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Manufacturing Glossary
Lean Manufacturing
Lean manufacturing focuses on eliminating waste, which can include any activity or process that does not add value to the product or service being produced. Waste can take many forms, such as overproduction, excess inventory, unnecessary transportation, defects, and waiting time. By reducing or eliminating waste, lean manufacturing aims to improve quality, reduce costs, increase efficiency, and enhance customer satisfaction.
This involves creating a culture of continuous improvement and providing training and support to help employees identify and address problems.
Overall, lean manufacturing is a powerful approach to improving manufacturing processes and achieving greater efficiency, quality, and customer satisfaction.
Manufacturing execution system (MES)
It software-based system that provides a link between planning and administrative systems and the shop floor. It can link MRP II-generated production schedules to direct process-control software. An element of computer-integrated manufacturing, MES encompasses such functions as planning and scheduling, production tracking and monitoring, equipment control, maintaining product histories (verifying and recording activities at each stage of production), and quality management.
Unit Economics
Unit economics is a financial measure that evaluates the profitability of a business model by analyzing the revenue and costs associated with a single unit of a product or service. In other words, it calculates the revenue and expenses incurred for each unit sold or produced.
To calculate the unit economics of a business, several key metrics are used, including:
1. Average Revenue Per User (ARPU) - This is the average amount of revenue generated by each customer or user.
2. Cost of Goods Sold (COGS) - This includes all the expenses incurred in producing and delivering the product or service, such as material costs, manufacturing expenses, and shipping fees.
3. Gross Margin - This is the difference between the revenue and COGS.
4. Customer Acquisition Cost (CAC) - This is the cost incurred in acquiring each new customer or user.
5. Lifetime Value (LTV) - This is the total revenue that a customer or user is expected to generate over the course of their relationship with the business.
By analyzing these metrics, businesses can identify their unit economics and determine whether their business model is profitable or not. If the unit economics are positive, it indicates that the business is generating more revenue than it costs to produce and deliver the product or service. If the unit economics are negative, it means that the business is not sustainable in the long term, and adjustments may need to be made to the business model.
Staticstical Process Control (SPC)
Statistical process control (SPC) is a method of quality control that uses statistical methods to monitor and control production processes. It involves the use of statistical tools and techniques to analyze data and detect any variations in the production process that may result in defects or non-conformance to specifications.
Some of the key benefits of SPC include:
1. Improved product quality - SPC helps to identify and eliminate sources of variation in the production process, resulting in improved product quality and consistency.
2. Reduced waste and rework - By identifying and eliminating defects early in the process, SPC can reduce the amount of waste and rework required to produce a high-quality product.
3. Increased efficiency - SPC can help to optimize the production process and reduce cycle times, resulting in increased efficiency and lower costs.
4. Better customer satisfaction - By producing high-quality products that meet or exceed customer expectations, SPC can help to improve customer satisfaction and loyalty.
Some of the common statistical tools and techniques used in SPC include control charts, process capability analysis, Pareto analysis, and root cause analysis. These tools help to analyze data and identify any sources of variation or defects in the production process, allowing for timely corrective action to be taken to improve product quality and consistency.
Operating equipment efficiency or effectiveness (OEE)
Operating Equipment Efficiency (OEE) is a performance metric used in manufacturing industries to measure the effectiveness and efficiency of production equipment. It provides a quantitative measurement of how well the equipment is performing in terms of productivity, availability, and quality.
OEE is calculated by multiplying three factors: availability, performance efficiency, and quality rate. The formula for calculating OEE is:
OEE = Availability x Performance Efficiency x Quality Rate
The three factors that make up the OEE calculation are:
- Availability - This factor measures the percentage of time that the equipment is available for production. It takes into account all planned and unplanned downtime, including maintenance, repairs, and changeovers. The availability factor is calculated as:
Availability = (Total Time - Downtime) / Total Time
- Performance Efficiency - This factor measures the speed of the equipment compared to its designed speed. It takes into account any slowdowns or stoppages that occur during production, including minor stops, reduced speed, and equipment idling. The performance efficiency factor is calculated as:
Performance Efficiency = (Total Parts Produced / Ideal Cycle Time) / Operating Time
- Quality Rate - This factor measures the percentage of good parts produced by the equipment. It takes into account any defects or rework that may be required to meet quality standards. The quality rate factor is calculated as:
Quality Rate = Good Parts Produced / Total Parts Produced
By measuring the OEE of production equipment, manufacturers can identify areas of inefficiency and take steps to improve productivity, reduce downtime, and increase quality. Some common techniques used to improve OEE include preventative maintenance, reducing changeover times, optimizing production schedules, and
Efficiency vs. productivity
Efficiency and productivity are two related but distinct concepts in business operations.
Efficiency refers to how well a company uses its resources to achieve its objectives. It measures the ratio of input to output, where input is the resources (such as Time, labor, and capital) used to produce output, which is the goods or services produced. Efficiency is about doing things right and minimizing waste, such as reducing the time or materials needed to produce a product.
Productivity, on the other hand, measures the output of a company in relation to the input. It is the amount of output produced per unit of input. Productivity is about doing more with less and maximizing output, such as producing more goods with the same amount of resources.
To illustrate the difference between Efficiency and productivity, consider a manufacturing company that produces 100 widgets in 10 hours using 10 workers. If the company reduces the number of workers to 8 and produces 90 widgets in 8 hours, it has increased Efficiency by reducing the input required to produce the same amount of output. However, the company's productivity has decreased, as it is now producing fewer widgets per hour.
Efficiency and productivity are important measures of a company's performance and can be used together to improve business operations. Improving Efficiency can help reduce costs while improving productivity can increase revenue and profits. Ultimately, a company that can balance Efficiency and productivity can achieve its goals more effectively and sustainably over the long term.
SIPOC
SIPOC stands for Suppliers, Inputs, Processes, Outputs and Customers. This tool is used to provide a comprehensive overview of a business process and can be an invaluable resource to assist with identifying areas of improvement or optimization. By clearly organizing the steps in a process from beginning to end and highlighting all relevant stakeholders, organizations can identify opportunities for increased Efficiency and cost savings that could positively impact the bottom line.
Utilizing a SIPOC Diagram provides a powerful visualization tool that can help organizations better understand their processes and the underlying relationships between each component. This technique is incredibly beneficial as it can help streamline efficiency by identifying any potential bottlenecks and improvement opportunities. Additionally, it allows for greater transparency within an organization as all stakeholders can access this visual representation of the process.