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QUANTIFYING LEAN MFG TECHNIQUES AND INITIATIVES

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Viewing 21 posts - 1 through 21 (of 21 total)
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  • #39471

    PV
    Participant

    Anyone out there have an effective method of quanitifying the financial benefits of applying lean manufacturing techniques and initiatives? I remain baffled at the emphasis this great methodoligy has but perplexed by the apparent fact that plant leadership places more clout in hard savings or cost avoidance opportunities. Since most agree that Lean initiatives are the way to go we need to provide some guidelines as to what the hard financial benefits are. How are you doing this? THANKS!

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    #120094

    Issa
    Participant

    I recently conducted a Kaizen event for a Cellphone provider in their logistics department. By just applying the 5s in a small department of the company I evaluated the savings to amount to about $300,000.
    They were doing some crazy things such as mixing good phones with defective. They use RF guns to scan the products, every time they scan a phone and it shows that it is a duplicate, they throw it in a big bin along with the damaged products and they later on sift the good products from the bad ones and put them back in inventory, by the time they do it, half of the good products are damaged.
    I do not know what kind of business you are in but I am sure that there is a way to evaluate the benefits of Kaizen events if conducted properly.
    Issa 

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    #120100

    PV
    Participant

    thanks for the response so quickly. i work with manufacturing syringes in the healthcare industry. as i have observed we do a lot of kaizen events but not hard quantifiable dollar cost savings are recorded. i have to imagine there is a way to assess the efeictveness of each particular lean technique from Kanban to 5S. Have you ever heard of a book that offers such info? Or work standardization, visual factory and controls, etc. I really find it hard to believe that there is nobody out there who has written an article or something spelling out how to assess and gain credit for such efforts. If it cant be quanitified why are we spending so much effort on it? I know it can be. Just trying to find out how…

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    #120103

    Issa
    Participant

    There are so many books that deal with that question, but none of them will give you a specific answer to your specific problem. You can go to Amazone.com or Barnes and Noble but I doubt that reading a book can in itself solve your problem.
    The way I select my projects is this:
    What department in a company is facing the most problems and needs urgent attention?
     I direct my resources (not necessarily financial) to that department. I gather a team composed of the stakeholders who can contribute to the problem solving including the line operators, even the janitors if they can be of some help. Armed with past data, we conduct brainstorming sessions and use all the quality tools at our disposal (Pareto analysis, Cause and effect analysis, regression analysis, control charts, process mapping, value stream mapping,… you name it), we work together in identifying the ways and means to improve the situation. We make projections on the financial impacts of the improvements because upper management usually likes it when you show bottom line improvement.
    I hope that this will help.
    Issa

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    #121272

    Mike Chad
    Participant

    You can show benefits of CI using Cost v Benefits analysis, but you have to be carefull with projecting benefits.
    In my experience material loss projects will be easier to show real benefits; material overusage, scrap, quality loss etc. unless you are operating in a production constrained environment where capacity improvements will release greater sales with the same resource in equipment and people.
    Try linking CI activity with you’re sites budget, In my opinion you’re senior management team should be setting strategy in-line with the businesses needs.

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    #121320

    Talaid
    Participant

    I recently set-up a press area as a 5S unit. All items are labeled and put away carefully. This, and some aqttitude adjustments, have reduced set-up time from 2 hours to 15 minutes. This converts to dollars easily because we have an established burden rate. Let’s use $100 per hour for round numbers. 5S and Cycle Time Reduction reduced cost by $175 per Set-up. We usually have 2 set-ups per week on this press. Do the math, that adds up to a very significant savings for the small job shop I work for.

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    #121332

    Kelly Thrasher
    Participant

    Andy is right on the money with time.  Lean cuts out time and you can also measure it and quantify it easily.  For instance, here in a bindery, we know what our operating costs are per hour.  Our projects are focused on reducing cycle and TAKT times.  We also try to cut make ready times, etc.  Delays are bad, production is good.  We can show how much time we save or lose and attach a real cost to it.  Materials we aren’t so good about but I’ve seen them measured as yeild also and then materila costs tracked.
     
    Andy where do you work ?  I’m at RR Donnelley.

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    #121335

    Dr. Scott
    Participant

    Kelly Thrasher,
    If you want some real improvements in your bindery, then contact Mohammed  in Portland. He has done some wonderful things there using a mix of Six Sigma and Lean.
    Good Luck,
    Dr. Scott

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    #121351

    Chugh
    Participant

    Yes, There in no particular way for Quantifying or reporting the savings achieved from any project. But the usual method we follow is to take Before and after situation photographs for visual reporting and then convert the savings in cost term as suggested by Andy… or by simple maths.
    Like if you save some space after 5S implementation , take befor implementation photograph and after implementation photograph and then convert the sapce saved in cost by simply multiplying with existing charges for per area space(i.e Rs.2000/sq mtr.)
    Hope I am clear.
    Manish

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    #121355

    Mike Chad
    Participant

    What do you do with the residual time you save reducing cycle times; do you have sales to fill this time or are you able to reduce overtime, where is the real saving. And in what way do you show the benefit of hours saved; sales value or labour cost.
    You said you have made savings on “In Run Make Ready” have these reduced material overusage, this would be a saving to the bottom line.
    I quess the reason I’m a little sceptical is that I’ve worked on a large number of cost reduction projects, and in the early days the people who tend to count in business (accountants) could’nt find the benefits. These were usually on capacity improvement projects i.e. reducing cycle times, increasing equipment yields, but if the sales were not there to fill capacity released and with labour being a fixed cost accounts could’nt see the cash savings.
    I’ve had consultants come into a business and free up capacity and show benefits calculated against sales. 
    E.g. increased the running speed of an extruder which in turn increased unit output, this was then indexed against total available time to show a project benefit of £1.1M p/a. The only problem was that the additional sales were not there to fill this time, this is an example of a poorly defined project – there wasn’t a business need.
    This is not to say that with this scenario the situation isnt any better, its just that the benefits are likely to be intangable. It does however put pressure on sales to find additional business.
    Remember one of the seven original wastes; “overprocessing” making too much too soon adds real cost.
    Mike.
     

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    #121357

    Peppe
    Participant

    Mike I agree with you and as you know many lean strategies require to have oversized capacity (maily assets), to respond timely to demand request. The strategies depend by the costs you have and you want save (Asset, Manpower, Material, etc..). You are right sayng that the basis is to plan a good project where the real problem must be addressed. As you know, sometime companies to respond timely to demand increasing, prefer to produce goods at higher cost rather than delay shipment. This always depend by compnay strategy. In any case, as often said, every project must be planned following a business case. Recently we tought to plan a dedicate 5S project to improve a specific area of shoop floor, but after a deep cost/benefit analysis we understand it wasn’t so cost effective and we decided to not do it, but just to re-layout that part of shoop floor. Of course we didn’t achieved the 100% of what we want, as planned by 5S, but the cost/benifit analysis show an higher rate of saving .
    Rgs, Peppe  

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    #121360

    Tronan
    Member

    Well, interesting discussion. However I agree and disagree at the same time, so you have put me in a world of termoil.
    Firstly Mike, you have missed out the eighth waste, underutalisation of people’s ideas. It has been an observation that when we run 5S’s we have a higher return in people’s involvement and yield of people improving their processes and procedures that they are working on. This is something that can not be defined in a PDF or charter.
    On another note, when you find that you can remove head count, it is not necessary to fire them in the true way of the western world, you simply don’t recruit in the future. An example of this is an automatic assembly for a product line has been proposed however the process is already under the takt rate required by the line, apart from the ROI calc being crap we loose the flexibility of that person.
    The tools that we have in our armoury are only that, tools, they should be selectively used to reach our target or goal,  not everything should be done to improve the bottom line, there is also the future aspects of what we do.
    On one of the projects I have a need for a 5S in an area, however i am attempting to distance myself of the dependancy for my running the 5S activities, so I am going to sign off a Requisition for £1500 for the two apprentices to 5S an area, knowing full well that there will be no return in hard savings. When these guys go and do a 5S in a more improtant area (in two weeks time) they will get it right, and then there will be hard benefits.
    But I may be wrong.
    T.

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    #121365

    Mike Chad
    Participant

    Tronan,
    To my understanding there are now “twelve wastes” in my post I refered to one of the original seven.
    Some good points made tho, also Peppe.
    I know I may have come across a little harsh with my comments, I recognise that getting people to willingly involve themselves in incremental improvements, that makes the job easier is a vital basis for Lean Enterprise and Change Management, and often these are intangable in definition.
    However, the bottom line is……….Profit is King!
    Mike.

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    #121367

    Tronan
    Member

    Hi Mike,
    The wonder of writing on these things as e-mail is that meanings can be misinterpreted.
    So what are the extra four? Also who came up with them?
    Profit is indeed king! However, without the people you have no profit.
    T.

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    #121368

    Mike Chad
    Participant

    Tronan,
    I agree people are the most valuable resource.
    The other four after “Waste of human potential” are;
    Waste of energy: power consumed to complete action
    Waste of polution: testing, legal costs, reputation, etc
    Waste of space: Cost of ownership of the buildings
    Waste of unnecessary complexity: Increased staff skills, extra time, more likely to get errors
    Source: Six Sigma Book from BAE (but not sure where they got it from)
    Mike.

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    #121388

    Talaid
    Participant

    Thanks for your positive words. Takt time reduction is crucial in large production. Many people confuse that with cycle time and end up with bottle necks or they complain about idle machines.
    I’m at Superior Technical Ceramics

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    #121510

    Chugh
    Participant

    Chad,
    Can you explain little detail about 5 other wastages you mentioned? Don’t you think Waste of Communication is one more area to looked upon.
    Manish

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    #121512

    Mike Chad
    Participant

    Manish,
    Seven wastes, eight wastes…..12 wastes, its just a guide to a way of thinking.
    If you feel that within communication there is activity that does not add value then challenge it. Its just a way of thinking……..Lean Thinking.
    Mike.

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    #121536

    Tronan
    Member

    Hi Manish,
    Just to build on what Mike has said is to state the following:
    Unconsciously incompetent:
    The manager looks through eyes that have no concept that he/she is surrounded by wasteful activities in the realms of Muda, Muri, and Mura.
    Consciously incompetent:
    Someone tells them about the above and they know that they have a problem.
    Consciously competent:
    They have to remember the lists of the wastes the original 7 being expanded over time to counter act the abilities of the managers to see things in the ‘new’ way.
    Unconsciously competent:
    Someone who has been practicing the ways of Muda, Mura and Muri for a long time and does not need the list.
    Your goal is to get to the stage of unconsciously competent whereby the list is irrelevant. What you call it is up to you, you could have 56 wastes if you so desired, but you need to have the same goal, something is either VA or NVA (or BVA if you want to split hairs) VA, ok but can be improved, NVA must be removed and are highlighted by your list.
    T.
     

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    #121660

    makarand
    Participant

    we have 3 set ups a day !! Will you please elaborate on how you reduced set up time from 2 hrs to 15 minutes. A good work indeed !

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    #121685

    Talaid
    Participant

    I just applied the basics you can read in any article on SUTR or SMEAD.
    1. Properly defining Set-Up Time as opposed to other things that were thrown in.
    2. Kitting to externalize most of the Set-Up operation
    3. Applying 5S techniques to the work and tooling area so that things could be quickly and easily found.
    4. Just making sure the operator had everything on hand when he begins a set-up.
    5. Explicit documentation of the procedure so there is no longer time wasted figuring out how to do the job.
    6. Analysis of observations watching the process. This is best done with a team but here I am the team.
    Three set-ups a day makes applying SMEAD principles absolutley critical. There is no time for any wasted operator motion diring the internal set-up period. You can easily justify people who just put SU kits together and put them away when the job is done.
     

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