The Uptime Story: A Lost Opportunity to Reduce the Cost of Production
Over the years, General Motors, based on its experience in setting up manufacturing lines, bought large pieces of machinery that would give it the ability to produce the volume of parts needed to meet forecasted demand. With that forecast information, it was possible to estimate the number of acceptable parts that would be needed to be assembled into finished products. Management could then order the equipment that would be required to produce the anticipated volume of parts.
Based on GM’s experience, the “uptime” for each line was estimated to be 50 percent. Uptime is defined as the percentage of time required to produce a number of acceptable parts and is computed by subtracting the number of acceptable quality parts that come off the production line from the number of raw parts that entered the production line during the same unit of time. Downtime is just the opposite. It includes any time production is interrupted for any reason, reducing the number of acceptable parts produced. Factors affecting uptime are potential enhancements to the line that improve the quality of the parts being produced. If the maximum number of acceptable quality parts produced per line was 100 and 150 parts per hour were needed by the plant, then the plant would order three lines of machinery to ensure it would have an adequate supply of quality parts.
The Tonawanda Engine plant bid and received the contract to produce a new V6 engine for GM. Orders were placed with Fiat of Italy to provide equipment to make cylinder heads for this engine based on the 50-percent uptime estimate. Three lines of equipment were ordered to produce the number of cylinder heads required. After the equipment was received and its installation complete, it was the job of management and workers to ramp up the equipment’s operation until it could meet the 50-percent uptime goal.
After the initial start-up and with the full cooperation of workers, the plant began to focus its attention on the uptime and output of each line. With the assistance of an outside consultant, the plant kept finding ways to increase the uptime of each line. In the end, it was able to generate uptime of 90 percent on each line.
Think for a moment. If the company had based its equipment purchases on an energized workforce that was capable of innovation and system improvements that would yield an uptime of 90 percent, General Motors could have ordered fewer pieces of equipment. The savings in equipment costs would have been in the millions of dollars, greatly reducing overall costs while improving competitiveness in the marketplace.
We believe the company’s estimate of 50-percent uptime was based on manufacturing plants ignoring the hidden costs of negative cultures. Through a collaborative effort between management and workers at the Tonawanda Engine plant, the 90-percent uptime realized could have saved General Motors the cost of purchasing more equipment than needed. Sadly, the resulting savings never happened because GM never recognized the potential of an energized workforce.
The potential gains that can be realized by creating a healthy culture are substantial. The cost of a negative culture is not always obvious, as in the case of purchasing unnecessary and expensive equipment. It is unfortunate that the norm in so many companies like General Motors is to tolerate negative cultures--which not only suppresses human energy but adds substantial costs to their business.