Using Value Stream Mapping to Reduce Overhead Labor

Author: Mitch Millstein, CFPIM, C.P.M., CQM, CQE

Background This Plastics Manufacturing Company was caught in the Great Recession of 2007 2009. They were operating profitably through the mid 2000s. In 2008 their customers cut back orders dramatically. One large customer was an auto assembly plant that closed permanently. They reduced direct labor in proportion to demand. But they still had unacceptably high indirect / overhead labor expenses. Instead of simply cutting these positions, they wanted to use Value Stream Mapping to identify where they could reduce costs. In addition to the short term cost reduction, they also viewed this as an opportunity to realign their indirect labor staff with their 24 hour a day production operations. Value Stream Mapping A Value Stream Map is a high level view of a process. This process can be an entire supply chain, the operations within a department or the steps to complete an order. In addition to the high level view, a Value Stream Map seeks to quantify what the people and machines in the process are doing. Are they adding value to the product or service, are they waiting or are they doing non-value added tasks? By gathering this data by time study we can see within the process how much of the time people and equipment are working and adding value for the customer, working but doing non value added tasks or waiting and doing nothing. Plastics Manufacturing - Value Stream Mapping Steps Schedule Order Pull Materials Mix/Grind Mold Parts Inspect Put in Finished Goods The scope of our Value Stream Mapping began at scheduling orders for production and finished when manufactured goods were put in inventory to be shipped to customers. Note, we did not include order-entry or shipping. We decided to keep this scope to the production operations of the company. Within these steps we time studied: Material Handlers Moved raw materials to the Mixing department, from Mixing to Molding and finished product to inventory Mixers Prepared the plastic raw materials for molding Floor Workers Did miscellaneous tasks as part of the order Lead Operator Oversaw other Operators Operator Checked quality of product coming off of the machine and packed product that was not robot-packed Set-Up Technician Set up machine to make a new part, involving mold changes and pick & pack robotics Inspector Did first part inspection and set up inspection station for part changeover Process Expert Trouble-shooter for machine problems We time studied each of these roles as they touched an order. This was a high volume and high mix production company so there were numerous orders to time study. The variables in orders were part complexity and count. We performed enough time studies to account for this variation. What Value Stream Mapping Showed Us Inspectors are only 50% utilized Utility Workers are very under-utilized and have no immediate link to an order No being linked to an order gives them the ability to float around the plant Lead Operators are under utilized and also float around the plant 2nd and 3rd Shifts are understaffed with Supervisors, process expertise and prep (Mixing) employees There were staffed to accommodate peoples desire to work on day shift versus the needs of production They are not working the molding machines very hard and have too many machines For each of the roles above we calculated their utilization for a full day. This was done via the simple calculation below: People Utilization = Average Minutes per Order * Average # of Orders / Effective Time per Person The results were shocking. We identified operations that were dramatically underutilized. Because these people werent directly linked to an order, they were allowed to float around the facility. Many times we saw them talking and disrupting direct people, sitting in an office or didnt see them at all! Staffing Rebalancing This chart shows how indirect positions were either eliminated or rebalanced on 2nd and 3rd shifts based on the utilization data. Lead Operators Current 1 per shift (3 shifts total) Future eliminate position Inspectors Current 2 per shift plus Lead Inspector Future 1 per shift plus Lead Inspector Process Experts Currently 2 on first & second shift, non on third shift Future 1 on first shift, 1 on second shift, 1 on third shift Floor Workers Current 1 per shift (3 shifts total) Future eliminate position Mixers Current 2 on first shift, none on second or third shift Future 1 per shift (3 shifts total) Overall Shift Supervisor Current No one in this position Future 1 per shift (3 shifts total) Results Eliminated Lead Operators Eliminated Floor Workers Reduced Inspectors Improved shift performance They were able to eliminate 6 overhead labor positions. Most of these positions were people who had very low utilization and floated around the facility because they were not directly linked to an order. Lead Operators were moved back to being Operators or made Shift Supervisor. Floor Worker jobs were eliminated, with this work being done by Operators. There was great debate about eliminating Inspectors, and the affect it would have on quality. However, in the end they realized that quality is not inspected-in; it happens at production and is the responsibility of Operators. This cost reduction helped them survive the recession, but in addition they found improved shift performance by moving highly skilled people to 2nd and 3rd shift, which was lacking support. This further reduced downtime costs and improved on time delivery of product to the customer. The result of this project was difficult on employees. We were moving people from 1st shift to 2nd and 3rd, which is a difficult transition. In other places we permanently eliminated positions at the company, forcing these people to go back to being Operators. However, the ownership did not just do a mass layoff. They invested to cut costs where it would not impact the Customer, but would actually improve off-shift performance.About the Author:

For more information on this subject goto www.supplyvelocity.com, where you can view our full white papers.

Mitch Millstein, CFPIM, C.P.M., CQM, CQE

President

Supply Velocity, Inc.

314-406-4962

mitch@supplyvelocity.com

http://supplyvelocity.com

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