I was in the UK last week and had an opportunity to participate in a production tour of a local manufacturer. This company produces consumer goods for yard care and is a great example of a manufacturer that sees the extremes of variability in their business. Imagine if your company received five percent of its revenues in 1 day. And 20% of its revenues in one month. Now try and keep your large retail customers happy as they demand delivery of stock within 2-3 days of placing an order. Let’s make it a little more interesting. The product is fairly mature and technically fairly simple in nature. As a result, the majority of your competition manufactures their product in China. Let’s finish it up with a highly variable demand driver: the weather. Too dry and water conservation goes into place making it illegal to use their products. Too wet and no one needs their products. With predictions of climate change increasing the extremes in weather, no one expects any of this to get better.
I visited this company about 4 years ago and it was impressive to see the changes the operations team has made since that time. Starting from the warehouse, a new warehouse management system is constantly re-allocating product within the racks to flow raw materials towards production and finished fast-turn goods toward packing & shipping . At the same time pickers are regularly re-allocating stock within the warehouse to maximize use of space. The company has reduced packing error rate by implementing a packing process that is “part” centric rather than customer order centric. What this means is that they bring a pallet of product to the packing area and pack the quantity required by each customer in a separate carton. They then pull the next pallet of product. Their third party logistics partner then consolidates the boxes by customer order and delivers the completed orders. The company’s order accuracy rate is so high that some of their customers have eliminated incoming inspection, providing a cost advantage.
On the production floor the team has increased use of production cells to eliminate WIP as they found some components were getting damaged as they were moved from operation to operation. To reduce labor and reduce cycle time, they have built quality into the product through the use of built-in quality inspection by operators to reduce quality inspectors and extra steps from the production lines.
To manage the large swings of temporary employees, management has isolated product operations that can be trained in as little as a couple of hours. This allows employees become productive as quickly as possible. They also reduce the seasonal swings of premium pay and shorter, unpaid weeks with their full time workforce by using banked hours. In this case employees work longer hours during the busy periods (winter and spring) and enjoy 3 day work weeks during the summer. The employees’ time is accrued and then paid later in the year during their time off, so weekly pay isn’t affected. The company transitioned away from piece rate to hourly pay so that employees receive the same size paycheck in both seasons which helps employees manage their cash flow at home.
They have also implemented a Kronos workforce management system that allows them to see labor usage and WIP movement throughout the plant. Previously they only had knowledge of materials when released to the floor and when they were entered into finished goods inventory. This visibility into what was happening on the shop floor has allowed for changes to labor standards which resulted in the lowering of standard costs on their two largest product lines. The information also provided the insight to re-design some processes. As a result, in the four years since I visited, their labor effectivity as measured by OEE on assembly lines has improved by 18%.
They have also made the factory more visual. Not like you would expect with lots of LCD screens spewing production information; those are purposely kept at a minimum. But rather lots of signs and color coding to help the many temporary employees find their way around the factory so they can stay productive.
The production cycle time is now so short and the factory so small relative to production volume that if they stop loading the trucks during busy season, production will have to stop within three hours because there is no room to put anything.
As though this wasn’t enough, this company has also gone green. From putting 50 tons of production waste into a landfill annually, they have gone to a virtually zero landfill footprint through re-using, re-cycling and finding markets for waste materials.
As though this wasn’t enough, their Director of Operations is looking to visit other manufacturers. He feels that while he has kept his head down and focused on the improvements, after a while they begin to focus on smaller and smaller gains. He feels that by seeing other company’s operations, he’ll be able to look at his operations again in a whole new light.