Six Cost-cutting Strategies for Better Throughput Efficiency and Employee Satisfaction
Pick up any newspaper nowadays and you will see that manufacturers are facing familiar challenges. Manufacturing jobs are being lost to offshore countries, transportation expenses are rising and costs to keep the food supply safe are increasing. Now, more than ever, decision makers must do all they can to remain competitive.
While walking the exhibit floor at a huge food and dairy tradeshow, I observed thousands of company representatives, from presidents to engineers, eagerly searching for the next technology, equipment or idea that would help improve productivity at their companies. In the midst of this mass of answer seekers, I wondered if each of them were asking the right questions of themselves. Two questions came to mind. Had they overlooked the one thing that most often leads to poor throughput efficiency, higher costs and lower morale for employees? And, how well were these managers utilizing the labor and capital resources they already had?
Line downtime is a productivity killer and it saps throughput efficiency. Minimizing it in favor of long production runs is critical to achieving higher overall plant utilization and output. Downtime results from several sources commonly known as "plant constraints." Regulatory Clean-In-Place/Sanitation, preventive maintenance, breakdowns and changeovers make up the short list. Other sources include poor planning, material shortages/movement and physical plant layout. These downtime sources often occur in small doses that add up to significant lost production time.
As a result, some food manufacturers are operating 24 hours per day, seven days per week just to achieve five days worth of production. Frustrated managers and exhausted employees are paying the price. Surprisingly, many managers do not realize that multiple starts and stops introduce opportunities for mechanical breakdowns, poor product quality and operator idle time - all of which are costly and unproductive. Managers should only stop a line for a critical purpose - sanitation, maintenance, lubrication and changeovers - and when the line goes down, the completion of these non-running tasks should be maximized during the stoppage.
The keys to minimizing downtime are careful planning and deliberate scheduling. Many companies have reclaimed lost productivity by going on the offensive against the plant constraints. There are a variety of ways and shift options to scheduling non-running tasks, such that costly idle time is avoided, employees' hours are unaffected and production runs to the full limits of federal and company regulations. Before increasing capital expenditures and upsetting the workforce by canceling time off to meet production demands, consider productivity best practices in use today by a variety of companies around the world.
One such best practice is Pit Stop Sanitation and it works especially well in plants that have multiple lines operating simultaneously. A costly mistake that many managers make is scheduling sanitation to the shift length rather than to the regulation. An Ohio food manufacturer scheduled three shifts per day - two 8-hour production shifts and one 8-hour sanitation shift. An analysis of a year's worth of daily data revealed that set-up, sanitation and equipment restoration were being accomplished in approximately five hours daily. So what did the sanitation crew do for the remainder of their shift? Through no fault of their own, they hung out in the break room until it was time to clock out at a fully loaded cost of $25.00 per hour. Managers' traditional scheduling approach cost the company approximately $500,000 in excess labor costs and nearly 1,100 hours of lost production time annually.
Alternatively, suppose there are four lines and each require just about five hours of sanitation. Using Pit Stop Sanitation, two appropriately staffed teams could be assigned to 10-hour shifts and clean all four lines within 20 hours daily by taking down one line, sanitizing it and restoring it to operation before moving to the next successive line. Continuous production is greatly improved since unaffected lines continue to operate while one is being cleaned. In some instances, food manufacturers actually use waterproof curtains to separate operating lines from lines undergoing sanitation as a means of executing this practice.
By building in maintenance windows during the week, food manufacturers can improve equipment reliability and reduce preventive maintenance backlog. Additional cost savings are achieved by making equipment available during the week for mechanics on standard hours of work, as opposed to on weekends when maintenance hours are typically paid at a premium.
The next challenge is to reduce changeovers. Excessive changeovers contribute significantly to lost production, and more often than not, the real culprit is high SKU counts. Under tremendous pressure to close deals and meet quarterly revenue goals, the sales team at an eastern Pennsylvania floor manufacturer responded by accommodating virtually every customer request. The number of different SKUs grew to more than 480 floor pattern and color variations. On the plant floor, downtime increased significantly from shorter production runs, small orders and multiple changeovers. Each changeover was very time-consuming. For each pattern variation, operators had to complete an arduous process of mechanically changing out a torpedo-sized cylinder.
Fewer SKUs equate to fewer changeovers and longer production runs. Reducing SKUs, however, does not equate to revenue loss. In fact, the opposite is true. An analysis of SKUs versus actual sales volume revealed that 95% of the floor manufacturer's sales volume came from 71% of the SKUs. The company actually increased profitability by discontinuing the practice of trying to be everything to everyone, selling off the discontinued large cylinders and freeing up valuable plant storage space. Most importantly, managers improved production by eliminating a large number of start and stops from numerous changeovers.
Running the right products at the right time of day can produce even better throughput efficiency. Simpler, high-volume production runs should occur overnight with an emphasis on long production runs and high output. A southern California plant that produces the syrup for a popular brand of soft drinks discovered that throughput efficiency is greatest at night. There are fewer distractions from vendors, tour groups and managers with various requests roaming through the plant. Employees that enjoy working night shift overwhelmingly cite these same reasons as advantages over their dayshift counterparts.
Multiple, short and difficult production runs - including new product introductions - should occur on dayshift where the most experienced operators may be assigned. Many companies err by allowing employee preferences to control when certain product runs occur. By example, senior operators on dayshift may feel entitled to the most straightforward workload and by practice "leave the tough stuff for the back shifts." A more efficient practice is for the reverse to occur. This approach also eases skill imbalance issues between day and night shift, and situations where inadequate supervision exists on night and weekend shifts.
Another way to increase runtime is to operate newer more efficient equipment continuously. Where interchangeable lines are involved, it is more profitable to run four lines 168 hours per week than it is five lines 120 hours per week. Managers can visibly measure the benefits. Lower fixed and variable costs, increased capacity for peak season production, and greater flexibility to integrate maintenance and production are a representative list of the gains. The challenge that prevents many companies from executing this strategy is getting experienced and skilled personnel to consistently work nights and weekends without incurring high overtime costs.
The solution can be found in attractive 168-hour shift schedules that provide coverage using mostly standard labor hours. There are a variety of 9-, 10- and 12-hour continuous shift schedules that often provide as much as 50% to 70% more time off. Better time off is an incentive for employees to abandon the traditional "work five, take two days off" type schedule. Some skilled employees will trade off their pursuit of a Monday through Friday dayshift schedule for one that includes weekend and/or night work, if it also includes a repeating cycle of two-day weekends, five-day weekends and time off during the week. When this occurs, manufacturers benefit in two ways. First, the right personnel and skill sets are in place for full production around-the-clock, and secondly, that same person is available to correctly train new or lower-skilled employees who may be ineligible for dayshift.
Finally, since every minute of production counts, the workforce should be retrained to view a non-running line as a negative and a greater sense of urgency applied to restoring a stopped line to full operation. This type of thinking often requires strong leadership and a cultural change. All personnel necessary to place and maintain the line in operation must view a line start up as high priority. That is, production operators, mechanics, quality assurance and sanitation personnel should all be on hand for a cold start or re-start following a stoppage.
A food manufacturer in the Northwest averaged four hours of downtime for each cold start. To better address the problem, managers made a small adjustment to how they handled a down line. Whereas critical personnel were once required to respond to a down line as their primary jobs permitted, managers made restoring a stopped line job one. The change was painless, free and the impact clearly evident in increased daily production.
Managers and employees alike have a stake in reducing downtime. For managers, a line stoppage means costly underutilized standard hours and increased overtime labor hours for production, support and maintenance personnel. Additional costs arise from poor equipment and space utilization, longer lead times, and negative turnover. For employees, the impact of overlooking these best practices is low morale and fatigue from long stretches of shifts, cancelled family plans and more weekend work. No matter how many incentives an employee is paid, if they never have the opportunity to enjoy time off with their family, they eventually leave the company and the cost of their departure can be significant. Typically, companies incur costs ranging between $1,500 and $10,000 per employee from advertising, recruiting, retention programs, medical physicals and training every time an employee walks out the door. The upside is that the application of these best practices is beneficial to both groups and creates a situation in which managers and employees are working together towards a common goal.
Each of the practices discussed here, whether applied in combination or alone, helps recapture lost productivity. Taking control of downtime through planning and production sequencing is at the heart of improved resource utilization. The planning should focus on long production runs with an emphasis on completing multiple critical path tasks during stops. Carefully scheduled sanitation and maintenance windows are at the top of the list. Fewer starts and stops, frequent maintenance, and a higher priority on keeping a line in operation maximize equipment uptime and labor utilization while minimizing idle time and exorbitant overtime. When the plan is complete, managers should remain vigilant for instances where outdated traditional approaches, subjective employee opinion and perceived limitations may be dictating how production is scheduled.
Looking for the next big idea to reduce costs and improve productivity? Save the conference expenses, stay at home and take a tour of your own operations. You may be amazed to find that the best opportunities were right there all the time.