One step in level loading a cell with long changeovers (later on you can think about SMED) is Setup Cycle. You find how much time is needed for production and use the remaining time for changeovers. If you notice I'm not even talking about lot sizes here. Whatever time is left will be used for set up. That's where traditional costing would come in conflict with Level Loading.
The moment we talk about setups, your mind would think about large batch sizes to reduce setup costs. On the outset it makes sense. The machine is sitting idle, so we are wasting the money spent on buying the machine. If we make large batch sizes we can reduce the time wasted per part. So, let me ask this question. Then why can't you keep running the machines running 24x7.
If your answer is "Because we don't have demand" you can read further.
The traditional costing model considers inventory as an asset valued at the standard cost. Consider this scenario:
- You are going to run the machine 24 x 7
- For simplicity, you have only one SKU
- Daily demand is 120 units
- Machine can produce 10 units/hour
- Warehouse capacity is 2400 units
- You can skilled worker anytime you need. You can send them home when you don't need them.
The costing model works well as long as you have infinite space, perpetual product life cycle, and a market place that would buy your excess/obsolete products at your standard cost. If you think that all these are possible, you need to see a psychologist.
Of course, you would have some direct labor involved with eset up. If you look at the whole value stream you would save the money by not having more warehouse personnel.
Don't get me wrong. Standard costing worked well for the mass production days. With the customer asking for more choice, it is different now. It will not work well in a lean environment.
Level loading will require you to do frequent setups. But you don't have to worry about extra cost. At the end of the day you, will reduce waste as a whole.
In the next post, we will get into the details how to calculate the Every Part Every Interval which is a key number in Level Loading.