Over the past 10-15 years, many manufacturing plants have gone through repeated cycles of budget cuts. Organizational layers have been chopped, headcounts reduced and entire factories have been outsourced to countries with lower labor costs.
You could be forgiven for thinking there is no more money to be made by improving operations, but think again and ask yourself the following questions:
- How well are your factories really operating? Are you still in the continuous improvement mode on cost and service or have you plateaued?
- What if you could cut your manufacturing time by 20-30%? Could you then cut inventories, improve your on-time delivery and outperform your competitors?
- What if you could produce 10-40% more in your additional factory with little or no capital expense? How would that affect your financials?
- What if expert manufacturing gurus did a 'top-to-bottom' review of your operations? Do you think you could jettison another 10% or more of operating costs?
- How well and how often are you tracking your operational performance? Does every shop floor employee have line-of-sight visibility of how their individual/team work relates to overall factory goals and objectives?
Can you find the money?
Assess your ability to 'find the money' by taking a look at the operations functions of two very different factories:
Factory 1 (20+ years old)
Touring the site, you notice housekeeping isn’t great. There’s lots of trash on the floor as well as a number of bins full of WIP. There is some evidence of LEAN implementation with several shadow boards scattered around the production lines. There’s a strong sense of urgency across the entire factory. Fork trucks are whizzing back and forth, a loudspeaker announcement is calling an employee to the office regarding a schedule change, an overtime sheet is posted at 9:00 a.m. looking for volunteers to work past their scheduled time and the production lines are humming. A line of trucks is waiting to be loaded, their drivers are the only ones seemingly idle, drinking coffee in the break room. Across the floor, a member of a maintenance crew carrying out essential repairs cries out when his wrench slips, trapping his hand.
Factory 2 ( 3 years old)
This plant has a completely different feel. You don’t see any shadow boards or kanbans so you wonder if this place has even heard of LEAN. The pace is decidedly subdued, fork trucks are moving pallets of stuff around, but they are not going flat out like they were at Factory 1. The production lines are humming here as well, but the workers aren’t rushing. One of the fill stations is waiting on containers but no one seems worried about it. Several people are on their cell phones and at least one person is checking Facebook. You observe a maintenance crew on the floor but they are on a break, and it must be an extended break as they are still sitting down when you walk past them again 40 minutes later. In shipping, there is only one truck being loaded. The driver remains in his cab, checking his cell phone. The factory appears to be limping along but you wonder whether the employees understand how, or even if, their work contributes to meeting the factory goals.
Two different factories, managed in very different ways. So which one has the potential for cost savings? The answer is, they both do!
The #1 enemy of well-managed, low-cost operations: CHAOS
Factory 1 has a pace issue that is inducing chaos on the shop floor. All plants can and do survive short periods of chaos but, in the longer term, it causes people to cut corners. Chaos makes people rush and that results in more injuries. That means lost time for the injured worker and higher overtime and training time for backfill, not to mention the employee’s pain and suffering. Injuries result in workers' compensation claims which take up management time and lead to higher insurance premiums. Chaos also causes operational errors, that means more scrap, more time spent correcting errors, more productivity loss and more management time wasted. Chaos also results in late shipments followed by an increase in inventory, with your sales teams desperate to ensure that it never happens again. You can never completely rid yourself of chaos, but it MUST be minimized.
So what about Factory 2? Not much sign of chaos here, but does this mean operations are fully optimized? Absolutely not! All employees, hourly and salaried, must understand how their day-to-day work impacts factory performance. The linkage must be as direct as possible. Best-in-class companies have whiteboards posted at every job area. Each board has a performance standard listed and is constantly updated with real-time data showing how well each work team is doing. It may seem basic but more than 90% of manufacturing facilities do not have this in place. As a result, many of the operators, mechanics and supervisors become just a “pair of hands” and never have to engage their brains in improving the operations. This forces management to do a LEAN implementation or shove down yet another program of the month in an attempt to drive progress. The end result? Dollars wasted, disempowered employees, morale problems, soaring absenteeism, and high worker turnover. That means more training, and loss of productivity as people learn their new jobs.
Reduce your manufacturing costs by at least 10%
If your factories are operating like either of the above, there is at least another 10% potential to reduce manufacturing costs. What’s needed here is the implementation of a thorough, robust shop floor Management Operating System (MOS) that links individual and team performance to the factory goals. Each area needs detailed and realistic targets that they can achieve. When problems arise that impact performance (and make no mistake, they will) action must be taken to restore performance as rapidly as possible. Some believe that a 100% full factory operates best, that’s generally true, but a factory can be optimized at any capacity level. The key is to understand the levers that control production and cost and make sure everyone is aligned. It may sound simple but, in our experience, it rarely occurs.
How we can help you
We can help you stabilize your operations and fully engage each and every shop floor worker in dramatically improving your performance. We can show you how to accelerate throughput, and rapidly add capacity typically with little or no capital cost ... and we can teach you how to eliminate the number 1 enemy of manufacturing.
As specialists in procurement, logistics and operations, we know that there are cost savings to be found almost everywhere in the key areas of your value chain. Not only that, we have the experience, methodology and capability to deliver significant savings and help clients move up the maturity curve to achieve Total Value Optimization™.
Find out how Maine Pointe can help assess your operations and implement improvement projects that deliver fast and compelling economic returns.