Machines and Workers

Observing processes that use machines together with workers is often an enlightening experience. To be sure, the usual problems can often be seen: high setup times, unplanned stoppages, defective production, etc. Yet, in almost every case, there is a deeper issue that goes unnoticed: the wasteful use of the human resource.

When workers are brought together with machines, in the short run we are really bringing together a variable input (labour) with a fixed input (the machine, which is physical capital). Since the machine is the cost of a fixed input (a sunk cost if you will),  it is the cost of the variable input – the worker – which is critical when one is trying to minimize the costs of production.

Firms are profit maximizing entities. To maximize profit, for any quantity of output, costs must be minimized – if a firm is producing its output without minimizing its costs, it cannot be maximizing its profit.

Because fixed costs in the short run are really sunk costs, cost minimization really means minimizing variable costs. Since labour is usually a key variable cost, a key question to ask, therefore, is what are workers doing when they operate machines? If we are using more variable input than we need to work with the fixed input, we really have an inefficient production technology.

Many firms focus on setup reduction. Setup reduction supports small batch processing and allows a firm to move through a mix of products easily because changeover times are low. It also reduces the variable cost (labour) that is required to work with the physical capital to enable it to become productive.

However, we should look beyond setup reduction for opportunities to reduce variable costs. To accomplish this, we should be looking at what the worker is doing once the physical capital (the machine) is working.

All too often, we see workers setting up machines, starting the cycle, and then doing little else while the cycle runs to completion. This is an inefficient and unproductive use of the variable input and drives up costs. Economic production where costs are minimized requires that operator time be separated from machine time – while machines are running, operators can do other things. Such separation can be achieved by adopting cellular manufacturing principles and modifying equipment to make it less dependent upon close operator attention (for example, installing automatic load/unload).

Many production environments use machines which have a high degree of automation and, once set up, are able to run without close attention by the operator. Depending upon the length of the cycle time (the time during which value is being added), workers can use this time to perform other tasks, perhaps setting up or running a similar machine which is located close by.

This insight is at the root of cellular manufacturing and autonomation – two lean production concepts which can reduce the amount of variable input required, if applied intelligently.

In a capacity-constrained environment machines should be working productively as much as possible. These machines should be attended to by the least number of workers possible. Setup times should be low, but firms should keep in  mind the potential for further reducing variable costs beyond just achieving lower setup times.  As much as possible, workers and machines should be decoupled to permit greater utilization of the variable input, thereby reducing the amount of variable input needed along with its cost. Economic production results when costs are minimized, not when output is maximized.

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