mike

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    Quote Originally Posted by McClure Machine View Post
    I have always had a low volume job shop most of our jobs require hours or days of machine work so my input may have very little application to high volume parts shops.
    For myself and lead people managing the shop we have never used a computer program other than for payroll hours and job invoicing and record keeping. I do speak with a lot of shop owners and mentor a few. The single biggest issue I hear is cash flow for start up and first 10 years in business. I think if you wanted to focus on a computer program for helping shops. I would focus on bidding through cash received. A lot of shops don't really know what it cost them to carry a customer and job costs for 30 to 120+ days. Shops need to understand what slipping a rush job in does to cash flow or profits.
    I read on here people talk about factoring their receivables, or having suppliers float them special terms. These things just kill businesses in the long run. Sometimes not taking work is the most profitable.
    Just my thoughts
    Mike
    Mike,

    Super helpful. Much appreciate you taking the time to describe the challenge.

    Just to make sure I'm understanding correctly - the earlier-stage shops should be focused on cash flow/profits vice top-line revenue growth. Current software systems don't provide good visibility into how cash flow and profits are affected by long carries (delays, inventory, etc.) sometimes made longer by jamming in rush orders.

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    Quote Originally Posted by dtbrown View Post
    Mike,

    Super helpful. Much appreciate you taking the time to describe the challenge.

    Just to make sure I'm understanding correctly - the earlier-stage shops should be focused on cash flow/profits vice top-line revenue growth. Current software systems don't provide good visibility into how cash flow and profits are affected by long carries (delays, inventory, etc.) sometimes made longer by jamming in rush orders.
    I am doing a lot of generalizations but most new businesses have limited access to lines of credit, or deep cash operating pockets. Employees, vendors, taxes, etc. Still want to be paid when they are do.
    A fat accounts receivable balance will not pay any bills. So some people factor there receivables and in doing so receive 20% or more reduction payment for the job,, If the job had a 15% profit margin it actually cost them 5% to do the job. So they may have gotten employees paid etc. But would have been better to not do the job.
    This is just a very simple example of the complexity that starts to unfold if someone doesn't have a very clear understanding of their cash flow and cash time needs.
    If a customer pays you on Monday but your employees quit the previous Friday because you couldn't make payroll. You are kind of screwed.
    A program that shows what, when , and how much is owed and a system that works with purchasing and bidding along with tracking customer payments would greatly help a business owner have actual cash available when they need it.
    A program shows them things like I need cash for payroll next Friday but nothing is expected in this week. But I have a job for a customer who pays at pick up maybe I need to shift some work around to get the cash in the bank. Or if they have a 30 day pay customer that will pay on Tue nothing needs to be adjusted.

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    Don't entirely flush factoring, lots of cases its good financing that can make you money. I've brokered factoring deals for others and looked into for our business but didn't pulling the trigger, so I have some knowledge but also get the cons. Something is wrong if factoring is costing 20%. Factoring is a really good way to finance A/R outside of the bloody banks (who will be focused on the weakness of your statements). If can get a higher selling price to the 90-120 customers (I do, 5-10%), a few points for factoring and insurance still makes it profitable and lets you go after bigger accounts.

    The smart customers offer the factoring themselves, i.e. a 2% discount if they pay in 10 days.

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    Quote Originally Posted by Mcgyver View Post
    Don't entirely flush factoring, lots of cases its good financing that can make you money. I've brokered factoring deals for others and looked into for our business but didn't pulling the trigger, so I have some knowledge but also get the cons. Something is wrong if factoring is costing 20%. Factoring is a really good way to finance A/R outside of the bloody banks (who will be focused on the weakness of your statements). If can get a higher selling price to the 90-120 customers (I do, 5-10%), a few points for factoring and insurance still makes it profitable and lets you go after bigger accounts.

    The smart customers offer the factoring themselves, i.e. a 2% discount if they pay in 10 days.
    Sorry if I seem to be saying factoring is bad. I personally have no experience other than a couple of business owners I have mentored had done it and if I remember it was in the 20% range. From my wife's observations on clients ( she is a cpa) dependent on creditworthiness of both parties it runs 5-30%
    What I was trying to point out is the real time cash flow projections for the business is very critical to quote and manage jobs. So if you are going to have to finance the operation of your business you are not doing work for less than the total cost of doing a job including the cash flow needs.
    I have helped a dozen or so shops over the years get back on their feet after they got in a jam and all but 1 was over having cash to pay the bills when they are due. They all tried to borrow their way out one way or another with out understanding the actual reduction in business profits and how with out pre-planning, this just takes a bad situation and turns it terrible.
    I am guessing that there are a 1000 different business models on here and no 1 will work for everyone. But the one thing that does apply to everyone is the cost of money. It doesn't matter if you have the cash, then its not invested so you have to figure what you are loosing or if you are borrowing money you have to know what it is costing and when you have to have it available.


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