On one hand, all overtime is not bad. On the other hand, overtime can become the fix -- the expensive fix -- to a multitude of manufacturing miscues that deserve better and more permanent solutions.
The latter -- the out-of-control overtime -- presents improvement opportunities. In addition, reining in uncontrolled overtime offers a significant cost-reduction opportunity, points out author Joseph Berk in his book "Cost Reduction and Optimization for Manufacturing and Industrial Companies." The book addresses cost-reduction opportunities across a broad range of manufacturing areas.
Reducing overtime begins with recognizing the drivers of overtime. They may include, suggests Berk:
- Poor production planning, which can drive bottlenecks;
- Poor quality, requiring overtime to either do rework or extra production;
- Late supplier deliveries, forcing production to work overtime to get back on schedule;
- Inefficiency or poor utilization, due to technical reasons, process issues or supervisory problems;
- Poor understanding by the company of its own processes, making it unable to accurately determine lead times; or sales departments committing to deliveries below lead time to get an order;
- Situations created by individuals because they want overtime pay.
"The good news is that addressing these overtime drivers is relatively easy," writes Berk, a consultant and author of nine books. In most cases it simply requires getting to the root cause of the overtime driver and eliminating it. For example, if the overtime driver is poor quality, then "identify and eliminate the nonconformance sources," Berk writes.
Berk says his comments address uncontrolled overtime, not all overtime. Indeed, overtime can be "a blessing to help meet short-term capacity shortfalls," he writes.
How Much is Too Much?
"Using a reasonable amount of overtime as a strategy to not hire more employees is good, as long as the overtime is moderately low," he says. "How much is too much? Theres no hard answer. In my experience, if it goes much over 3% to 5% [of the total hours worked] for extended periods, it is not effective. People become tired, they make mistakes, productivity deteriorates..."
Berk offers several additional suggestions designed to reduce overtime, including establishing an overtime budget based on data gleaned from work centers and "tempered by critical management review."
He also promotes the idea of requiring a request form to obtain overtime, not "to bureaucratize the overtime approval process," he says, but to force the person making the request to focus on why the overtime is needed "and it identifies improvement opportunities."
Berk also suggests that approval authority for overtime reside with management levels one or two steps above the first-level supervisor.
How to Use Overtime