Monday, December 11, 2017    

Improving the Health of Your Business With Cost-Cutting & Operational Efficiency

What's in it for Me? What's In It For Me?
The opportunity to have a competitive advantage in the market place FIRST. Gain or regain market share  via optimized machine use, lower production costs and efficiency.  Lowering costs and increasing quality can give your sales force a tool to offer a more competitive price and market a better product / service.

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Your Process

Your Process

This is an area of concern for businesses of all sizes and industry. Your Business is Alive! asks questions about your Controls and Process Flows, applies principles of Operations Management and finds ways to measure and improve Productivity.
Controls

Controls

Has your company been losing sales to the competitors and the product feedback been "it's just not like it used to be." or "switching to the competitor was because it may have cost more but the quality of the product was consistently better?" If you're concerned about the product quality, let YBIA help diagnose the your production quality and collaborate with your employees to effectively measure the control over the quality as well as diagnose the source(s) to the less than stellar product reviews. Process improvement experts look at upper control limit (UCL) and lower control limit (LCL) of the processes. First, let's take a handful (n) of samplings of your product. The samples of unacceptable product (p) is used to calculate the UCL and LCL. Average all of the p values to come up with the center line, i.e., the Next plot the p values for each n sample. The is in the center of your graph with +/- lines parallel and equidistant to it. The "+" is the UPPER control limit and "-" is the LOWER control limit. Any time the p value is above or below either the UCL or LCL, we've identified a time to stop production. YBIA will be asking you what your UCL and LCL are. If you don’t know them, then we’ll work to get to know them. Below is the formula for calculating these:
Control Limits Formula Control Limits Graph
Control Limits Formula Control Limits Graph

Over time, we calculate what is called the control limit (CL). We also call the measurements of the sampling vs. the control limit a range (R). Once it has been assessed as being out of control, there are three primary areas that are usually identified as being the cause: material, operator, and/or machine. That brings us to the Pareto Principle, fish diagrams, and the origin of Six Sigma (6σ). If your team is not measuring and formulating cause and effect diagrams, then YBIA will ask, “How far is your company going to go? When will it arrive? How will it arrive?” and of course, “Will the community be saying, ‘Your Business is Alive!’?”

Process Flows

Process Flows

Your Business Is Alive! asks questions. We need you to tell us what your current processes are because it’s findings like the aforementioned which saves you money. It’s not that you can’t or won’t do it. It is because you haven’t identified it as an area that could save you time and money, and unless you’re growing fond of the color pink associated with those layoff slips, let’s work together to not pass them out.

The process flow begins with, as we said, asking questions. Specifically, we work with your staff and you to identify "a day in a life." We're annotating what each step is, where there are decisions made, what occurs when the product does not meet quality checks (e.g., It fails a stress test.), what actions are needed when the customers change their orders, and finally how does your company determine that the product or service is complete. Some companies have weekly, monthly, quarterly, semi-annually and annual responsibilities as well. For many service companies, especially seasonal ones, we find this to be true. Therefore, Your Business Is Alive! also performs process flows for "a month-end in a life" as well. Identifying the periodic steps is important in understanding your business and your people. Ultimately, we are looking to establish a critical path. Once the critical path is computed, the total slack (TS) and free slack (FS) are calculated. Our product is a network diagram, and its recommendation is a means for optimizing the critical path.


Manufacturing Business

What about the machine fabrication shop with a computer numerically controlled (CNC)? The capital expenditure for the CNC was indeed a wise investment because it minimized the hours, lowered material waste, increased accuracy, and allowed for increased production output with little re-work, if any. Process Flow Improvement! There was a client in the fabrication business using primarily steel. They had invested in a machine which optimized the sheets down to the last millimeter. There was only one person capable of interpreting the drawings, who in turn, entered the dimensions into the software which optimized the company’s entire steel of grade X, thickness Y and so on. Where is the risk? In the one person, of course. However, there was another risk. What about the fact that the company input the sales order four times before it reached the engineer? In essence, there existed four separate times where the designs could have been entered, duplicated, or often, modified by the client and only communicated to one of the four people. This indicates a need for process improvement.


Service Business

A law firm, for example, touched the piece of "incoming client" paper over 200 times before the potential client was ever contacted by the attorney. What do you think that potential client had time to do? Exactly - shop for another attorney, and last I checked, there is not a shortage of attorneys.

Operations Management

Operations Management

Two of the principles of OM that Your Business Is Alive! applies for its clients are flexible manufacturing and lean management. Unless you have a degree in operations management these terms may not be very familiar but they can pay huge dividends for your company.

Flexible Manufacturing

GumbyWhat is it about Gumby that fascinates children? His body could contort to anything imaginable – and if you have children, we know that they have an abundance of imagination! What about the “all-in-one” screwdrivers? A magnet at the end of a screwdriver for changeable heads empowered the frustrated homeowner. No longer did the real estate heavy individual need to purchase an ensemble of tools. Right at the tip of the screwdriver, and without having to get down from the ladder, the driven homeowner changed out things madly. Flexible manufacturing and lean management, albeit two fascinating subjects, are just like the “all-in-one.” Flexible manufacturing occurs when the production uses one machine to accomplish multiple tasks. Did the toolmakers of modern day offer 15 different changeable heads? No, that would not be economical. They determined the common sizes of Phillips heads and went from there. Honda wants to become 100% flexible in its car plants. In Japan, there isn’t a large supply of land in the middle of “nowhere” waiting for Honda to build countless types of cars. It has done a cost-benefit analysis of real estate vs. labor and machine costs.

Lean Management

Lean management is the discipline of using only what is needed. Remember the machine fabrication shop? The company purchased a software package which optimized the sheets of steel. This was a crucial competitive advantage for the company because (1) the lead time on steel is significant and (2) the steel is costly --> waste is costly. The employees read the designs, entered in all of the orders, and the software package computed the raw material order size as well as the method for cutting the sheets optimally. Therefore, the company only ordered what it needed. When asked what the owner's concern was, we learned that it was centered around time. This brings us to lean manufacturing.

Lean Manufacturing

Let’s put the two together: flexible manufacturing + lean management = lean manufacturing. Lean manufacturing circles around time. How quickly can we get the job done, the widget made? Specifically, when should you invest in a lean manufacturing initiative? If an employee approaches you with an idea, below are the pre-qualifications:

  • ¼ the lead time
  • double productivity
  • lower costs by 20%

If these three aren’t predicted to happen, then back to the drawing board. But keep those ideas flowing because your company is spawning excellence. It is the epitome of working smart with working capital.

Honda’s goal encompasses working capital via working smart. How do you plan for tooling and CNCs? How does your company convince financial institutions that it needs the monetary support to move forward with a substantial capital investment? Simply, if it’s not going to pay for itself in eight years (or less), then go back to the drawing board.

Productivity

Productivity

What about efficiency? What about time and motion (T&M) studies? T&M studies began in the 1950s. If used on a complex level, they can contribute to PERT, but often advisors avoid using probability to extrapolate a critical path. Instead, we're looking to ascertain the amount of time required for each step of your process. We're looking for the earliest and latest start time any one event can begin and finally, when it can end. By using a stop-watch, we can be fairly precise. Therefore, T&M studies have early start (ES), early finish (EF), late start (LS) and late finish (LF).

"Stop watch!" you exclaim. You don't have time for that. One of the other reliable methods for scheduling is applying the "beta statistical distribution." Beta statistical is applied while optimizing the schedule because it is most flexible. For example, let's say that you have two machines in your process. One is ten years old and the other was purchased this year. It is likely that the outputs vary (even though the capacities, for simplification purposes, are equal). The outputs vary because the older beast is breaking down frequently, lead times are backlogged for spare parts, and so on. Beta is appropriate because it accounts for variances between the optimistic vs. the most likely time and the pessimistic and the most likely time. For example, if we think an activity will at best take 10 minutes, at worst take 20 minutes but most likely take 15 minutes, the difference between 10 and 15 is 5; the difference between 20 and 15 is 5. The beta distribution, if plotted, will be a normal distribution curve. As these time elapses vary, then the beta curve allows for a shifting. Below are samples of beta curves:

Beta Graph

Here is what you need to know for calculating activity times:

  • optimistic time
  • pessimistic time
  • most likely time, aka, the mode

The variables for each are denoted as a, b and m respectively. The beta distribution formula for this is as follows:

activity time = (a + 4 * m +b ) / 6

What about knowing your set-up costs and the down times of the machines? YBIA is saying that we purchase cars knowing that we will not use them at night, but we do not purchase houses without using them 24 hours. The house is keeping our hard earned money and people safe. If you’re willing to make a capital expenditure that costs as much as your house or often more, then you need to be reviewing the output rate, the efficiency of those repairing the machines, and what the economic production rate (EPR) is for your company. How much does it cost you / hour each time your machine is down?

The Electrician’s Story
The owner received a call in the middle of a weekend night saying his entire plant had lost power. He rushed over and tried everything he could to no avail. Finally, he called the electrician, who went to the circuit panel and tested each wire and circuit in a matter of minutes. He replaced one wire and the plant was back on line. The owner was relieved. Only 15 minutes, this was the best possible outcome. The electrician handed him an invoice and left. The owner walked back to the office and before he put the invoice in the accounts payable box, he reviewed it. It was for $10,000. Furious, he called the electrician, who replied, “How much would it have cost the company in lost production for the rest of the weekend?”

 

 

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