Make your tail of SKUs a seamless part of operations
How you make your products needs to change. Consumer desire for more product choice will lead to more changeovers and smaller batches. Your ‘work horse’ manufacturing equipment isn’t suited to change – they’re locked into high speed, fixed product technologies. Agile manufacturing will allow you to embrace this trend, lower your cost of production and encourage new product development.
An ever-increasing array of SKUs (Stock Keeping Units) allow you to offer a diverse range of products to your consumer. It only stands to reason that your product portfolio has developed some ‘middle aged spread’. Critically there are some products you cannot afford to lose at the risk of reducing sales revenue: consumers have grown used to their favourite products and have an expectation of wide choice. And diverse complimentary products are key to the demand of your ‘big runners’. Typically 80 per cent of the SKUs make up only 20 per cent of the volume produced – trends like product personalisation and customisation mean it’s likely to get more extreme as time goes on. Take the paint industry: this ‘tail of SKUs’ (all those SKUs that have small volume needs) is huge. If you looked purely at volumes, you’d only produce white paint. But without the enormous range of colours, consumers would never buy the white paint. These complimentary SKUs are not going to be cut from the product portfolio and they’ll certainly be joined by others as time goes on.
Manufacturing equipment within your factory is unlikely to be suited to small batch production. Most machines are monogamous by nature: they like to run with one product for a long period of time. When forced to change products regularly, they become less efficient because of long changeover times and high batch wastage. Often, to operate with some efficiency, there’s a large minimum batch size that means holding excess stock for weeks or months.
Making work horse lines more agile heavily increases capital costs
A number of techniques are used with ‘work horse’ lines to make them more agile. These techniques often have limited effect and come with a hefty price tag in terms of capital cost, factory space and line efficiency (when running a large batch). These techniques include:
- Buffering: Allowing a large quantity of product to be stored between machines or processes. It gives the time to allow machines to be manually changed over while production continues. This approach can take significant factory space and increases the minimum batch size because of the large amount of product in transit around the manufacturing line.
- Adding servo actuators: Replacing simple, fixed actuators (cams, pneumatics) with high cost multi-position, motion-controlled servo controlled systems. Machinery changes can be partially automatic (by software recipes) and performed in minutes but typical capital costs and associated spares increase by up to 30 per cent.
- Redundancy: Including a second identical module or machine in the overall architecture, so one module or machine is always waiting ready for a changeover. The use of such redundant systems is often low (operating only 50 per cent of the time). Rather than have significant number of redundant modules, it can often be more effective to have two normal production lines instead.
Machinery suited to ‘one-night stands’ could allow your work-horse lines to do what they do well: make lots of one product.
Machinery and technology that’s naturally versatile is often described as ‘agile’, ‘SMED’, or ‘fast changeover’. Combining new agile technologies and machinery platforms can create lines truly adapted for near instant changeover and multi-SKU running capability. By combining well established agile technologies and adapting them for the specialised needs of your products, it’s possible to create a first production line in 12 – 18 months. And you can produce functional demonstrators in under six months. Examples of agile technologies include:
- ‘At-the-nozzle’ mixing: Moving away from batch mixing of products allows fast changeovers. Often challenges related to microbial and allergen control require extensive flushing and cleaning and minimising waste on long pipes. The closer to the dispense nozzle the product is made, the quicker the changeover time and the less product is wasted. By creating systems like this to allow continuous rather than batch production of toothpaste, for example, we’ve cut processing costs by 15 per cent and significantly reduced the amount of water used in cleaning cycles.
- Robot system and intelligent decision making: Cartesian, Scara (4-axis) and 6 axis robotics have got much cheaper over the last five years. They’re now considered mainstream and offer great value for money as they’re so flexible and accurate. You can enhance them by coupling them with vision systems and intelligent decision- making algorithms to identify, locate and choose what products to work on. It’s possible to mount technology (welders, grippers, filling nozzles), directly allowing multiple product formats to run down the same line at the same time.
- Linear motor platforms: Most machines have a fixed distance that it indexes product by (machine pitch) and are speed limited by the slowest process. Linear motor platforms, like the Rockwell iTrak and Beckoff XTS, allow flexible movements (that can be adapted to different products) and motion control (making processes simpler). They also provide the capability to have some processes doubled up to increase overall production speeds. We recently developed a high-speed food additive manufacturing system, based on a MagneMotion platform, within just five months.
Agility benefits you today
Many manufacturing companies are being driven to convert well-established lines to be more agile at very high costs. Often the assets are heavily depreciated and it appears less costly to adapt this equipment. This approach is contrary to the fact that most manufacturing companies still have ‘big runners’ for which their existing machinery network is perfectly suited. By segmenting the ‘tail of SKUs’ from normal production, and targeting truly agile lines to manage them, the overall supply chain benefits and can lead to capital payback in under two years. The immediate benefits include:
- Improving the profitability of the tail of SKUs
- Justifying the removal and replacement of older production lines. Products nearing the end of their lifecycle can be manufactured on equipment designed for short runs. This frees up factory space for newer workhorse lines
- Minimising the need for repacking. Agile production machinery can be blind to product format, size, volume and shape. Such lines can be scheduled to perfectly match orders creating mixed pallets to retailers needs directly without the need for breaking down and repacking.
Agility unlocks new channels
As we look to the future agile manufacturing will underpin your capability to deliver in a digital world. The number of SKUs is going to grow as consumers get more connected and assert their choices and needs to manufacturers. Existing manufacturing will become redundant as too costly and ineffective to manage this digital disruption. The same agile machinery used to manage your ‘tail of SKUs’ can turn this disruption into new opportunities with direct-to-consumer and e-commerce. That’s because they’re focused towards smaller batch sizes and rapid development of new product forms.
While existing solutions to agility are acceptable (but only just) it’s clear that as the ‘tail of SKUs’ grows so must our mind set to manufacturing. Manufacturers that embrace this new agile production approach will realise the value immediately by managing changeovers and waste while preparing for a more consumer-led, immediacy-focused, digital world.
By Steve Clarke, Consumer and Manufacturing Expert at PA Consulting Group