Challenge to improve performance
The Situation
The Managing Director of an engineering company manufacturing different types Power Tools (drilling and grinding machines) for different applications, called me and said that he was very much embarrassed in the recent Board meeting as he could not improve the performance of the company despite investment in several CNC machines. Accordingly, requested me to provide assistance to address the issue.
The company was struggling to increase the production quantities over 12000 per month.
The Task
The task assigned was to diagnose the causes of lower performance and recommend actions for improving the performance.
The Action / Approach
Action covers :
Data analysis : The data analysis of the production plan of six months revealed that the company manufactures around 48 products. Out of such 48 products, 50 % , 24 i.e. of the products were contributing to 90 % of the sales turnover and remaining 50% i.e. 24 were contributing to 10 % of the sales turnover.
Observations :
Production planning – It was observed that the production people were giving priority to 24 products contributing to 10 % of the sales turnover causing significant wastage of production time due to the requirement of considerable setup time on account of small quantities. This was causing shortage of time available to produce the products contributing to 90 % of the sales turnover.
Layout of machines : Layout of the machine shop was not unidirectional causing wastage of production time as well as accumulation of WIP on the shop floor.
Small processes : Small processes like drilling , oil hardening were done inhouse which appeared to be highly inefficient having potential to outsource.
Recommendations: Following recommendations were made-
- To concentrate on the products contributing to 90 % of the sales turnover.
- Maintain inventory for 24 products which are contributing to 10 % of the sales turnover instead of producing every such product every month.
- Rationalize product portfolio – eliminate similar products with little difference in the specifications.
- Outsource the small processes at economical cost and release the manpower to concentrate on production of products from the products group contributing to 90 % of the sales turnover.
The Result
- Product portfolio was rationalized. Accordingly, 6 products were eliminated from the list to produce which were similar in nature with minor differences.
- All small processes were outsourced at competitive cost.
- Layout of the shop floor was re-designed and aligned as per the flow of process.
- Production planning was improved to concentrate on fast moving products contributing to 90 % 0f the sales turnover.
- Significant reduction in WIP.
- The end result was that the production quantities were significantly improved to nearly 22000 tools per month from that of 12000 per month tools over a period of four years.
