December 5, 2019 Growing & Complex Businesses en_US Manufacturing shutdowns provide businesses the data they need to prepare for the unexpected and build a thriving business. https://quickbooks.intuit.com/cas/dam/IMAGE/A9OiqfIFf/How-experienced-firms-use-manufacturing-shutdowns-to-increase-revenue_featured-600x440.jpg https://quickbooks.intuit.com/r/growing-complex-businesses/how-manufacturers-use-production-shutdowns-to-boost-revenue/ How manufacturers use production shutdowns to boost revenue
Growing & Complex Businesses

How manufacturers use production shutdowns to boost revenue

By Andrew McDermott December 5, 2019

Rhodes Bake N Serv sells an estimated one million pounds of frozen dough per week. They supply 90 percent of the grocery stores in the United States (both public and private) with product. They do this by producing the majority of the products sold by other brands on the store shelves, the dough used in grocery store bakeshops, and more.

In fact, if you’ve eaten bread in North America — bread and dinner rolls, sweet rolls or warm-and-serve products — you’ve likely had Rhodes.

For Darry Campbell, former plant manager of Rhodes Bake-N-Serv, a consultant at Rhodes International, and a 50-year veteran of the industry, manufacturing shutdowns were an integral part of the company’s weekly operations.

He conducted partial shutdowns on a weekly basis and full shutdowns on an annual basis, to exacting standards. He used shutdowns to consistently maintain rigorous performance standards, steadily growing production from 24,000 lbs of product per day in 1972 to 750,000 lbs per day peak capacity by 2012.

Why manufacturing shutdowns are necessary

A manufacturing shutdown provides your firm with vital information you need to grow your business and prepare for the unexpected.

These are the benefits of a shutdown:

  • Data on machine performance and required breakdown maintenance. This gives you a clear sense of the products, components, and materials that break down frequently. Firms get a clear sense of what their machinery is capable of and how long the various components and machinery in the plant can sustain performance at a high level. You can also learn the machinery that needs to be fixed and the approximate cost for repairs. Having this data allows you to prepare in advance and replace parts quickly to minimize downtime during full production.
  • First pass yield metrics. Are the percentage of products manufactured to spec, on the first run, low? A shutdown gives your team the chance to investigate why. It’s a straightforward way to identify the cause of the problem (e.g. personnel, machinery, ingredients or components) and the appropriate solution.
  • Equipment failure frequency. Scheduled (temporary) shutdowns enable you to monitor the failure rates for your machinery and the impact on production rates. How often are you experiencing equipment failure? Despite routine maintenance, what areas are seeing the most wear? This gives you the data you need to see when it might be time to upgrade to new technology.

Every plant is unique to itself. You’ll want to use ad hoc analysis to track the specific metrics you feel are most important. Whenever possible, work to tie these metrics to your revenue and profit goals.

Use key metrics to improve shutdown success

Rhodes, like any other firm in the foodservice industry, was subject to regular inspections by the FDA and Department of Agriculture. To complicate things further, Rhodes was a kosher plant. This meant they were also inspected by the Orthodox Union once a month.

The pressure to perform is constant.

Rhodes used a consistent mix of partial and full shutdowns to dramatically reduce unexpected shutdowns and machine downtime. This had a cascading effect on their business that also provided unexpected benefits like increased stability.

Rhodes had specific data they could use (e.g., wear and tear on parts, equipment, and component performance) to maintain plant uptime.

Stability came in the form of predictability. They were no longer caught off guard by unexpected machine or equipment failures. They were able to state whether off-market parts were comparable to official (but more expensive) parts. This gave them greater control over areas like manufacturing cashflow, forecasting and purchasing.

Here are two strategies Rhodes used in their shutdowns to increase revenue and decrease expenses.

Strategy #1: Use partial shutdowns as practice

In addition to yearly shutdowns, Rhodes would shutdown every Friday to clean and sanitize their equipment. A small or partial shutdown provides your plant with the practice you need to shutdown safely and in a controlled manner. Using weekly, monthly or quarterly shutdowns, your firm can get a sense of the objectives, planning, and coordination required to conduct a shutdown successfully.

“One of the things the weekly shutdown did was it prepared us for the major shutdown. The full shutdown we did during the summertime,” said Darry.

A practice shutdown comes with risk, but that risk is greatly reduced with a small or partial shutdown. This is important because it gives you the chance to plan for the unexpected secondary and tertiary details (i.e. replacement parts are unavailable) that require time like:

  • Training employees to look for specific breakdowns that occur over time
  • Showing employees how to communicate these important details (e.g. who, when and where of sharing)
  • Encourage consistent collaboration with assembly, operator, engineering and management teams
  • An accurate sense of the wear and tear/breakdown that occurs with specific machines in each department/plant
  • The parts and materials you’ll need to keep on hand for frequent, infrequent, and major repairs
  • The amount of inventory you’ll need to carry to maintain production standards during a shutdown
  • How to deal with unexpected challenges (missing or unavailable parts)

Understanding these details are crucial to the success of a planned shutdown. With practice, you can find the answers to these pressing questions. A small or partial shutdown provides you with the learning you need while reducing the overall risk that comes with a full shutdown.

Strategy #2: Mine shutdowns for additional data

It doesn’t matter if you’re running a small, partial, or full shutdown. If it’s handled properly, you’re able to mine your shutdowns for additional data and to work on important but finer problems that require attention. With small or partial shutdowns here are some important metrics to consider.

  • Rework analysis. You’ll want to break rework figures down by machine and department. Work to identify the explicit and implicit causes of rework and scrap. Do certain departments or machines have trouble working with specific materials or ingredients? Are employees making specific mistakes?
  • Manufacturing cycle time. You’ll want to track your total process time, from beginning to end. Typically this is done from the beginning of the process until your product reaches your customer’s hands. But you can use the beginning, middle, and end phases of a partial shutdown to assess cycle times at the machine and department levels. If you have multiple machines handling the same process you can analyze things at this level too.
  • Capacity utilization. How much of your available capacity are you using before, during and after your shutdown? You obviously want to see an improvement or lift post-shutdown but it’s important to look for these details carefully. See a decrease in utilization? Find out why so the problem doesn’t catch you by surprise in the future. Seeing a dramatic lift? Work to find out why. This is obviously easier if there’s overlap across your machines.

With a partial shutdown, you’re working to achieve a variety of smaller goals (e.g. repairs, rebuilds, upgrades, sanitization, etc.). You’ll want to watch performance carefully. Monitor your staff and machines/equipment before, during, and after your shutdown.

You’ll also want to monitor metrics like:

  • Product quality. Is there a noticeable change in product quality before/after the shutdown? Use end-to-end traceability software and lot tracking best practices to monitor derivative metrics (e.g. first pass yield, rework, customer returns, etc.).
  • Downtime vs. Operating time. This ratio measures the availability of assets in your plant. This is primarily a measurement of unplanned downtime.
  • Number of products produced per dept. Has production increased or decreased after your shutdown? This metric is helpful on its own but it’s even more helpful when you’ve identified the cause of slow, incremental decreases in production.
  • Average supplier incoming quality. Are you receiving high-quality raw materials from your suppliers? Poor quality materials have a direct impact on the quality of your end product. A loss of usefulness also has an impact on your machine/equipment. If a pump that’s designed to pump 300 gallons per minute now struggles to produce 175 gallons per minute due to poor-quality materials, there’s been a loss of usefulness.

These metrics are crucial because they provide you with data you can use to maintain or even increase revenue consistently. Regular shutdowns require investment, but they provide firms with stability and the ability to maintain high product quality standards.

Final Thoughts

Consistent shutdowns in the form of small, partial, and full shutdowns and produce the kind of data, stability, and performance enhancements firms need to grow.

A shutdown comes with significant risk, which savvy manufacturing firms offset by using small or partial shutdowns to hone their skills. This gives managers the intuition and experience needed to a full shutdown properly. This is crucial, as a shutdown provides firms the data they need to build a thriving business.

Create the right shutdown structure to reduce risk. Follow a clear plan and learn from the inevitable mistakes. It’s a surefire way for manufacturers to produce the revenue and growth they desire.

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Andrew McDermott is the co-founder of HooktoWin.com. His work has been featured on Entrepreneur Magazine, Fox Business, and other top 1000 sites. He shows business owners how to increase average order values by 20 to 40%, automatically. Read more