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Strategic Management and Business Consulting

Lot Size of 1

I was touring a factory earlier this month in the heartland of the USA. I saw stamping equipment, wire benders, plastic injection molding equipment, printed circuit board placement, and much more. I keyed in on the utilization rate of the equipment. I was born in the city of Detroit, Michigan and my family all worked in the automative factories. 40 hours per week was unusual. Often it was 58 hours, with 10 hours per day and 8 hours on Saturday. And, not just one shift, but two or three. The aim was to keep that expensive equipment humming and putting out product.

I just penned an article for FleetOwner’s IdeaXchange related to this and how it might apply to our overall transportation system as we apply technology to make trucks run autonomously. Drivers can only drive for 11 hours per day, and often must deal with traffic jams and slow traffic. That means it is impossible to have greater than 50% utilization of a tractor/trailer with a single driver. You can move to teams, which would allow 22 hours per day of driving. Or, you can move to double and triple trailers of varying lengths to get the effective utilization up. Imagine, though, if you could put a driverless truck at the entrance to a limited access highway at 7PM and let it drive autonomously to some distance exit ramp until, say, 7AM the next morning. Limited access, limited traffic, no people to deal with. Sounds to me like a safer way to begin doing autonomous trucking. And, there is a benefit for the rest of society. We should end up having fewer trucks on the road during the daytime when we want to be there.

Another issue with factories is determining how many of each product to make based on orders, supplies, and the time it takes to set up a machine. Back in the 1980s, we talked about single minute exchange of dies so that we could approach lot sizes of 1, minimizing building product that ends up in inventory. Inventory can be both good and bad, depending on the distribution means. For cars and recreational travel trailers, a portion of the customer base wants to walk into a showroom and walk out with the product. That takes inventory. Some want to have things made to order and are willing to wait. Tesla owners have been willing to wait as long as 2 years to get their product. At that, I doubt it was very customizable. The RV and the Auto industry have a problem with balancing orders to build rates so that inventory buildup does not outpace sales.

This week, I’m attending the 2019 Northwest Food and Beverage World show here in Portland. All of this got me to thinking about something related to my ideas for applying technology to the restaurant industry. When I first left the corporate world, I had some grand ideas for applying automation to restaurants. Some of it has come to pass, such as reservation systems and some checkout systems. Others have been tried and rejected by patrons such as tablet based menus. People seem to prefer the laminated, over-sized menus we’ve had forever.

I’d like you to think about a restaurant as a miniature factory. It has inputs of supplies and parts. It gathers information from outside such as reservations. The waiters and waitresses all take our individual orders, sometimes with special requests. They disappear into the back room of the restaurant called the kitchen. Minutes later, they come out with our individualized and customized order. Some menus have limited choices, while others make it difficult for us to choose. I can’t recall a menu that offers just three choices as is recommended for most people selling on a web site. Restaurants have to worry about having the right inventory of supplies in the right quantities, quality and consistency of the preparation of the food, proper delivery through its “sales channel” of waiters and waitresses, and waste.

I submit to you that a restaurant is worth studying further for insights into how manufacturing can better serve its customers, avoid inventory buildup, and reduce waste. They’ve achieved a Lot Size of 1 with every order from every patron. Restaurants, in turn, could learn something from how factories are run efficiently.

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