Takt times and falling sales: How to Respond?

Question from Jean-Baptiste Bouthillon on The Lean Edge:

We have all learned that overproduction is muda, and that production must follow the takt of customer demand.
Is there a lean way of dealing with falling sales ? Should we just adjust production to customer takt time or stabilize sales by giving rebates ?
Is it important to level sales and give some stability to production or should we just adjust the production takt time ?

My response:

You question implies that takt time is only a function of customer demand. It is not. When you calculate it, you divide your production time by the demand, which means that it is as much a function of how long you decide to work as of how much you have to produce. Without any change in customer demand, you double the takt time by working two shifts instead of one.

The takt time of a production line is the time that elapses between two consecutive unit completions when the line runs. It is not the rate at which customer orders arrive.

So how do you respond to falling sales?

You have to distinguish between fluctuations in sales, for which you should not change the pace of production, and major changes, for which you should.

Once you have set up a large assembly line to work at a takt time of 57 seconds, changing it to 60 seconds is a major effort, involving the balancing of tasks among stations and adjustments in part supplies. In car assembly, unless you are hit by something like the Fukushima earthquake, you don’t do it more than once in four months, even if you are Toyota. During this period, you use heijunka to respond to fluctuations in mix, and adjust overtime for fluctuations in total volume.

If you have a major downturn, you have to reduce production, and the challenge then is to do it without going bankrupt while retaining the work force you spent so much time and effort developing.
It is in such times that having your money tied up in inventory can bankrupt you. When the recession hit in 2008, management in manufacturing companies suddenly took an interest in working capital, but it was too late. Downturns come brutally, and it is when they occur that you must be ready.

Keeping your work force intact and prepared for the next upturn is just as essential. So you stop using temps, cut all overtime, go on four-day weeks, or three-day weeks, and use the available time to solve nagging engineering problems, experiment with new technology, etc. I remember an auto parts plant in Japan, in which recession time had been used by a team to build in-house a pick-to-light system with their own AGV out of Creform. Even though they did not explain it, you could tell that they would know exactly what to require from vendors and how to deploy this technology when the upturn came.

9 comments on “Takt times and falling sales: How to Respond?

  1. I’m a little confused. It appears you’ve given two, contradictory definitions of takt time:

    (1) “When you calculate it, you divide your production time by the demand…”
    (2) “The takt time of a production line is the time that elapses between two consecutive unit completions when the line runs.”

    The second sounds like *cycle* time to me…please clarify. Thanks! 🙂

    *** Wayne G. Fischer ***

    • The two definitions are consistent. If you work 400 minutes/shift to make 400 cars, the division gives you a takt time of 1 minute. If you watch the last station of the line, you see exactly one minute elapse between two consecutive cars rolling off.
      Conversely, if you observe one car rolling off every minute, you will make 400 cars in 400 minutes.

      “Cycle time” is used with different meanings, and some authors use it to for takt time. Personally, I use it for the total time it takes one unit to go through a line. If your assembly line has 200 stations and a takt time of 1 minute, its cycle time is 200 minutes.

      Best regards.

      • Au contraire…production rate is not *directly* tied to demand. Yes, you can *control* your production rate to *match* demand…or to exceed it, or to be less than demand. For clarity, I think the explanation ought to go something like this:

        “Cycle time is the total time it takes one unit to go through a line. Takt time is the production time divided by the customer demand. One principle of Lean to set cycle time equal to takt time.”

  2. Comment in the Lean Six Sigma Canada discussion group on LinkedIn:

    Michael

    Thanks for the thread. This is an area that has concerned me during the “recessions”.

    I have seen many companies take a block of work that would normally be completed in 4 hours and spread it out to last a day.

    My take is to maintain the production rate and use the time for other improvements.

    Steve

  3. To Wayne G. Fisher:

    You wrote: “Cycle time is the total time it takes one unit to go through a line. Takt time is the production time divided by the customer demand. One principle of Lean to set cycle time equal to takt time.”

    No. Again, if your line has 200 stations at a 1-minute takt time, the cycle time is 200 minutes. What you try to do is to get the process time close to the takt time at each operation, the process time being how long it takes to do the operation.

    The takt time places an upper bound on this process time, and you try to design each operation so that its process time is as close to the takt time as you can make it. With manual processes, particularly in assembly, it is usually possible. With machines, it is often not. When you arrange machines in a line, one is a bottleneck, with a process time close to the takt time, and the others underutilized.

  4. Michel, I respectfully disagree if a line has 200 stations at a 1 minute takt time that the cycle time is somehow automatically 200 minutes. Cycle time “is what it is” but, as you go on to say, work has to be done to adjust each operation as close to takt time as possible. Whatever is done, however, the controlling factor for the line has to be at or below takt time in order to meet customer demand and that may indeed mean some machines are less than fully utilized. But this should not be viewed as “underutilization” but rather appropriate equipment utilization as needed to meet customer requirements.

    • I was writing in the context of an assembly line. It has a pacing mechanism, often a conveyor in continuously moving lines, but other kinds of signals in stop/start lines. This mechanism imposes a constant pace, and a constant time between unit completions at the last station. This is the takt time of the line. Whether or not we know how to fill up the takt time with useful work at each station, each unit of product will be there that long.

      The best way to run assembly is to balance the stations so that there little or no slack between the process time and the takt time at each station, and since manual assembly work is infinitely divisible it is always technically possible. That is what you do with the Yamazumi charts. In a line that is out of balance, without a pacing mechanism, and with a bottleneck part way through, you have WIP waiting in front of the bottleneck, and units moving faster than the takt time prescribes downstream from the bottleneck, and waiting to be picked up at the end. You can’t balance machine lines to the same level because the machines have different capabilities. You can balance work among sewing machines but not between a milling machine and a lathe.

      In principle, running “below takt time to meet customer demand” doesn’t make sense because takt time is, by definition, what is required to meet customer demand in the production time available. In reality, the demand you use to set the takt time of a line is an average daily rate, and, if you adjust it once every four months while demand fluctuates daily, you will be over- and under-producing some days. You do it because it is just not practical to recalculate the jobs of hundreds of operators and the deliveries of thousands of parts every day.

      When I wrote “underutilized,” all I meant is that the machines are not running all the time they could. I didn’t mean to imply that it was inappropriate. Making every machine run 100% of the time is not the goal.

  5. A common misconception seen in the on-line version of Quality Magazine today:

    Takt time is the amount of time, or cycle time, for the completion of a task. This could be the time it takes to produce a product, but more likely it’s the cycle time of a specific operation on the product. By displaying takt time, manufacturers can quickly determine where the constraints or bottlenecks are within a process.

    The author further describes takt time as a performance indicator, which it is not. It is a requirement.

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