|
Author: Adam Sommers Article source: http://www.tefen.com/. Used with author's permission.
Abstract
The electrical products industry is one characterized by fierce competition, declining margins, and legislative regulations, all that have forced the majority of electrical product manufacturers to rethink their business models. This article describes a successful story from a leading electrical products manufacturer and its journey towards lean, which to date, has saved the company over $65 Million in hard -dollar savings.
Background
Tefen has worked closely with one of the world's leaders in Power and Control products. With worldwide consolidated sales exceeding $9 Billion in 2002, the company has roughly 200 manufacturing plants worldwide, with about half of them in North America.
In North America, Tefen has specifically worked with a division known for quality switchboards, switch gear, breakers, and other electrical components used within the energy, building, industry and infrastructure markets. The company faces stiff competition from General Electric, Siemens, and Westinghouse Electric in most categories. Given the level of world-class competition, the company has continually pursued strategies to improve its cost position, quality, and overall order fulfillment processes.
In the industry, this company is renowned for its ability to tailor its products to meet the specific needs of its clients. The ability and willingness to customize has created a competitive edge for them, while at the same time created operational challenges. Engineer to Order (ETO) products with a high degree of variability can often drive long lead time from design to production, large inventories, obsolescence, design control issues, production complexity, and inefficient scheduling, among other problems.
From 1996 to 2001, the highly competitive North America market and economic downturn drove steady margin erosion. In response, the company launched an enterprise-wide initiative to reduce manufacturing costs by 20-25% within two years at select manufacturing sites. Further, it set goals to build the skills base necessary to generate lasting continuous improvement, drive consistency in production systems, and optimize key areas of the supply chain.
A major plant in South Carolina was chosen as a key ETO facility to target for manufacturing cost improvement. With its 258,000 square feet of production space, large dollar opportunity,
and products of strategic significance, it was a logical target. Tefen was engaged to understand the current state operation, define improved methods by applying Lean techniques, and then drive rapid implementation. The stated goal was to reduce conversion costs by a minimum of 20%.
The Situation at South Carolina
During the first week of the 3 week long diagnostic phase, Tefen worked with plant personnel to understand the current state of the operation. The Motor Control Center product (MCC), along with the Fabrication area (Fab), were the subjects of particular focus. Here, a number of key findings highlighted the need for dramatic operational improvement. Specifically, it was uncovered that the two areas of focus were characterized by:
- Long changeover times
- Excessive WIP and Raw Material
- Excessive active part numbers
- Long lead times
- A functional layout with poor material flow
- High order variability
- Inefficient labor utilization
- Inefficient order entry processes
- High level of overproduction and rework
- High transportation costs
These underlying issues hindered the company's performance at the plant level, which in turn, diminished the overall corporate operating result. Besides diminished cash-to-cash cycle time efficiency, the plant experienced
less than optimal order fulfillment performance, low inventory and asset turns, and high overall supply chain costs.
The Solution
During the second and third weeks of the diagnostic, Tefen defined a number of key levers to drive significant conversion cost savings. To conduct the diagnosis and quantify tangible savings, a number of tools and techniques were employed.
For example, Value Stream Maps were created for both the "current state" and envisioned "future state" of the facility. Besides providing powerful visuals of the operations, these maps were used to quantify cycle times, inventory levels, number of operators, and the ratios of productive times to lead times. Another key analysis looked at the demand data to understand the volume/product/order mix. By coming to grips with the level of variation, smarter scheduling and better flow techniques could be devised. A full listing of analyses and the associated tools used to conduct them are shown below in Figure 1.
In Figure 2. the levers for savings and associated key activities are detailed.
At the core of Lean is speed - process cycle-time efficiency is the overall defining Lean metric that paints the picture of a manufacturing plant's health.
By applying Lean principles, Tefen was able to identify ways to dramatically improve cycle time efficiency, which in turn, pointed the way to a 21% reduction in conversion costs. Recommendations focused on several key areas including improved material handling through a revised layout, reduced touches and dedicated handlers, reduced changeover times through standardized work, a flexible workforce operating within a flowing cellular line, and a scheduling system based on customer "pull" rather than forecasted "push." In addition, Tefen recommended implementing a Constant Daily Output (CDO) system to produce the high volume products to a
schedule. Instead of ramping production up and down in response to order volume, production of high volume material would be leveled based on order volume history.
Getting Results
Having identified what to fix, the next step was to put together a workable roll-out plan and begin implementation. Prior to the diagnostic, the pervasive culture at the SC plant was a typical one. There was a lack of urgency for improving things - inefficiencies were accepted as the normal mode of operation. One of the by-products of the three week diagnostic was an awakening among plant personnel. By including plant personnel as an integral part of the diagnostic process, new possibilities became apparent to them. Word spread and when it came time for implementation, there was more of a willingness to change. Further, Tefen's "Go-Fast" implementation approach instilled a true sense of urgency and importance throughout the plant. The "Go-Fast" approach is designed to obtain significant results within 10 weeks, achieve more than 50% of the targeted savings within 6 months, and foster a continuous change culture.
Figure 1.
Improvement Lever Key Activities
Reduce Overproduction Waste - Schedule starts based on a pull system
Align Lead Time Information Flow - Define lead time across all systems
Improve Material Flow - Cellular layout and elimination of excess storage
Reduce Order Variability - Produce 80% of volume to a daily demand
Improve Labor VA Utilization - Flexible work force, 5S discipline, shorter C/O
Reduce Transportation Costs - Load consolidation and lane simplification
Improve Order Processing - Develop Constant Daily Output order generator
Standardize Work Methods - Improve C/O, eliminate multiple handling
Improve Inventory Management - Constant daily production on top 80%, use stores
At the SC plant, a number of dramatic changes were made which drove significant savings in a relatively short amount of time. Within the first 10 weeks, over 40% of the targeted 6 month goal was achieved, 30% greater than what was predicted.
Numerous changes were implemented to increase efficiency and reduce inventory. In the MCC area, a pull approach was employed to reduce WIP by employing a build trigger for the main structure. Prior to the implementation, structures and a related component were scheduled separately and were connected together at an area called plug-in. This created WIP of structures and the component waiting for their mates. By triggering the structure build when the component was done, the structure WIP at plug-in was dramatically reduced. In addition, the entire structure line was redesigned to balance the stations, shorten the cycle time, reduce space, and reduce the raw material inventory needed at the line. Production space was reduced by introducing U-shaped work cells in both the structure line and wiring areas
In the wiring area of MCC electronic work instructions were employed to allow the wirers to always have the latest revision print, reducing rework as well as part shortages.
To further drive efficiency and reduce unnecessary material handling, kitting and "milk run" concepts were implemented. With these techniques, fewer operators were needed as productivity rose with more time on task.
In the Fab area, the other area of particular focus in South Carolina, additional improvements were implemented. A cellular layout based on material flow and capacity analysis was created. Changeover times were greatly reduced by division of internal and external work content to maximize operator value-add time. Further, a constant daily output (CDO) scheme was implemented to help reduce the effects of variability. Level loading of Fab production was accomplished by observing the 80/20 rule where 80% of the volume is driven by 20% of the part types. For the remaining 20% of the volume, which reflected special customer orders, lead time was greatly reduced by using a Supermarket to provide a buffer to demand variability. The Supermarket technique allowed for a lead time reduction from 6 to 2 days.
Other improvements impacted the entire plant, beyond the MCC and Fab areas.
Scrap reduction of over $40K month was accomplished via coil re-banding. At the plant, raw material arrives on a coil. When a part type is finished at its CDO quantity, the coil is taken off the press and re-banded instead of becoming scrap. Previously, before the re-banding implementation, 21% of raw material became scrap. Improvements in the Tool crib added another $100K in inventory reduction.
Implementation of actionable performance metrics solidified the overall gains and instilled a culture of continuous improvement. The metrics enabled a focus on reducing waste and drove operator empowerment at the cellular level. KPI's are now tracked at the plant level, the department level and the cell level to illuminate cost/efficiency, service level, quality, and continuous improvement. Examples of KPI's implemented include: CDO Stability, Supermarket space requirements, Planned schedule versus actual, and the percent of good parts out.
Looking forward, the outlook for further improvement is bright. About 60% of the total identified savings will be realized according to schedule. The remaining savings are on track to be realized within a year and a half of the implementation start.
About Tefen
Tefen is a publicly traded, international operations consulting firm with seven offices in United States, Europe and Israel. The firm has over twenty years of experience in improving the overall operational effectiveness of Fortune 500 clients around the world. Tefen designs and implements solutions that enhance operational performance throughout an organization. The main areas of focus include operational excellence, manufacturing, quality, customer service, research and development, and supply chain management. All of Tefen's support programs are ISO 9001 and TCS (Total Customer Satisfaction) certified. Our hands-on approach has achieved success in delivering quantifiable and value-driven results. The company has remained profitable since its inception and currently employs over 250 professionals worldwide, 40 of whom are certified Six Sigma Black Belts. Adam Sommers is the author and Partner at Tefen (http://www.tefen.com/). For questions or further information regarding this article, please contact Raymond Cheng, Marketing Manager, at info@tefen.com.
Adam Sommers, a Partner with Tefen USA, has over 15 years operations management and strategic planning experience. His background and expertise is in all aspects of organizational improvement including manufacturing productivity, supply chain management, and business strategy. Adam has worked with leaders in a variety of industries including Aerospace, Energy, Telecom, Electronics, Medical Devices, and Travel. Currently, he is helping an $8B Power Distribution equipment manufacturer achieve significant productivity gains via a focused Lean/Six Sigma program. Prior to Tefen, he ran the corporate strategic planning function for The Columbia Energy Group, a Fortune 200 diversified energy company. Adam received his MBA from The Wharton Business School and a BS in Aerospace Engineering from Polytechnic Univers
Self-Sabotaged By Research
Why do we spend all our time doing research and never actually go on with "doing" the thing we were researching?
The Changing Role of the Sales Consultant
Are sales consultants aware, or for that matter inclined to change with the market?
Developmental Coaching
So, what does developmental coaching mean? For us, it represents the last frontier of coaching.
Starting Your Own Redecorating Business: The First Key Steps
Do you love to decorating? Learn key steps to starting your own redecorating business.
Fico Scoring Basics
This gives you a basic understanding of how fico score is determined and how it affects your personal credit score.
Tuna Patties With Lemon Dill Sauce
Losing weight doesn't have to be difficult, boring or making your hungry. "Tuna Patties With Lemon Dill Sauce" is another recipe in a range of hunger-fighting, ...
How To Write A Resume, Avoid These Resume Mistakes
If you have a resume you maybe making these mistakes and don't even know. But in the process of ignorance your losing job opportunities and precious time.
Media Training: Exposing Reporter Tricks -- Three Tactics Designed to Get You
A reporter's job is to get the most accurate and interesting story he or she can. Whether journalists make you look good or bad in the process is inconsequentia...
Easter Lilies, and the Number One Gardening Question Right Now
Everybody asks about Easter lilies! Can they go outside; can I plant them in my garden? And to this I reply, "Why not?" Like other bulbs, there are two optio...
Great Relationships: 4 Big Relationship Mistakes and How to Avoid Them
Relationships are tough enough without making major mistakes. Here are four big mistakes and what you can do to avoid them.
Reading For Success
Our world today is changing faster than at any other time in our history. Knowledge and information is doubling every two to three years. This means that your k...
Resume Writing - Importance of a Professional Summary
The Summary is the preview of your entire resume. This may be be the only part that an interviewer or employer might read for shortlisting your resume. This m...
Cut The Take Out
A long hard day at work. You get home and mmmm, what is that aroma? Dinner is cooked and waiting for you. Find out how to have dinner done when you come home fr...
Optimize Your Mailing List For Better Results
A list of customers who have previously bought from you is your most important asset. These are the customers who will provide you with return business, wh...
A Real CRM Strategy or Just Tracking Customers?
An increasing number of companies claim to have adopted the principles of Customer Relationship Management (CRM), but in many cases they are simply paying lip s...
The Liberal Solution: Assault a Conservative?
Ok, here is what happened: On March 31, 2005, Pat Buchanan, conservative commentator and former presidential candidate, was giving a speech at Western Michigan ...
Write Your Ezine Article in 15 Minutes or Less!
Gasp! I can hear it from the purists now: Matt is advocating that writers really dumb down their writing styles to crank out more articles in less time. No, not...
Reducing Debt Before Its Too Late - How to Avoid the Pitfalls of Creeping Debt
Reducing debt usually isn't a high priority for people until they have already gotten into trouble with overspending. Using a few basic guidelines, and debt cal...
Soy and Menopause - The Menopause Relief Benefits of The Soy Bean & Soy Products
How does soy benefit a women in menopause and help provide relief of common menopause symptoms? This article takes a look at the promising evidence and undenia...
Great Ideas and Radical or Disruptive Innovation
We're all looking for great ideas right? There are a few Creativity and Innovation principles that are relevant before we discuss practical application:
Managers: Heres a PR Template for You
Point to remember: the work you do BEFORE you use PR tactics will determine the success of your public relations effort.
Google Adsense: What You Need to Know!
Heard a lot about Google AdSense and not sure what it has for you? Here is a quick listing of benefits which can be derived by adding Google AdSense to your web...
The Maharishi Ayurveda Approach to Allergies
Allergies: The Ayurvedic Answer In a healthy body, the allergic response serves to protect against invasion by harmful agents. Secretions and inflammation help ...
Self Improvement and Living in the Present Moment
Having clear goals and desires for our future, and planning for their fulfilment are vital steps if we are serious about self improvement and achievement.
|
Print this page