Retail Product Manufacturing Business

The Challenge: This was a $25M machining and assembly division that was experiencing high operating losses, providing poor customer service and suffering market share loss. It was plagued with poor product quality, high scrap and warranty costs, as well as poor manufacturing productivity.

The Fix: The organization was restructured and training began on cellular and team concepts, implementation of Just-In-Time (JIT), and the use of inventory kanbans. A Total Quality Management (TQM) program was implemented, including process refinement and documentation, as well as transitioning from batch inspectors to an on-line, in process inspection by assemblers. A Single Minute Setup (SMED) and tooling calibration program was also instituted. Finally, the MRP planning system was fully integrated with the JIT shopfloor environment allowing all floor production to be managed by kanbans. The MRP system was then used mainly for master production scheduling and long-range purchased component planning.

The Results: Setup times were reduced from 8 hours on the old machining processes to 5 minutes or less on machining centers allowing the cost-effective reduction of lot sizes from 500 units to fewer than ten units. Total production lead-times on orders were reduced from sixteen weeks to 4 hours thus allowing orders to be built on a make-to-order basis and eliminating the need for finished goods inventories. In addition, on-time delivery was improved from 85% to 99% while total business inventories were dropped from $8M to $1M. Using TQM methods, the quality yields increased from 77% to 99.995% (50 parts per million) while production scrap dropped from $600K to $30K per year. The COGS was reduced 15% ($3.75 million) in the first year and another 7% ($1.75 million) in the second year of the program. This was a precedent-setting program in that it was one of the first fully integrated JIT/MRP hybrid implementations on the West Coast when it became fully operational back in the late 1980’s. The quality and delivery improvements from this project supported profitable growth for the division for a decade thereafter.

Posted in Case Study, Case Study - Restructuring Businesses, Restructuring Businesses and Struggling Businesses


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