How we saved $460k ($US57k) reduced working capital by $300k and reduced lead time from 10 days to 20 minutes with a $24k invesment.
The company* made powder coated and anodized aluminium roof rails and other products. Their turnover was approximately $15m per year for roof rails which were sold in the automotive aftermarket. The company had been making roof rails the same way for many years.
Original layout of factory showing batch production
The process was as follows:
- 6m long mill finish aluminium extrusions were cut to size and then moved to the next stage. A full day’s production was cut and held ready for the next stage.
- The cut extrusions were punched at the ends to allow for injection molded end caps to be fitted. A full day’s worth of parts were punched and moved to the next stage.
- The punched extrusions were then sent to the CNC shop where they were milled and drilled to prepare them to allow fixing of cross bars with bolts. A full days’ worth of parts were milled and placed on racks.
- The parts were then sorted by size and colour required and sent out to an anodizing /powder coating company. The parts were returned to the company after 10 days at the sub-contractor.
- Parts were received and sorted by colour and size.
- Parts were then sent to the assembly/packing area.
The total time produce the finished goods was 14+ days.
We looked at the work flow with the team. One of the questions we asked was why they were processing the aluminium parts before sending them out to the sub-contractor. The answer was typical. They had always done it this way. Some of the engineers and operators claimed that if they did process pre-painted/coated aluminum shapes, they would scratch during the process.
We also looked at the physical workflow in the factory. Parts were stored (one full days worth at each process) and moved all over the factory for each process.
This was a typical batch production factory. The question was how were we going to get this into flow production?
Actions taken:
We tested pre-painted/coated aluminium extrusion and noted where the products were scratched damaged during the process. The problem was easily fixed. Workbenches were cleaned of swarf and clamps and jigs were smoothed so that they did not scratch the aluminium.
We then looked at the layout of the factory and decided to move the entire roof rail production system into cells.
Key equipment included two saws, nine punches and eight CNC machines. Assembly and packing was on a simple workbench. We arranged the assembly area into eight work cells each with a punch machine and CNC machine plus assembly and pack area. The cells were served by the two saw stations. The setup and layout of the cells was designed by the operators themselves to be as smooth and ergonomic as possible.
Actual cost of moving machinery was approximately $24k by using subcontractors.
The new process was now:
- The saw station cut lengths or precoated/anodized aluminum lengths and passed via a simple gravity roller track to the cells.
- Each cell then punched, then CNC, then assembly and pack. There was NO work in progress at each station.
Revised layout of new cells showing flow production.
Summary:
By purchasing pre-coated/anodized aluminum bars, the company saved over costs by eliminating the sub-contractor.
Total cost savings: $480k
Reduction on working capital due to no work in process whether on the shop floor or at the sub-contractor.
Total working capital savings: $300k
Lead time reduction from taking out the sub-contractor lead time (10 days) and work in progress at each station.
Lead time reduction: 14 days to 20 minutes
Labour efficiency – there was no longer any moving parts around the factory and to and from the sub-contractor.
Labour efficiency: 20%
Space saving – no storage space for work in progress was required..
Space Saving: 300 sq. m.
Return on investment 700%, payback in 1.5 months.
Conclusion
‘We’ve always done it this way’ is the usual reason why companies focus on batch production rather than flow. Flow production can often bring huge savings with minimal investment.
*Note that the product and process has been altered to keep client confidentiality. Images are schematic and do not represent the actual client’s factory. The savings and other data in the case history are as at the client’s factory.