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KSM Blog | Katz, Sapper & Miller CPA

The Most Common Manufacturing Mistakes

Posted 4:26 PM by

The Theory of Constraints assumes that the rate of achieving a given goal (typically increasing manufacturing profitability) is limited by at least one constraining process. The theory then goes on to state that the only way to improve the achievement of the given goal (in this case manufacturing profits) is to increase the throughput on that given constraint. Typically the steps in applying the theory are as follows:

  • Identify the constraining process
  • Decide how to improve that constraint or how to exploit it
  • Align all other processes in the system to support the decision in number 2
  • Make any other changes need to eliminate the constraint
  • Reassess if the improvement has created a new constraint

Many manufacturing companies are aware of this theory and have worked to apply it to their manufacturing process. However, Spectrum Publishing has identified the 18 most common manufacturing mistakes when trying to apply the Theory of Constraints:

  • Thinking a strong market will buy the company time before improvements need to be made
  • Thinking that a company can solve its big problems by only improving on one specific area
  • Focusing the companies' process on high yields but at the sacrifice of good customer satisfaction
  • Purchasing raw materials in large quantities for false economies
  • Confusing "Earned Hours" efficiency with actual business effectiveness
  • Making processing decisions based on the convenience of the assembly department
  • Making processing decisions based on the on the convenience of the finishing department
  • Line vs. Item thinking
  • Reluctance to let go of the old, comfortable ways, such as standard-cost thinking
  • Investing to correct capacity constraints that don't really exist (i.e. identifying the wrong constraint)
  • The inability to turn increased capacity into improved customer deliveries
  • Not aligning the measurement system used with the outcomes desired
  • Over-reliance on forecasts and budgets
  • Failure to improve the teamwork between the manufacturing department and the marketing department
  • Avoid making any improvements for the fear of failure
  • Improperly delegate responsibilities that should not be delegated
  • Reluctance to get help from an outside third party
  • Avoiding improvement due to a lack of understanding/knowledge of the options available

For more information on these mistakes and possible solutions to the mistakes check out Spectrum Publishing's The 18 Most Common Manufacturing Mistakes and How to Avoid Them.

About the Author
Justin Hayes is a director in Katz, Sapper & Miller’s Audit and Assurance Services Group. Justin works with clients to help ensure accurate financial reporting, keeping an eye on their bottom line, helping them avoid risk and maximize efficiencies. Connect with him on LinkedIn.

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