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Smaller Does Not Necessarily Mean More Efficient

Best Practices for Real Waste Reduction in Today’s Manufacturing Environment

In an effort to cut costs, many inefficient medium-to-large companies have transformed themselves into smaller—but still inefficient—companies. While this may seem like an obvious cost-reduction technique, it doesn’t necessarily translate to lasting efficiency improvements.

Successful companies, on the other hand, are using this downturn to focus on true waste reduction, creating well defined, proven, and scalable business and manufacturing processes. These best practices are seeing them through today’s hard times and will lead to increased levels of profitability and competitiveness when the market turns around.

What kinds of things separate the efficient from the inefficient? Below are some of the best tactics for reducing waste and improving profitability. 

Get Back to Basics

This includes getting management out on the floor during production hours and holding staff accountable for starting and stopping on time. A 10-minute break is from stopping the machine to starting the machine, and five minutes of clean up are five minutes of measurable cleaning that must be accomplished—not used to line up first at the time clock. 

Engage the Entire Organization

A business owner once explained that he was “owed” cost reduction ideas exceeding two times each person’s annual total cost because he already knew how to save one times their annual cost. Involve the entire enterprise (leadership, staff, hourly, shop, office, customers, and suppliers) in waste identification, elimination, and prevention processes so that the waste does not creep back into the system once eliminated. Invest no more than 30 minutes to train everyone on the eight wastes, and then get their ideas, respond to everyone, and quickly act upon the good ones. 

Staff Appropriately

Consider eliminating or reclassifying unskilled staff with “skilled trades” titles and pay. In addition, re-evaluate competency and performance and reassign staff to more appropriate positions. For example, consider moving supervisors to production positions, superintendents to supervisor positions, etc. With staff members working at positions below their former levels of responsibility, fewer supervisors are required and process improvements are more easily identified. These afford companies a “twofer” benefit—retaining the best and brightest staff and reduced supervisory expense and improved processes. 

Improve Inventory Accuracy, and Adopt a “Zero-Scrap” Tolerance

Inventory accuracy is poor in most low performing companies. Inventory inaccuracy leads to expenses for scrap, remanufacturing lost parts, late deliveries, non-value-added staff reaction time, premium freight, and on and on. The best companies are using this period of low production to improve inventory accuracy, to reduce inventory costs, and to eliminate the need and expense of a complete physical inventory.

Moreover, several effective leaders are using the current situation to establish a zero-scrap tolerance throughout the company. The message is articulated from the highest levels of leadership, efforts are resourced, exceptions are highly visible, and expectations are clear. 

Make Meetings Matter

The largest portion of most meetings is non-value added and consumes significant staff time that should be used to create improvement. The most profitable companies never spend time in meetings discussing what can be read before the meeting or in handouts or presentation materials. Instead, they use meeting time to focus on coordinated actions to improve the process under consideration. Meeting waste is most clearly demonstrated in low performing company production meetings when the previous day’s schedule is reviewed in agonizing detail with little or no discussion focused on the actions the have been or will be taken to prevent recurrence of the poor performance. Remember that eight people, in a single one-hour meeting, consume the wages and potential contribution of one person for the entire day. 

Budget Management Time Wisely

During tight economic times it is as important to budget time as it is finances. Challenge where members of the management team are spending their time. It is critical that time is focused on the activities and projects that will put money on the bottom line. Managers should not be working on so many projects that they are not bringing them to closure. Be sure managers are focused on the vital few so projects can be closed and savings realized, then move on to the next priority. 

Focus on Preventive Maintenance & Overall Equipment Effectiveness

Preventive maintenance is key. All too often, there’s an arbitrary repair/replace frequency that was established years ago. One client reduced coolant and lubrication expense by more than 50 percent through a laboratory analysis of fluids that would have been changed and recycled.

The best companies are keeping skilled trades craftsmen very busy by permanently fixing tooling and equipment issues that don’t require significant capital investment. Preventive maintenance programs are being revamped based on tool analysis.

In addition, focus on overall equipment effectiveness (OEE). Clients that make this a priority have routinely seen productivity increases of 30 percent or more. During 2007, with stable volumes, one client improved efficiency so dramatically that they eliminated the entire third shift and a hefty percentage of the second shift and reduced inventory by 50 percent. OEE can be just as effective during periods of transition and turbulence as it is in periods of stability. 

Contest Customer Chargebacks

Contest every customer chargeback to your company at the highest management levels of your company and your customer. If the customer’s engineer can charge your company with only minimal resistance, you’ll be a priority target. If the president or CEO requires a face-to-face meeting with the customer’s plant manager whenever there’s a potential chargeback, your company will move well down on the list of those being charged. Even if you lose the contest, you’ll fully understand the customer’s problem and can personally ensure that this issue never happens again. 

Other Quick Tips

Consider these best practices as well:

  • Energy audits with internal staff have been very effective in reducing expenses. Closing doors, powering down fully when equipment isn’t in use, and fixing compressed air and hydraulic leaks have all shown to be cost effective measures that most any company can implement.
  • Sorting scrap materials that were previously sold as comingled scrap at a reduced price has yielded benefit to several clients.
  • Proper management of returnable containers is more possible with today’s reduced volumes. The elimination of cardboard and repackaging expense has shown great benefit to those who have been successful in this effort.
  • For ease of transitioning employees into new positions, several clients have graded jobs based on ease of learning and potential cost and quality impact of the position. New or reassigned employees can only be used on low impact jobs until tested and fully qualified for higher impact positions.

In Conclusion

Remember that best practices from one area are generally applicable in several areas. Most successful companies benchmark both within and outside of the company to create a culture of success throughout. For questions or additional information, please feel free to contact us at any time.

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