Implementing Lean in our Organization - Part 1
Problem Definition
There is a sudden surge in volume for one of the product line from daily output of 18,000 to 24,000 per day.
Goal
Increase daily output by 33% without incurring additional capital cost within a period of 3 months.
Current Operating Strategy
This line is currently operating on a 24 work hours per day with 17 direct operators and 15 indirect support staff. It is a fully synchronous line with a total of 23 processes link together by conveyor systems. The initial capital outlay for this line is approximately US$3 Million.
Approach
As the line is currently already working on a 24 hr work day, 5 days week, there is no way to increase the output by working additional hours through daily overtime. Working week end overtime is also not a solution as this would only increases the operating costs, which eventually lead to increase in unit cost.
This facility has been in operation for 10 years, since then, we have increased our daily output from 15,000 to 18,000pcs. Hence, in order to achieve output by another 33%, we need to think “out of the box”. We started with the objective of “Achieving Flow through the entire value stream” – that is from the moment customer order is received until cash is received upon goods sold. To achieve this significant output improvement, we would need to identify and eliminate waste along the value stream, as wastes prohibit FLOW. The 2 Key approaches were to create flow and improve machine output by applying several lean concepts.
1) Create Material Flow from Suppliers to Internal Point of use
Prior to Kaizen, suppliers delivered raw parts based on our consumption. As our consumption was not regular, deliveries from suppliers were not consistent or predictable. Thus, we have a 4 days stock staged at our supermarket to ensure there is enough to raw materials supply to production. Pallets of parts were also issued and staged at the production area causing poor housekeeping.
After Kaizen , parts from key suppliers are delivered to the plant daily, at a fixed time (3x/day) and fixed quantity (based on level schedule). This provides a standard work to suppliers and does not cause any jerk to their processes – hence ensures quality product and upfront supply chain stability. Other part supplies were also improved from weekly to daily deliveries thus reduces inventory in our supermarket. Through these implementations, we are able to reduce inventory in our supermarket from 4 to 1.5 days. Parts delivered to the receiving dock are transferred to line site flow rack in a FIFO manner. Any quantities those are not able to be placed onto the allocated rack space will be staged at the ‘Overflow’ area which indicates an ‘Abnormal’ situation. Action will be taken to resolve this abnormality. (E.g. machine down, hence missed schedule). Overflow quantities also indicate a need to catch up missed production. To create rapid flow in m manufacturing, delivery router will move parts to point of use in small lot size - 15 minute delivery route. (see Figure 1)
There is a sudden surge in volume for one of the product line from daily output of 18,000 to 24,000 per day.
Goal
Increase daily output by 33% without incurring additional capital cost within a period of 3 months.
Current Operating Strategy
This line is currently operating on a 24 work hours per day with 17 direct operators and 15 indirect support staff. It is a fully synchronous line with a total of 23 processes link together by conveyor systems. The initial capital outlay for this line is approximately US$3 Million.
Approach
As the line is currently already working on a 24 hr work day, 5 days week, there is no way to increase the output by working additional hours through daily overtime. Working week end overtime is also not a solution as this would only increases the operating costs, which eventually lead to increase in unit cost.
This facility has been in operation for 10 years, since then, we have increased our daily output from 15,000 to 18,000pcs. Hence, in order to achieve output by another 33%, we need to think “out of the box”. We started with the objective of “Achieving Flow through the entire value stream” – that is from the moment customer order is received until cash is received upon goods sold. To achieve this significant output improvement, we would need to identify and eliminate waste along the value stream, as wastes prohibit FLOW. The 2 Key approaches were to create flow and improve machine output by applying several lean concepts.
1) Create Material Flow from Suppliers to Internal Point of use
Prior to Kaizen, suppliers delivered raw parts based on our consumption. As our consumption was not regular, deliveries from suppliers were not consistent or predictable. Thus, we have a 4 days stock staged at our supermarket to ensure there is enough to raw materials supply to production. Pallets of parts were also issued and staged at the production area causing poor housekeeping.
After Kaizen , parts from key suppliers are delivered to the plant daily, at a fixed time (3x/day) and fixed quantity (based on level schedule). This provides a standard work to suppliers and does not cause any jerk to their processes – hence ensures quality product and upfront supply chain stability. Other part supplies were also improved from weekly to daily deliveries thus reduces inventory in our supermarket. Through these implementations, we are able to reduce inventory in our supermarket from 4 to 1.5 days. Parts delivered to the receiving dock are transferred to line site flow rack in a FIFO manner. Any quantities those are not able to be placed onto the allocated rack space will be staged at the ‘Overflow’ area which indicates an ‘Abnormal’ situation. Action will be taken to resolve this abnormality. (E.g. machine down, hence missed schedule). Overflow quantities also indicate a need to catch up missed production. To create rapid flow in m manufacturing, delivery router will move parts to point of use in small lot size - 15 minute delivery route. (see Figure 1)
Figure 1: Frequent delivery of parts to point of use
2 comments:
First of all, thanks for sharing. It's always great to learn from others!
I don't want to get the cart before the horse as we haven't seen the entire solution laid out, but I did have one thing I wanted to ask after reading Part 1. While it was stated that "Working week end overtime is also not a solution as this would only increases the operating costs, which eventually lead to increase in unit cost." Obviously, a true statement. However, I was struck by the fact that inventory was decreased and delivery frequency was increased so drastically. My question / comment being...were transportation costs taken into account in order to map the entire value of the kaizen activity? This is an area I continually struggle getting people to comprehend in our lean implementations...that being that they need to think globally and outside of the four-walls in order to make the most sound business decision possible.
While I want inventory as low as possible, I don't always need it to be in a "lean vaccum" if it's going to cause costs to skyrocket. In other words, I want my inventory levels right-sized.
Again, this is more for discussion that this particular example as this is clearly going to be an exciting kaizen story, and for all I know the suppliers in question could be right down the street and transportation costs could be minimal. But what I always want my team to think about is total costs, not always necessarily "pure" lean.
To boil it down...what if the additional transportation costs incurred were equal to or more than the incremental costs of working weekend OT. What direction should be purused?
Thanks in advance for any feedback! Have a good day!
Great example.
On the other hand, there's no way in heaven, hell, or on earth my clients could get three deliveries a day of any of their raw materials...at any price.
Post a Comment
Anything to say. Please feel free to leave your comment below.