Lean Six Sigma Case Study: Reducing Overhead Labor

Using Value Stream Mapping to Reduce Overhead

January 2010

In This Issue

Client Testimonial - Sales Process

What are Mitch & Ray Doing?

Using Value Stream Mapping to Reduce Overhead Labor

Greetings!

Given all the difficulties this economy is causing we want to give you some resources to reduce costs quickly using Lean Six Sigma. We will use a case study to show how this Client intelligently reduce Overhead Labor in three weeks.

Sincerely,

Mitch Millstein & Ray Davis

Client Testimonial - Lean Sales Process

"We used Supply Velocity to rethink our sales process. By analyzing the entire process we found wasted time in our Sales, Admin and Operations departments. Streamlining this process created extra time for each Sales Rep, allowing them to spend more time with Customers and increase the value we add. Gross profit margins are up 40%!

We are now using Supply Velocity to help us rethink our entire Strategic Plan."

Jeff Reitz

Vice President

What is Mitch Doing

Mitch is working with a Grocery Retail & Distribution Company, teaching a select group of associates to be Lean Six Sigma Champions.

What is Ray Doing

Ray is working with a Defense Contractor on creating company-wide Performance Scorecards.

Reducing Overhead Labor with Value Stream Mapping

This Plastics Manufacturing Company was caught in the Great Recession. They had to reduce costs when some of their customers cut back, including an auto-plant that closed. However, being a capital intensive manufacturer, the options were not obvious.

LEAN SIX SIGMA TOOLS

This project used Value Stream Mapping to identify underutilized people and machines.

DETAILS

1) We mapped the flow of orders as they went through the production process, so we could identify what needed to be time studied. http://www.supplyvelocity.com/files/Jan_2010_Value_Stream.ppt

2) The Value Stream Mapping Team time-studied the labor content of each person in the process per order (Material Handler, Mixer, Floor/Utility Worker, Lead Operator, Operator, Set-Up Technician, Supervisor, Inspector)

3) We calculated the utilization of all people and machines by multiplying the work-content of each order to the average # of orders going through in one week.

4) The team recommended eliminating positions that were underutilized. Note: no one was fired. The owners used attrition to move people into the positions that were staying. (See Slide #2)

5) The team also evaluated machines that they should sell due to extremely low utilization and outsource production to other manufacturers. We wanted them to "Sweat the Assets"... work the machines they have hard, keeping utilization high to conserve capital. As you can see 9 of 23 machines have utilization under 50%. (See Slide #3)

6) We also conducted a 5S Baseline Assessment to prepare them for their 5S Visual Management Implementation. (See Slide #4)

7) During the time studies we observed additional non value added tasks that could be eliminated. These were put in our prioritization matrix and assigned to team members. (See Slide #5)

IMPACT ON PEOPLE

The result of this project was difficult on employees. We were moving people from 1^st shift to 2^nd and 3^rd, which is a difficult transition. In other areas 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 reduce costs where it would not impact the Customer, but would actually improve off-shift performance.

RESULTS

As you can see, they were able to reduce staff by 5 people. This cost reduction helped, but in addition they found improved shift performance by moving their highest-skilled people to 2^nd and 3^rd shift.