Rapid Turnaround of Large Manufacturing Operation
Lack of management controls in Symbol’s Mexican factory was causing poor performance in cost and schedule attainment. Recruited to Symbol because of success installing state-of-the-art assembly, test, and systems integration process for Telxon. Language barriers and material imports across the border provided hurdles to turning around the operation, compounded by dealing with Mexican labor unions and high employee turnover.
Stabilized operation by clearly defining staff responsibilities and assigning a manager to clean up the WIP disaster left by the former management team. Evaluated current operation and installed lean manufacturing techniques. Hired an Engineering Manager previously worked with at Telxon, began planning to install a system similar to the Telxon manufacturing system, and set goals for the new processes. Purchased and installed seven Worksmart assembly lines needed to set up continuous flow process in factory, as well as additional test and assembly equipment.
Within about one month, thousands of defective WIP units were repaired and in stock. Installed real-time repair loop in the manufacturing cells. Established cross-functional Emergency Response Team comprised of Manufacturing, Test, and Quality Engineers to immediately respond to problems on the manufacturing floor. Manufacturing and test engineers created work instructions for each product with photographs and simple instructions. Assembly and test operations were broken down into short-cycle, multiple-station instructions. Ran pilots for all products to train operators, debug work instructions and balance assembly operations. Established production goals and measurements that were continuously monitored and addressed by manufacturing management and engineering staff. All new processes were in place within three months.
Increased productivity by more than 100%. Achieved yields in the high 90% range over most product lines. Eliminated inherited defective WIP inventory. Because of the changes and level of stability in the factory, continued transfer of products from New York manufacturing facility and met production and revenue goals. This was a very successful and rapid turnaround for a large manufacturing operation.
Leading Operation to First Profitable Quarter
Company’s Dallas operation had never been profitable, and the largest customer (Ericsson) had increased demand by more than 250% from the previous quarter. Company did not have the staff or processes in place to meet the requirements. There were serious supply issues from vendors and material control issues in the warehouse and on the floor, as well as high yield loss in the process and many unrepaired units from previous runs.
Split operation into two business units: one for Ericsson and one for all other customers. Assigned top manager as business unit manager for the Ericsson BU. Directed sales, program management, and production control to correct errors in sales and work orders to fix discrepancies in WIP report and backlog. Worked with BU manager and engineering to determine capacity of SMT lines and developed an appropriate staffing plan. Established continuous-flow methodology and capacity of labor-intensive secondary operations. Production requirements were about 4,000 units per day. Set up short-cycle assembly operations and balanced line to meet necessary rate. Developed run rules for production cell, including real-time repair loop and shutdown procedures for high failure rates.
Within three weeks, expanded from one to four fully staffed shifts, including management and support personnel hired and trained; all were working at full speed by the end of week four. Corrected supply plan and met with key suppliers to gain commitments on materials. Collaborated with customer to iron out any scheduling issues. Implemented Kanban system to improve material flow and contracted outside service to assist with scheduled maintenance.
Acted as BU manager for non-Ericsson business for the quarter. Established capacity models and staffing, and set measurements for output, yield, cost and delivery for each product line. Charged Program and Production Managers with achieving goals, and held regular reviews and daily production meetings.
Exceeded revenue and profit goals for the quarter, increasing revenue quarter to quarter by 250% ($6 million to $15 million). Met Ericsson's supply requirements, and began addressing inherent quality problems in the products, positioning company for additional growth. Achieved first profitable quarter in the history of the Dallas operation.
Continuous Improvement Creates Lean Environment & Job Satisfaction
Personally tasked with revitalizing manufacturing operation that was inefficient, produced inconsistent quality, and was greatly overstaffed at management and supervisory levels. Production was outdated and current staff lacked experience in lean manufacturing and total quality management.
Collaborated with engineering and management staff to understand key issues. With three distinct manufacturing areas, determined to initially target one area (final assembly area) because of its impact on outgoing quality, contribution to waste (cost), and relative ease of implementing improvements. Targeted highest-volume product line and set production and quality goals. Studied options for process flow, selected simple, short-cycle operations built in a progressive close-looped assembly cell, and developed visual assembly instructions. Chose equipment and furnishing deemed easiest and fastest to integrate, as well as effective and flexible for inevitable process changes.
Piloted process, set up new work cell and training, and started production. Established new quality improvement run processes. Within two months, met production goals and saw significant quality improvements. Duplicated process and equipment across remainder of final assembly area. Continued to make improvements over next four years.
Improved yields from roughly 65% to 97% first-pass rate. Quality improvement, simplification and standardization created a 40% productivity improvement. Streamlining meant less management and supervision requirements: over a two-year period, reduced factory management and supervisory staff by 75%.
Greatest outcome was creation of a spirit and discipline of continuous improvement in the factory, transitioning to a truly lean manufacturing environment. This atmosphere of continuous improvement created and sustained a very high level of commitment and job satisfaction throughout all levels of manufacturing.
Manufacturing Turnaround Amplifies Profit
Company had out-of-control WIP inventory, more than $1 million in delinquent orders, and was losing money at $3.5 million clip on $15 million of sales. AMP subsidiary was in deep financial trouble and in danger of being shut down. A key supplier was delivering defective material that was causing a high warranty return rate.
Ascertained reason for problems was high fallout of product in the manufacturing process. Formed cross-functional team to determine causes of the failures: process variations in manufacturing and defective LEDs. Directed Manufacturing Engineering to mistake-proof the processes and Sustaining Engineering to investigate component failures. Reworked manufacturing process, trained employees, and put process controls and measurements in place. Found new LED supplier who eventually developed a special device for the application. Installed Continuous Improvement and Corrective Action processes to continually monitor and correct defects and deficiencies.
Over twelve-month period, reduced WIP inventory by 50% and reduced order delinquencies from $1 million to less than $2,000. At the peak of quality problems, company experienced a warranty return rate of 25%. Reduced this to less than 200 parts per million, and closed the Repair Department because no product was being returned. After losing $3.5 million the previous year, company made a $750,000 profit.
Streamlined Manufacturing Boosts Productivity & Profit
Low margins on the top product line due to poor productivity were affecting profits. The work was microassembly of electronic catheters, which required highly skilled operators to perform work under a microscope and did not lend itself to automation. This made variation in the process difficult to control. Most employees at Millar had no exposure to modern manufacturing theory and were resistant to change. The situation was complicated by having to meet the requirements of a specific customer and the FDA.
Educated staff on Lean Manufacturing and Crosby Quality techniques for problem solving. Hired an industrial engineer with medical experience and worked with engineers and department manager to identify waste in the process and opportunities for improvement. Team created a value stream map of the process to measure the actual value-added time for each process, and established goals for quality and productivity improvement for the process. Identified four areas that needed attention: process flow, equipment, training, and material handling.
Created a plan to install improvements and communicated this to the area operators. Developed visual work instructions and divided the manufacturing process into short-cycle operations where five operators built each catheter instead of one. Reorganized production area to create a logical and continuous flow process, and established which operators were best suited to each operation based upon skill and difficulty of the task, then cross-trained operators to work at multiple stations.
Piloted process in phases to allow adjustments to balance the line. Identified and addressed two offline processes that affected productive time, eliminating 32 hours per week of non-value-added labor. Launched the process across all disciplines in the production area, and revamped the supply process for material from kitted jobs to a Kanban system that enhanced the continuous flow process and eliminated work in the warehouse. Installed daily and weekly measurements for quality, productivity, and cost to provide data for the improvement process. Made incremental improvements including a major upgrade to the test systems.
Productivity increased by 50% and margin for the product line increased from 18% to 50%. First-pass test yields for the product improved from 93% to 98%. Scrap dropped by more than 50%. Overtime typically running at about 20% of regular hours was virtually eliminated. Job satisfaction grew due to elimination of hassles and increase in teamwork created by the new process.
Inventory Planning Reaps Positive Cash Flow
Inventory turned less than twice annually, causing company to borrow money to finance inventory. High inventory levels were maintained because of lack of planning; ownership was not attuned to the real cost of holding inventory.
Conducted a detailed investigation of current inventory levels looking for obsolescence, excess stock, and other opportunities for reduction. Established plan to reduce inventory levels over time. Directed planning department to improve the accuracy of WIP inventory and set goals for WIP inventory of about 70% of existing levels. Installed Sales and Operations Planning (S&OP) process that was used to load the Master Schedule. Most safety-stock items were eliminated and items were built and bought based upon the Master Schedule and S&OP. Collaborated with Finance to institute inventory turns.
Boosted overall inventory turns from 2 to 4.5 in one year, and reduced WIP inventory by more than 30%. Decreased lead times from an average of 39 days to 14 days, which eliminated short-term borrowing and triggered positive cash position of $500,000+.
Production Controls Boost Product Yields
Product yields in test were 35%. Because of parts shortages, printed circuit boards were frequently assembled missing parts to be added when they arrived. There were few process controls in place to assure that jobs were done right the first time.
Reviewed major causes of yield loss: missing parts and workmanship defects. Discontinued practice of building boards missing components. Installed inspection points at each process step and established a "buddy check" system. Set up measurements and reviewed defects and yield loss weekly, taking corrective action as necessary.
Test yields improved from 35% to 95% in less than six months. Process controls and run rules made it easy for employees to do things right the first time. Bad practices that had become part of the manufacturing process were easily eliminated as all involved saw positive results.
Adept Management of Company’s Largest Subcontract Project
Appointed to manage smaller terminal in a high-growth area. Facility had grown quickly and the former manager had not provided consistent leadership. Terminal and equipment were maintained, terminal was losing customers and money, and had failed an internal audit inspection. Employee morale was low and the level of distrust equally high. Company’s reputation with customers was damaged due to former manager’s inaction. None of the employees had ever been held accountable for their actions.
Company sought and gained the largest subcontract project in its history from Hercules Defense Electronics Systems to produce electronic assemblies for a radar system to be deployed on slow-moving military aircraft. Personally assumed project management from quote stage through fulfillment stage in addition to normal duties.
Company was small, with few engineering and professional resources, and needed to add capital and engineering resources, design and build test fixtures, and source and procure materials with long lead times. This was aggravated by extended price negotiations prior to the contract award, which decreased the time available to execute project plan.
Built project team, created plan, and set regular meetings. Determined resources required and assigned team members to obtain them. Hired an EE for the project, and promoted the test supervisor to Manufacturing Manager. Acquired used capital equipment, and sourced and purchased material, maintaining price targets and delivery schedules supporting the manufacturing schedule. Engineering group produced complex test and burn-in equipment, in place within a week of the original schedule.
Aside from a one-week slip on the initial shipment, all shipments were delivered on time and defect-free, and materials and non-recurring charges were held to budget. Managed relationship with customer through duration of the contract.
Seamless Manufacturing Migration through Expert Planning
Operations were housed in excessive space, costing the company $160,000 per year in unnecessary rent. Business was increasing and shutdown of manufacturing organization to move would jeopardize customer shipments and revenue.
Established layout in the new building and hired professional facilities engineer to help coordinate building contractors. Determined facility requirements and location of utilities and fixtures. Planned the physical move between old and new facilities. Completed construction on timetable and moved operations in phases, beginning with the warehouse and shipping/receiving. Continued moving major operations, culminating in moving test operations and large burn-in process chambers.
Completed entire move in less than a week with no area being shut down for more than four hours. Moved entire operation with no loss in revenue and creating no delinquent shipments. Company saved $160,000 annually in rent.
Reporting Tool Aids Problem Identification & Resolution
Management lacked information to measure operational performance, hindering ability to make informed decisions to improve company’s overall performance. Controller reported to the CFO in Chicago and was hostile to the new management team.
Coordinated transfer of IT function from finance and counseled IT manager in customer-service orientation. Directed senior staff in what measurements were key to their areas. Analyzed and determined key measurements for the business and produced single-page Key Factors Report containing week, month, and quarter breakdowns for: sales and shipments; quality, productivity, inventory and financial measures, plus goals or targets for each. Worked with IT department to set up reporting to extract necessary data from ERP system. Published report weekly, held a meeting the day after publication to review, and secured signoff of all staff members.
Key Factors Report proved an invaluable tool to management to aid in decision making. It became obvious which areas were under control and working well and quantified which areas needed most attention. Identified and reduced overtime. Determined MRB inventory issue and reduced it from $100,000+ to essentially zero within a month.
Strategic Outsourcing Prompts Significant Cost Savings
Due to a variety of cost issues, top management decided to investigate outsourcing the manufacture of printed circuit boards to reduce product cost. VP of Global Operations allowed 2-3 months to finalize the outsourcing decision. Competing internal factions supported different potential suppliers. Boards were relatively high-mix and low-volume, which was not generally attractive to EMS providers.
Assembled cross-functional team to evaluate current and potential suppliers. Determined a set of assemblies for quote and current cost of assemblies built in-house: $20-30 million. Established criteria for potential suppliers: size, capabilities, geographic locations, reputation, fit/corporate philosophy, management team, and commitment to lean manufacturing, quality and continuous improvement. Narrowed choice to five suppliers, and distributed bid packages with target pricing to all potential suppliers. Established selection criteria, made visits to each supplier, and coordinated supplier presentations. Evaluated and selected a principal supplier with one backup.
Quotes received from chosen supplier would save the company about $7 million annually over in-house operations. Instigated transition of production to the new supplier within two months of starting the outsourcing project.
Inter-company Relations Revitalize Product Development
Transfer of new products from engineering to manufacturing had virtually stopped due to contentious relations between the two organizations. Engineering group was located in Akron, Ohio and the manufacturing was located in Houston, Texas. The engineering project managers had been directed by their senior management to look to outsourcing partners to manufacture new products, bypassing the manufacturing group completely.
As Director of Program Management, traveled to Akron to meet with Senior Engineering Management and Project Managers. Interviewed members of engineering group to understand the issues and problems with manufacturing. Then met with factory management and factory engineering organizations to understand their perspective on product transfers. Made several trips to Akron to build rapport and confidence and to move engineering away from the outsourcing option.
Held weekly meetings with engineering project managers to review schedules and issues. Added two manufacturing program managers to help coordinate projects. Established Production Readiness Review checklist used to track project status from design to production. Made bi-weekly trips to Akron to coordinate with project managers, design and software engineers, and senior engineering management. Addressed all factory issues back to engineering and worked with both groups to correct problems and settle any disputes that arose. Took ownership of factory pilots and early production, and managed production effort until all engineering and manufacturing issues were resolved. Managed startup of suppliers for new parts and assemblies.
Relationship between engineering and manufacturing was turned around to an atmosphere of total cooperation and mutual respect. In a 12-month period, program management successfully introduced 12 next-generation products into manufacturing and achieved volume production.
By meeting the needs of internal customers, resolving problems and significantly improving the new product introduction process, created a successful program management organization and earned promotion to Director of Manufacturing.
Inventory Revamp Saves Labor & Production Costs
Company took physical inventory consisting of thousands of line items for four days per year, costing about $200,000 and shutting down production for those four days. Accounting and auditing firm both thought the physical inventory was necessary.
Assessed inventory control practices. Changed accounting method for metal coil usage. Attended offsite training on ERP system to learn about cycle-counting capabilities. Set up inventory records defining ABC inventory and cycle-counting rules. Appointed inventory control specialist to manage cycle-count program, counting A items monthly, B items quarterly, and C items semi-annually. Established weekly cycle-count measurements and corrective actions to correct systemic issues discovered.
After three months of cycle counting, achieved greater than 99% accuracy on a week-to-week basis. Instead of conducting physical inventory at year-end, external auditors reviewed program and diligently sampled inventory accuracy. They certified the inventory and agreed that cycle count was effective and physical inventory was no longer needed. Company discontinued physical inventory, saving the company $200,000 annually.
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