The ultimate indicator that any thermoforming production needs

In 2022 thermoforming packaging market faces many challenges: growing prices, broken supply chains, and a lack of skilled employees forcing us to adjust the existing approach. 

At the same time, the demand for packaging is growing, and many packaging producers encounter a lack of machine capacity. Some companies buy equipment to increase productivity, while others have to look for hidden reserves.

There is not much we can do with our output per hour – in most cases, experienced companies are already on edge; each improvement requires lots of tests and ends up with new investments. One of the most underestimated areas is increasing machine hours with existing equipment. Each producer plans their production with 500-650 hours based on the particular situation. We believe that that amount of machine hours is solid, and we don’t want to start a discussion if you can get extra 10-50 hours there. 

Machine hours you achieve monthly with your equipment is the room for improvement. We interviewed 30 thermoforming packaging producers to find out downtime hours, average downtime, and reasons. If we say in 1 shift (12 hours) we have ten machine-hours, then we get something like this: 

Case-to-case situations may vary, and there are companies with lower downtime in particular cases, but all problems are familiar to you. 

Is there something you can do about these losses? For sure, you can decrease them, but that requires some effort. 

First of all, you can’t fix something out of your focus. Try to answer now, without checking records and statistics following questions: 

• Do I know last year’s downtime hours for each piece of equipment? 
• Do I know the reasons for the downtime of each piece of equipment? 
• Do I know the amount of lost profit due to downtime?
• Did I change something to prevent it in the future? 

If you don’t have answers to these questions, it is clearly out of your focus, and this article is precisely for you. 

While the questions above seem obvious, most producers don’t have answers. The amount of machine-hours is the indicator that becomes a limiting factor for production sooner or later. Once the bottleneck is defined, the next step is to subordinate the system to this factor. But to do that, we need an indicator that will connect economic indicators with available machine time.

When we calculate how much we lose with 1 hour of downtime, all the traditional metrics and economic parameters become useless. How can we summarize them in one integral indicator for the product range?

To make things universal and straightforward, we need to find an ultimate indicator for each thermoforming production regardless of their accounting or calculation policy. It must be simple to calculate, and at the same time, it has to summarize the results of the entire system. 

Throughput margin might be an indicator that we are looking for… 

Throughput margin per hour = INCOME per HOUR – TOTALLY VARIABLE COSTS per Hour (TVC). 

Throughput margin (T) allows us to manage production regardless of the product, material, or tool parameters. All of these are considered a part of T.  

TVC  are the costs vary with retaliation of production. Few examples here:

• Salary doesn’t change with increasing or decreasing production, so it goes to OE.
• If part of the salary scales with every kilo produced, it goes to TVC.
• If you pay for electricity per kW, it can be associated with TVC. But in this case, each machine should get its electricity meter. 

So to make things simple and usable for any case, let’s begin with this formula.

The great thing about throughput margin is that it shows the speed of margin generation, allowing us to relate margin with machine hours and downtime. 

If you calculated the throughput margin for each of the products you supply, you would be able to calculate the target/average/minimal throughput margin for your equipment. Once you have it, you know exactly how much money you lose in 1 hour of downtime. 

Now let’s assume that our Throughput margin equals 150 euros per hour and we produce 200 kilos of product per hour; how does that chart look now:

Unlike the first chart, which was frustrating and confusing, the second chart clearly shows what must be in your focus. The lost margin could cover our operational expenses or investment and company development. 

Saving on the training of employees, postponing service procedures, saving on tooling, and jumping from product to product never seemed healthy for anybody. 

But who could imagine the actual price that is paid for these things?

Now let’s imagine you have spent 10 000 euros on tech training for operators and revising maintenance procedures. That has decreased the number of operator mistakes and problems caused by lousy service; also, you have adjusted the production policy and reduced the number of unplanned tool changes from 5 to 2 per month. Finally, you buy the tool from the supplier with its thermoforming machine for testing tools before shipment. Before shipment, your tech team tested and accepted the tooling at the supplier’s facility. Now our downtime chart looks like this: 

While it was surprising how much time and margin is lost in the previous chart, how much is saved with these simple things is even more stunning. 

Throughput margin considers your productivity, efficiency, and all the economic parameters. Even more – it connects the production economy with your equipment capacity. Managing your production with a throughput margin is like controlling the speed limit with a speedometer. 

Imagine that you have to arrive on time and can’t exceed the speed limit. Now imagine your car doesn’t have a speedometer. Instead of it, you have a chart with a variety of indicators:

• RPM
• Torque
• Gear number 
• Clutch ratio 
• Horsepowers in use 
• Etc. 

To check your speed, you have to perform 5-6 calculations at any moment.  It sounds crazy, but in a way, this is precisely how many thermoforming companies are managed now. Skilled drivers don’t need to make all those calculations; they feel the parameters and know if speed is okay. The same thing happens to thermoforming managers. 

But does it have to be that way?  Think now about managing your thermoforming like driving a car with a speedometer. Being focused on the Throughput margin per hour instead of the variety of parameters:

Just a few more ways of using throughput margin indicator::

1. To compare thermoforming equipment. Twenty Euro per hour with 550 machine-hours monthly gives you the benefit of 132 000 euros in one year. Extra 50 000 euros economy on machine price with lower throughput margin doesn’t seem to be a good deal anymore. 
2. To compare tooling options. Same as with the machine, you get clarity compared to tool configurations. 
3. To compare new products that you are planning to produce. Knowing your target throughput margin, you can predict the price and get the market’s feedback.  

Thermoforming Tech is developing a software solution that helps you make throughput margin calculations, knowing the benefits that thermoforming companies can get with throughput margin. 

If you want to know more about the Throughput margin concept and our solutions, let us know, and we will contact you as soon as possible.