Industry: Industrial Suspension Manufacturing Event: To develop a Professional and Prioritized Deployment for Optimizing “ACME’s” Cash-Conversion-Cycle cycle. 50 Words or Less: Rework hours were >15% of all labor hours. By combining a Value Stream Map with an X-Matrix, our client was able to develop a long-term strategic plan resulting in significantly reduced defective parts and overall cost of poor quality (COPQ). Project Background Our client, an industrial suspension parts manufacturer, was suffering lowered metrics across the board as measured against other factories and plants in the same division. Issues such as lack of Best Practices documentation, inconsistent defect codes, and no coherent KPI’s in production and quality measurements resulted in significant excess labor costs, the labor cost alone averaging >$125,000 every year. However, they were not just interested in quick fixes, but also in a long term strategic plan which would result in a change to the culture, both in how they did things and why they did it. Discovery Mapping Beginning with Value Stream Mapping, the team began to map the order to fulfillment process, later defined as the ‘Cash Conversion Cycle’, of their highest volume production line. With key process step they discovered an imbalance of production times and parts inventory between the value added steps of their processes. Value Stream Mapping helped our client qualify the efficiency of their process by measuring the time of each step in the process, dividing these tasks into two groups: “value added” and “non-value added” steps: A Value Added step would be applying a weld, while a non-Value Added step would be leaving the station to get more inventory or repairing a defect. Working with our client, we qualified the efficiency of each key function of the process by measuring the duration of time at every value added and non-value added steps in the process, including materials procurement, inventory procedures, supplier relations, and more. Analysis Phase The investigation revealed that the lack of a demand analysis resulted in the company carrying over $400,000/year in extra inventory and it was determined this particular client was spending over 99.4% of its production time on non-value added steps! In addition, it was shown that the cost of reworking products added 15% to payrolls in some periods, and senior management and executives frankly wanted to change a culture where “Unplanned schedule changes ARE our schedule!” was the most popular saying on the floor. Building the X-Matrix Aware of the desire to build a long-term strategy centered on a Continuous Improvement culture, the team developed an X-Matrix, a one-page plan designed to break down 3-5 year strategic goals into daily tactical routines that will achieve these goals.
In developing this plan, we were able to take the results of the Value Stream Mapping to develop Long Term Objectives to be completed within a 3-5 year time frame. In reducing defects, one of the strategic objectives was to reduce Defective Parts per Million from 144 to 72. In an X-Matrix, the Long-Term objectives can be found at the 6-o’clock position. Once these Strategic Objectives are determined, 1-year Goals are identified that will break the objectives down into achievable and measurable steps (found at the 9-o’clock position on the X-Matrix). For example, one of the steps to reduce the defective parts-per-million was to rework their outdated defect code system to make it more effective at identifying root causes, allowing the team to pinpoint the top 5 root causes, eventually eliminating those defects by 50% over the course of the year. But saying “identify and eliminate defects by 50%” does little good if that strategy is not tied to specific actions. That’s what the top of the Matrix is for – to identify the specific actions necessary that will reduce those defects by 50%. To reduce the defects, operator training will be increased as well as a visual quality identifier system to be established that will make the identification of defects a much quicker and earlier part of the process than before. Lastly, the X-Matrix assigns specific people to be responsible for the actions, as well as provides them with the metrics used to measure progress. At the 3-o’clock position KPI’s are identified and people are assigned different roles for each and every action: Responsible, Accountable, Consulted, and Informed.
Workshop Results: Using the X-Matrix, a strategic plan was developed that broke down long-term objectives into very tactical, short term actions, while still identifying both those responsible for making sure the actions are carried out and those who have oversight authority. Specific savings opportunities defined in the workshop:
$800,000 (conservative) worth of actionable benefits identified
33 Opportunities vetted for value and level of effort
26 Kaizens identified, chartered and time-bound
Project Planning skills normalized across the Leadership Team
Key Milestone Plans defined and time-fenced to keep the team’s focus
A draft of the Leadership Governance protocols for: Planning, Executing, Following and Sustaining the gains.