Increase Manufacturing Through-Put with Time and Motion Standard Data:
Develop incentive based labor standard data to increase efficiency 50% and for use to estimate labor cost for changes to existing and new product introduction.
- Define parameters of standard data coverage such as machine capability, workplace layout, crew size, material specificationscovered in the data, exceptions to data coverage.
- Observe operations and establish standard times using predetermined time standards or classic stopwatch time and motion study to
determine the constant and variable elements of work.
- Use linear regression to establish time value formulas for ease of application.
for variable elements based on variation of weight, size or other variable.
- Define different classes of work from the linear regression analysis.
- Identify outliers and their causes and decide if causes can be corrected and if not handle as special rates if necessary.
- Establish unavoidable delay allowance as a
percent of work using three to five all-day studies observing and recording
reasons for delays.
a. Study unavoidable delays to
determine better methods to reduce or
b. Record avoidable delays to define areas of
- Report to operators and management on avoidable delays for use to eliminate their occurrence.
- Define acceptable quality levels and rework procedure for deducting incentive earnings for producing poor quality work,
- Establish easy-to-use form for future clerical and/or electronic application of standard data based on defined algorithms.
- Develop standard form to track output including clear definition of downtime activities not covered by the standards and their necessary approvals
a. Elements not included in the unavoidable delay allowance
b. Examples include: machine breakdown, out of or waiting on material, meetings and clean-up.
Test the Data
- Test data for application, accurate measurement output and resultant process improvement thru reduced labor cost. Use several
weeks of actual production after methods improvements have stabalized.
- Meet with operators and management to explain
the standard data application, define elements included and not included,
explain how production is reported.
a. All production sheets are reviewed and approved/corrected by direct supervision.
- Maintain the standards by increasing or reducing them for process changes due to equipment speeds, fixture changes and all other process changes (any change +/- 3-5%).
a. Make periodic reviews of the processes to determine any shift in the process.
b. This is fair to the operators as well as the company as equipment gets older and may
slow down as well as process improvements that are introduced
Share the Gains
- Pay operators an incentive for performing over 100% baseline.
- An operator works 30% over the 100% level would be paid a bonus of 30% greater than their base rate.
- If the base rate is $8.00 per hour the bonus is 30% more than base or $2.40 bonus per hour or a total of $10.40 per hour.
- In a typical non-incentive factory the level of efficiency is rarely higher than 70%.
- When operators are paid $8.00 per hour while working at 70% the equivalent cost per hour for 100% efficiency is $8.00/.70 = $11.43.
- If incentives are correctly installed the operator can produce at 130% or a difference of 60% increased efficiency.
- Achieving a 60% increase in output at the current 70% efficiency would require:
| Non-incentive efficiency %
| Equivalent paid for 100% output
| Potential Incentive efficiency %
| Difference in non-incentive and incentive
| Increase in output due to incentives
|One person would produce the equavilent of 1.86 people.
This does not include additional benefits of: less overtime, additional floorspace for larger workforce, additional equipment and work stations.
- With the existing 70% efficiency the cost of 60% additional output (.60/.70 = 1.86%) would equal $8.00 x 1.86 = $14.88 per hour.
- With developed Standard Data and an operator working at 30% over the 100% base the cost per hour would be $10.40 per hour.
- The labor difference per hour is $14.88 - $10.40 = $4.48 per productive output hour less for an incentivized process.
- The employees are paid the same benefits with 60% more output means not having to hire additional workers for increased demand.
- Equipment produces more parts reducing the need for additional new machinery.
- Overtime is reduced.
- Employee quality of life is increased through increase in pay.
- The customer wins with quicker delivery higher quality, the employee wins with higher wages and the company wins with reduced cost.
- Cost avoidance savings such as:
- Avoid building expansion
- Additional supervisory cost
- Additional Equipment
- Additional Work stations
- Increased Utilities (services)
- Direct Labor savings potential example at $4.48 per hour:
a. 50 employees working 2000 hours per year and 40% fringe benefits = 50 x 2000 x ($4.48 x 1.4) = $627,200 per year