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Legal Considerations
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Disclaimer:   I am not a spokesperson for the US Coast Guard or ABYC. For an official interpretation of regulations or standards you must contact the US Coast Guard or other organization referenced..   More..... 

Production And Operations Management

This section is purposely kept very basic because it is intended only as an introduction for start up businesses and small shop owners. Production management can become very complex, with specialized terms and many different processes. I have included references at the end of this page if you want to know more about production management. What follows is meant only to be a brief summary of things a business owner should do to efficiently organize his or her shop. A little extra effort can make for big savings in time and money.

Two terms that any manufacturer of boats should be familiar with are production and operations management.

Yes, even if you only build canoes in your garage, you are a manufacturer and need to know some of the basic principles that all manufacturers of goods need to know.

Production and operations management is essentially control of the process of manufacturing something, in this case, boats. But, you say, I'm just building boats in my garage. That's not manufacturing! Well, in the strictest definition it is, because manufacturing is simply making things. When you developed the plans for a boat, you were taking the first step in the manufacturing process. When you build a boat you need to know the sequence of steps from beginning to end, from building the jig to putting on the final trim and painting. In any manufacturing or building process there are a series of steps that you follow so that you don't miss something and have to go back or start over. But building the boat is just a part of the entire process. There are also steps and procedures you need to know to complete the entire process, from ordering the parts and supplies you need, to the very end when you deliver the boat. Controlling that process is production management.

Type of Shop:

Job Shop: A shop where one job is completed at a time. In boat building this would be the shop where you build one boat at a time. This does not mean that you can't be working on more than one boat, but each is a separate job and is worked on from start to finish as a separate job. You may have different crews working on each boat or the same people working on more than one boat.  An example would be building a one-off boat or a custom build. Or, you may have a selection of designs and a customer orders from the selection and you build the boat.

Batch Shop: This is not found much in boat building.  In a batch shop things are made in batches. An example of a batch in boat building would be a customer who needs twelve identical boats for a rental operation. A good example of a batch shop is a woolen mill that spins yarn for individual yarn producers. They spin batches of fleece from different farms to make different yarns. The process is the same but the product is different.

Flow Production:  This is the production line where large quantities of the same product are built. The product is built in stages with each step in the process being done by a different set of workers or machines.

The type of shop you have determines the type of planning and production management but some things are common to all of these. Much of this applies to flow production but can be used effectively in batch shops and job shops to save time and money.

Planning:

The very first step in the production process is planning. At this point you may not have a formal plan, but you have thought about what you are going to do and what you will need to do it, and that is planning. The only thing you need to do to make it a little more formal and efficient is to put it down on paper, that is, write a plan.

The simplest plan is just an outline and may contain such things as:

Order materials (with a date that you order them)

Receive materials (expected date of receiving materials)

Construct plug (expected date you begin and how long it will take)

Construct molds for hull and deck (expected date you begin and how long it will take)

Install interiors in boat;

and so on. Some steps in the process may occur at the same time as others. For instance, while you are laying up the hull and deck in the molds, someone else may be building the wood parts for the interiors, so that when the hull is finished they will be ready to place in the boat.

So planning is just figuring out the steps in the process, and when those steps occur. When everything is done in the correct sequence, time is not wasted. The sequence of steps is called a Time Line. You don't want to be sitting around idle, waiting for parts or materials when you have a product sitting on the floor only partially finished. So, knowing when each step in the time line occurs and what parts and materials are needed for each step saves time, money and manpower.

The final result of all this planning is called a Production Plan

If you are building canoes or dinghies your production plan may be as simple as putting the plans for the boat up on the wall. However, if you are building something more complex, like a 30 foot express cruiser, this plan may be made up of several volumes of written material and all the blueprints for the boat. The more complex the boat, the more complex the plan. But also, the more complex the boat, the more mistakes are going to cost you, so having a good plan can save you money. This not only means that it costs you less to build the boat but it also means that it costs your customers less, which makes for a more attractive product.

Implementing the Plan:

This is simply, doing what is in the plan. Following each step. You will more than likely have to adjust the plan. You will find things you left out, things that belong at some other point in the sequence and things that may take longer or less time. Plans should always be flexible. You will more than likely have to adjust the time line. Your plan and time line should be posted up on the wall, or some where you and other employees (if you have them) can see it. Also, everyone involved in the time line should have input into the plan and where things fit. You may think that one step belongs somewhere, but the person who actually does it may say, I can't do that until this other thing is done. Getting the time line right also helps when you bring in new people. They can see immediately where they fall into the process.

In a large company with many employees, it may not be possible for every employee to have input into the whole plan, but you should get their input into the part that affects what they do. They may know better than you the proper sequence of steps in that part of the construction.

Examples of poor production planning, production management and quality control:

Supply Chain:

Simply put, this is the process of ordering all the parts and materials that go into the boats you are building and includes all the tools and equipment you need to build the boat. If you forget to order sanding disks, everything comes to a halt while you run to the hardware store to get them. This may not be crucial in a small shop, but in a production line situation you will have people sitting idle and the line will be backing up while someone gets what you need.

In a small operation the supply chain may be just buying what you need from the local lumber supply or marine supply. In a large manufacturing plant the supply chain may include everything that goes into the finished product from raw materials to finished goods. For instance, in the auto industry the supply chain includes everything from digging the ore out of the ground, delivering it to the smelters, to delivering the final product to the consumer, and supplying parts and trained mechanics to maintain and repair your car. Now that is complex!

With small volume boat builders it doesn't get that complex but there are certain things you should know and plan for.

You should know who you are buying from and what the terms of the purchase are.

You should know when it is going to be shipped, and delivered and who is delivering it. You should also know if there is a means of tracking the shipment. Outfits such as FedEx, UPS, the Postal Service and others provide means for tracking shipments. Most trucking companies do too.

The supply chain includes what you have in stock, so you should have some means of knowing when you are going to run out and when you should order. This is called inventory management, and can be as simple as counting how many you have left in the box from the last shipment, and knowing how many you will use until the next order arrives. Knowing when to order is called the Order Point. Or, inventory management can be a computerized system where everything has barcodes that are scanned when taken out of inventory, and the computer tells you when it is time to reorder and automatically makes the order.

Most large manufacturers use Just-In-Time inventory management. Small quantities are shipped daily from the supplier to the manufacturer and used up on a daily basis. This way they do not have to keep large quantities of materials in stock, saving money on inventory and space. The drawback is, if anything goes wrong in the supply chain, production stops. This has happened many times in the auto industry when a supply chain is disrupted. In small volume manufacturing I would not recommend this because there is no real cost saving. I would suggest that quantities are kept on hand to last a week or two weeks for a production line operation, or for a one or two man shop a month or even a year. Then the cost savings come from purchasing in volume and getting a discount from the supplier. The drawback here is that you need a place to keep all of this stuff, and a system of keeping track of how much you have, both of which cost time and money, and take up space in your shop.

The Production Line:

In a small shop there really isn't a production line. The boat is built in the same spot during the entire process, and the only time it moves is when you turn the hull over, or roll it out the door. But if you are building more than one of the same model boat, or many similar boats at the same time, then you need to think about the production line. Most shops use what is called a moving production line where the item being built actually moves along to the next step, or what is called a station, for the next sequence of items to be installed. In a boat factory the first station is usually laying up the fiberglass hull, or building a wood hull. Often there is more than one station at the beginning of the line. For instance, while a hull is being laid up, another employee may be laying up the deck or cabin. These will then move down the line side by side until the station is reached where they are joined.

At each station tasks are performed each in the order specified in the production plan. For instance:

Station 1: Layup hull. Layup deck

Station 2: Clean up hull and deck, install engine bed, install longitudinal stringers, floors, etc. Install liner and wiring in cabin, windows, hatches, etc.

Station 3: Install engine, fuel tank, water tank, bilge pump, hoses, wiring for engine and pump, put foam in flotation compartment

Station 4: Install deck over stringers, tanks, and flotation compartments, add bulkheads,

and so on.

An efficient production line is like a stream, or a pipeline, with smaller streams (the components) flowing into it at each station until it becomes one large stream as the product goes out the door.

The goal is to set up each station so that no product piles up at any one station.  Just enough work should be accomplished at each station so the product moves smoothly, at the same speed throughout the process. If product does pile up at one station, slowing the production line, then this is called a bottleneck. A production line can only move at the speed of the slowest station. To have a smooth flowing production line you need to constantly look for and eliminate bottlenecks.  This may mean reducing the tasks at one station and splitting them with the next, or just assigning more people to complete the tasks at the bottleneck.

Production lines have what is referred to as capacity.  Capacity is how many finished goods, in our case completed boats, can be turned out in a specified time period. Most efficiently run production lines are operated below their maximum capacity, usually 75 to 80 percent. This is so you can increase production during periods of higher demand. In other words it is good to have a little excess capacity. 

Capacity can be increased in several ways but the most common one is to simply add a separate parallel production line. However, this requires space and people, so an analysis has to be done to determine whether or not running another line would be profitable.

For instance, suppose your current production line can produce 100 boats per year, but your demand goes up to 130.  If you are running one line at 80% (80 boats) or more capacity and then start another line to make the needed fifty boats, the second line is only going to be running at about 50% capacity, but will require just as much space and people. So, it may not be profitable at 50% capacity, to run a second line. It would be even less profitable if you ran the first line at 100% capacity and the second at 30%.  So before you commit to a second production line do a financial analysis.

Another way to increase production is to speed up the line, that is just do things faster. This should be possible if you are currently running below 100% capacity. Also you can extend the work day, or add a shift, or add more people. 

One way to speed up a production line that has a bottle neck is to increase the capacity at the station with the bottle neck. This speeds up the line and doesn't require as many additional employees as an entire production line.  Or you can do this at as many stations as may be needed to smooth the flow and speed up the output.

Operations Management:

Operations Management is more about running the entire business than just the production line, and involves accounting, pay, personnel, shipping, and all aspects of a business. The point of operations management is to fully integrate all operations so the company operates as an integrated coordinated whole, rather than as separate, independent departments each doing their own thing. This is how a well managed, efficient, profitable company is run, but is beyond the scope of most small businesses, simply because in small businesses, there are only a few employees and the boss, hopefully, knows what they are doing.

But if your company grows you need to begin thinking about how all your operations fit together. You need to look at ways to coordinate purchasing, accounting, planning, production, personnel, maintenance and training. If any one of these becomes disconnected from the others, then you get bottlenecks outside of the production line that slow down production.  

For instance, if personnel does not hire enough electricians, then the installation of wiring slows down. On the other hand if the production manager does not communicate to personnel how many people they need and when, personnel won't hire them. So all functions have to be a coordinated effort.

On-line references for Production and Operations Management:
Wikipedia Ops Mgt http://en.wikipedia.org/wiki/Operations_management
The Production & Operations Management Society http://www.poms.org/
APICS American Production and Inventory Control Soc. http://www.apics.org
Free Management Library http://www.managementhelp.org/ops_mgnt/ops_mgnt.htm
Biz/Ed http://www.bized.co.uk/learn/business/production/index.htm

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