Throughout the course of typical operations, manufacturers will generally have products in various stages of completion. This is especially true for manufacturers of large, complex, and time-consuming products such as machinery and other industrial equipment. Products that have yet to be completed are typically referred to as Work in Progress (WIP).
In order for businesses to be able to properly track production across their supply chain through distribution, it’s imperative that they understand how many products they have across the varying stages of completion.
In this post, we’ll review the concept of Work in Progress and why it’s important for manufacturers to keep track of WIP within their operations.
What is Work in Progress (WIP)?
Work in Progress is a term used by manufacturers to describe items that have started the production process, but have not yet been completed. The important thing to note is that work in progress is about more than goods and orders awaiting fulfillment. The concept is also used to describe costs associated with the work involved in completing the remaining steps of the production process.
Therefore, work in progress refers to materials still within the production process plus labor, overhead, and related production expenses. These expenses point to the total manufacturing cost sunk into finishing the products necessary to complete an order.
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The importance of reducing WIP for manufacturers
Managing and reducing work in progress is essential for manufacturing businesses because it can significantly impact the overall efficiency of production. Therefore, proper work in progress management provides many benefits for manufacturing businesses. Some of the main benefits include:
Improved inventory planning and management: Determining the amount of work in progress shows manufacturers the state of their order fulfillment efforts and resource utilization. This allows manufacturers to order raw materials from suppliers only as needed, making inventory management and planning much simpler.
Better productivity and production efficiency: When businesses examine their manufacturing operation and notice an unexpectedly large amount of work in progress, it points to an inefficient production process. Higher than expected WIP indicates that there might be bottlenecks along the production line, leading to a build-up of unfinished goods. Effectively managing work in progress allows businesses to assess their production processes and refine operations to increase efficiency.
Increased customer satisfaction: With the increased production efficiency, manufacturers can more consistently meet demand and fulfill customers' orders on time. Ensuring that orders are completed on time is a significant factor contributing to customer satisfaction.
Improved warehouse management: Knowing the amount of work in progress allows manufacturers to assess their warehouse usage and storage needs. This reveals if the space contains more work in progress than required, preventing waste of both materials and space.
How to track and manage WIP
Maintaining a high level of work in progress shows inefficiency in the entire production process. In addition, a high WIP indicates that a significant amount of capital is tied up within the business, leading to constrained cash flow and fewer profits.
In the modern manufacturing scene, businesses should leverage their enterprise resource planning systems (ERP), manufacturing execution systems (MES), and other manufacturing systems to manage work in progress.
Here’s how to properly track and manage work in progress:
Adopt just-in-time manufacturing: Manufacturers should apply the pull system in just-in-time manufacturing. Leveraging this lean technique ensures that production doesn’t start until after order placement by customers.
Just-in-time ensures no excess work in progress is lingering across the warehouse or production lines to tie up resources. Instead, materials are processed and turned into final products if and when there’s direct demand from a client.
Analyze and forecast demand accurately: In some operations, manufacturers will opt to run a push system rather than a pull system because their offerings have extended demand from the market. As a result, these businesses always have work in progress to meet the continuous, regular demand.
But since errors in forecasting or unexpected lulls in demand can happen, such manufacturers are often left with a high level of WIP. Utilizing advanced forecasting solutions to analyze the market gives manufacturers a more representative picture of market forces, enabling smoother workflow on the production line.
In demand shortfalls, these push system manufacturers should leverage event-driven dispatching systems on the shop floor. These systems optimize production on the line, adjusting production volume appropriately to respond to the changes in demand.
Upgrade machinery and personnel: In many instances, increased WIP results from bottlenecks within the operations. A viable solution is upgrading tools and machinery that can process work quicker and more efficiently.
Additionally, the personnel at the station might not be equipped to handle the workflow, resulting in additional bottlenecks and WIP. Extra training and skilling can make workers more competent in dealing with increased WIP at their stations. Alternatively, manufacturers can opt to hire better trained and more experienced operators.
Benefits of automating WIP management
In order to better manage work in progress, manufacturers must leverage the data collected by their ERP, MES, and other production systems to reduce bottlenecks and optimize manufacturing workflow on the shop floor.
While the implementation of digital solutions to help collect data and track production is often perceived as time and resource-intensive, the benefits far outweigh these initial upfront costs.
Some of the benefits of digitizing WIP management include:
Typically, the systems that are implemented within a manufacturing environment collect data automatically, eliminating human error, a significant cause of WIP.
Digital, data-driven process controls can adequately handle much of the production line, leaving personnel to execute tasks that require more cognitive power.
The insights generated by WIP management tools often promote continuous improvement within a manufacturing environment by identifying points of inefficiency on a regular basis and enabling supervisors to issue corrective actions.
Well-integrated systems and equipment combined with predictive analytics can identify a possible occurrence of bottlenecks, enabling workers to intervene before WIP piles up.
By connecting the people machines, and systems across a manufacturing environment, Tulip has the ability to automate data collection across an entire operation. Using the insights that Tulip provides, manufacturers are able to more effectively plan and forecast their production needs, tackling the root cause associated with unmanageable WIP.
If you’re interested in learning how Tulip can help make your production processes more efficient, reach out to a member of our team today!
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