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.
1) We mapped the flow of orders as they went through the production process, so we could identify what needed to be time studied. Value Stream Presentation.
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 1st shift to 2nd and 3rd, 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.
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 2nd and 3rd shift.