# SMED vs EOQ-The Customer Makes The Difference

A number of customers of the precision machining industry have started telling their suppliers (Us!) that we need to adopt SMED (Single Minute Exchange of Dies) Techniques so that we can reduce costs. We make it a rule never to prescribe solutions when we haven’t first diagnosed the problem…

Reducing setup time is important, but if that is not the constraint that is limiting your ability to serve your customer, why would you address that first?
The real issue that the customer has not brought to the table is lot size, economic order quantity (EOQ).  Given an order quantity of 100 parts, if changeover time is 8 hours  on a part with a one minute cycle time

•  to make his parts originally takes 480 minutes of set up time.
• Plus 100 minutes (100 parts at one minute per part) to produce;
•  Total 580 minutes or 5.8 minutes time per part.

The setup time is 480% of the actual process  time to make the parts. 480/100= 480%
Reducing the set up to 4 hours set up, its now 240 minutes set up time plus 100 minutes to produce total 340 minutes or 3.4 minutes time per part. The setup time is now just 240% of the actual process (Cutting) time. The customer is saying that you should do this.  And as far as you can, he is right.
But lets look at what the customer’s order quantity does to affect this.
Increasing  just the lot size from 100 to 1000 pieces

• Results in the time per piece on the 8 hour setup being 480 minutes for set up plus 1000 minutes, or 1.480 minutes total time per part.
• The ratio of setup time to total time is now just 48%of the process time.

THATS A TEN FOLD REDUCTION!!! This is where the Bang for the BUCK is! If you could get your setup down to four hours, you’d be at 24% ratio of setup to total time.
On 10,000 pieces it becomes,   at 8 hour set up, 480 minutes setup plus 10000 minutes process time; or about 1.048 total time per part;  4.8% is the ratio of set up to the process time.
WE CAN SEE that while reducing set up time is important and something that you can control, It is the increase in the lot size that is the most powerful determinant of the amortization of cost of setup.  And your customer holds those reins.
ECONOMIC ORDER QUANTITY is in your customer’s control and ultimately delivers drives far greater savings than your  cutting set up time in half, and in half again as we have just shown.
What he wants to ignore is that you have to set up the machine regardless of his lot size and he has to pay for it. So he wants you to reduce that set up as much as possible. However, there is no free lunch, there is always a law of diminishing returns, and he has to give you an order quantity that makes it profitable for you to set up your machine and produce the number of parts required.
Reducing setup time is important, but if that is not the constraint that is limiting your ability to serve your customer, why would you address that first?
Just cause that medicine sounds good to you Mr. Customer, doesn’t mean that it is the magic cure for everything.  Increasing your Order Quantity may actually drive substantially larger savings.

Sometimes, more is better.
Medicine Photo