5 Reasons to Love Process Maps

My sense is that to most people, process maps are boring and uninteresting. I mean who wants to sit down and write out how a product flows from one process to another? Well, I do and I actually love process maps, seriously, I do.

Why do I love process maps? I find them intriguing, for me a process map is a moving picture, with both sound and action. I become curious about how each process integrates with the whole map. It’s like an adventure, where I imagine what’s possible.

This all seems like a lot of fun and games, and it is, but what I like best about process maps are the benefits they provide my clients and our organization. I’ve listed my top five.

  1. Planning
  2. Training
  3. Execution and Performance Management
  4. Throughput Maximization
  5. Process Improvement

How do each of these translate into realized benefits? Here’s how it works for me:

  1. Planning – when I understand all the processes and sub processes a product travels, I can plan for its arrival at its next destination/process. I understand how many people, what material and equipment I will need at a given time. I look to the map to navigate and plan resources accordingly.
  2. Training – With a map, I can share the journey of the product with my colleagues. With a shared understanding of the beginning and ending point, people begin working toward a common goal and seek to learn how to best get from one process to another process.
  3. Execution and Performance Management – With an action plan and a map, implementation becomes a shared responsibility because my team has helped to create the plan and they understand their role. Performance is measurable to the plan and compared to the plan and if unexpected results occur, we go back to the plan and make adjustments.
  4. Throughput Maximization – Having documented processes allows me to analyze each process, define process times and uncover bottlenecks. Once I understand where the constraints are, I am empowered to engage in, and encourage a problem-solving approach to the situation.
  5. Process Improvement– I think I like this benefit best. With a plan, and performance feed back for each process, I can make improvements to one process, and understand how the improvements affect the whole system. This eliminates bottlenecks, and reduces work in process so the whole systems flow evenly and smoothly.

Finally, let’s not forget that all these benefits add up to better quality, increased profitability and better client satisfaction! With all these benefits, it becomes easy to see why process maps are a really important business tool and why I love them!

What do you like best about process maps?

45 Seconds = $25,000 in Savings

Really? 45 seconds.  I can’t even brush my teeth in 45 seconds, boil an egg or sing the ABC’s.  But I can save $25,000 – how?

We all know time is equal to money.  Workforces are paid based on the amount of time spent working, and therefore a monetary value is placed on time.  A strategy then to save money in this difficult economy, is to save time and that is exactly what process improvement does – saves time and consequently, saves money.

The depth of savings is of course, dependent on how time is valued.  In the model below, we illustrate how saving 45 seconds in process time equates to saving money.

Seconds Saved

Fully Burdened Labor Rate

Project Run 5 times/year

45

$20

$2,500.00

$12,500.00

45

$25

$3,125.00

$15,625.00

45

$30

$3,750.00

$18,750.00

45

$35

$4,375.00

$21,875.00

45

$40

$5,000.00

$25,000.00

The beautiful thing about making process improvements is that the savings are not a one-time event, but rather an ongoing return on investment earned each time the process repeats.

For More Information

Check out this video to learn more
about how small process modifications can make large improvements to profitability.

Click Here to learn more about how
ASAP can help you increase your process efficiencies.

Imagine the opportunities – what would happen if I could save 45 seconds on, 2, 3 ,4 different processes?  How could this affect my capacity to grow my client base?  How could this affect my ability to invest in new products? How could this affect my ability earn that promotion? How does this affect whatever it is, that is important to me?

45 seconds. It’s less than the time it takes to brush my teeth!

Performance Problem Solving 101: Moving Beyond The Pointy Finger

Performance evaluation can be a messy topic. Often it is difficult to understand why performance output does not match expectations.  Part of the complexity is separating out personality conflicts and learning to focus on the situation.  However, focusing on the situation requires us to unravel or peel back the layers to uncover the inputs to performance.  Three important inputs include:

  • Process – the work instructions to perform functions
  • Tools – the equipment, machinery, jigs, computers, etc used to enhance performance
  • People – those who perform processes/functions

Taking time to focus on each of these inputs provides insight into how they effect performance and measures the degree to which each is aligned and leveraged for optimal performance.

The next step is how to evaluate each input.  A great way to begin an evaluation process is to gain an understanding of the current state by asking questions about each input.  Beginning with process, process questions might sound like this:

  • Is the process written
  • Does the process support the desired outcome
  • Are there redundancies
  • What quality level is the process capable of producing
  • Are tasks combined to reduce motion and waste
  • What are the cycle times

Once the process is defined and validated for quality and productivity performance goals, we can evaluate the tools.  Tool evaluation questions might sound like:

  • Do the existing tools support quality goals – what tools could be incorporated
  • Do the tools proper enhance productivity and decrease cycle times
  • Are the tools easily accessible
  • Are the tools well cared for and maintained
  • Do the tools allow for self correcting behaviors

Now that the process and tools questions are resolved, we can move to an evaluation of the people engaged in the process.  People questions might sound like:

  • What physical skills are necessary
  • What intellectual/emotional skills are necessary
  • What problem solving skills are necessary
  • What leadership attributes are needed
  • What training is necessary

After exploring,  problem solving each component can begin.  Knowing how to measure each input helps to untangle and align each for the best possible outcome – And it could lead to a happier work force too!

What have been your challenges in performance evaluation?

Achieve Target Price and Earn Profits Too!

Whether launching a new product or expanding capabilities to accommodate our clients growing needs, meeting the target price is a significant barrier to earning new revenue streams and potential profits. Sometimes we take on new business opportunities as a way to gain market share, deepen relationships or to gain an advantage over the competition. While these strategies for new business serve their purposes well, it remains essential not only to meet the target price, but also to be profitable at the target price.

Fortunately, approaching target price challenges from both a design improvement and process improvement perspective allows us to open ourselves to a path toward meeting our objectives. A design and process improvement course can make taking risks less emotional and bring us into the realm of rational decision making. What if a design and process improvement method was consistently employed, and the data collected from these efforts demonstrated that a 10%, 15% or even 30% gain in profitability is likely.

One step in achieving a data driven decision-making model is to create processes that deliver reliable data needed to incorporate into an existing decision making and forecasting model. A process that generates and delivers this kind of information is presented below. It is an iterative process that synergizes with a well known Six Sigma concept, Define, Measure, Analyze, Improve, Control (DMAIC).

Step One: Define Base Process

  • Define base process
  • Create value stream map
  • Delineate sub-processes and assign cycle times to each
  • Identify and document opportunities for improvement
  • Present per product price and improvement opportunities

Step Two: Perform Project, Provide performance Feedback and Improvement Opportunities

  • Actual cycle times
  • Yield reporting
  • Constraint analysis
  • Feasibility study
    • Incorporate actual data to engineer design for manufacturability model
    • Material & equipment suitability
    • Yield and process time optimization

Step Three: Adopt New Process

  • Define new process
  • Create new value stream map
  • Delineate sub-processes and assign cycle times to each
  • Identify and document opportunities for improvement
  • Present per product price and improvement opportunities

Step Four: Perform New Process, Provide performance Feedback and Improvement Opportunities

  • Actual cycle times
  • Yield reporting
  • Constraint analysis
  • Feasibility study
    • Incorporate actual data to engineer design for manufacturability model
    • Material & equipment suitability
    • Yield and process time optimization

This iterative process continues to deepen, creating an improvement perspective and can continue until all potential waste is removed, or can be finished when a desired target price and profit is met.  The data gathered from the process can then be integrated into our decision-making models.

While the decision-making model currently in use may not be well structured and documented, we are making decisions and are therefore using some sort of model. Enhancing our awareness regarding how we go about making decisions and adding a rational perspective to our new business strategies can support our efforts to increase revenues and profits.

Click Here to download a case study supporting this model.

Click Here to begin a conversation on how ASAP can help meet your target price initiatives.

Productivity Affects Sales – How?

Meeting sales goals is one of our highest priorities, and productivity is a determining factor in whether or not we meet those goals. The degree to which our manufacturing processes are productive affects our capacity to generate revenue. Since our organizations exist to serve the demands of our customers, measuring productivity and understanding the degree to which productivity affects sales performance is worth exploring.

One of the difficulties in measuring productivity is that often our manufacturing environments have high-speed, automated equipment to produce our core processes, and secondary process are semi-automated requiring a labor component. While it may be a fairly simple equation to determine cycle times of our equipment-based primary processes, methods to determine cycle times in secondary processes requires a different approach, especially if customization is a requirement.

Although it may be difficult to measure, monitor and improve productivity, it is an important component to capacity and ultimately sales. This model demonstrates how productivity affects our ability to generate sales revenues.

Productivity 100% 50% 60% 70%
Budgeted Hours (at capacity) 2,000 2,000 2,000 2,000
Actual Hours 2,000 4,000 3,333 2,857
Lost Capacity (hr) 0 2,000 1,333 857
Lost Revenue ($50/hr) $0 $100,000 $66,650 $42,850

Looking at this model in terms of meeting sales goals shows how important it is to know what capacity issues may sprout up if productivity levels are less than expected. If I am planning to achieve a 15% increase in sales, do I have the capacity to meet the goals? Are the capacity issues due to productivity or a lack of available resources?

Theses are ideas and questions are integral components in planning for successful organizational growth and meeting customer expectations.

Generating sales opportunities, closing sales, increasing demand and developing long-lasting client relationships is only half of the equation. The other half is actualizing these efforts through our manufacturing environments. Productivity has a big impact on whether or not we fully leverage our sales efforts.

The Painful Truth about the Temporary Labor Industry’s Business Model

Most of us use temporary labor agencies.  It seems like a pretty easy solution to managing variable demand.  And it is.  I just make a call and ask for laborers. An agency could have an office right in my building.  I just walk down the hall, or have them attend my production meeting, send an internal email or phone call.

Except that often, when I ask for 8 folks, I get 5. I ask for people with specific skills and 3 of the 5 actually possess the skill.  The other 2 folks, not the 3 as asked for, are coming soon and those people don’t have the skill set either.  Not only is the skill set absent, but the temps don’t really want to be here anyway.  Several of the people selected are not interested in productivity or quality and we hear about it in a very loud fashion.

These are just some of the frustrations we experience when contracting with temporary agencies, and we can’t really blame the people because the painful truth is that the industry itself benefits when their staff is unproductive.

I know this sounds harsh, but consider this: if my customer is expecting a turn time/delivery in 5 days, I need to plan and staff my project for this expectation.  If I plan the project as if it will run at 100% of productivity, then I need 5 people and I staff my project with temporary labor.  After the project gets started, I notice that productivity is at 60%.  Now I need 2 more laborers, or do I?  Since the 5 people I have are producing at 60%, what output can I expect from the additional 2 laborers and how will this affect my commitment to my customer?

This is a complex mathematical question.  First, I have to calculate lost time/productivity from Monday and if the crew continues at 60%, I have another calculation to make.  I figure I actually need 9.167 people working for the next 4 days.  Consequently, a project that should have taken 5 people 5 days, or 200 production hours to complete, now becomes a 333.33-hour, stress-filled project.  Not to mention the extra management costs working to avert disaster.

Whew, I avoided disaster with my customer and that feels great, but now I have a responsibility to my company to be profitable.  Let’s look at how this project performed:

Project

Budget

Actual

Hours

200

333.33

Revenue  ($30)

$6,000

$6,000

Labor Cost  ($15)

$3,000

$5,000

Gross Profit

$3,000

$1,000

This model demonstrates the actual labor cost due to an unproductive crew.  My company just lost $2,000 of gross profit.  In fact, I gave it to the temporary agency because instead of researching other alternatives, improving my process and or asking folks to be productive, I continued to add unproductive labor costs to the project.

Additionally, the temporary labor industry does not help me  improve my processes; offer fixed per project costs, or guarantee quality and yet the agency gains $2,000 in revenue.  The logical conclusion, painful as it may be, is that the temporary labor industry benefits from providing unproductive labor hours.

I’m thinking there is a better way to manage my variable demand and that now is the time to check into alternatives, especially before my next project is due.

How Does Productivity Affect Profitability?

We all know there are several factors that affect profitability.  One of my favorite considerations is productivity.  Increasing productivity levels can dramatically increase profitability.  Typically, profitability is evaluated from a financial statement prospective, and labor is measured as a percentage of sales.  Often, the natural inclination is to decrease labor costs through lay-offs and work force reductions.

However, rather than reducing our work force, productivity provides a platform to increase the output of our current work force and thereby increasing profitability.   A key starting point to uncovering the potential profits hidden within productivity is asking questions such as; “How productive is our work force?” and, “How do our current productivity levels affect our profitability?”

Often, there is difficulty in determining a method to answer these questions due to the complexity of our manufacturing operations, ERP systems and reporting systems.  Simplifying the process with productivity models helps to gain insights on the potential Return On Investment involved with the pursuit of increasing work force productivity.

The productivity model below illustrates the effect of productivity on profits.  The first table explains the basic assumptions behind the model.

Assumptions
Process Time (sec) 250
Product Sales Price $5.63
Project Quantity 10,000
Project Runs Per Month 5
Labor Cost / hour $25.00

Next, this model illustrates the effect of productivity on the profitability of one manufacturing process, produced five times within one reporting period.

Profitability

Productivity

50%

60%

70%

80%

100%

Revenue

 $281,250.00

 $281,250.00

 $281,250.00

 $281,250.00

 $281,250.00

Labor Cost

 $173,611.11

 $144,675.93

 $124,007.94

 $108,506.94

 $86,805.56

Manufacturing
Cost (50%)

 $140,625.00

 $140,625.00

 $140,625.00

 $140,625.00

 $140,625.00

Gross Profit

 $(32,986.11)

 $(4,050.93)

 $16,617.06

 $32,118.06

 $53,819.44

This model demonstrates how powerful productivity is, as a factor in profitability. While developing processes to track productivity outside financial reporting mechanisms, can be cumbersome and complicated, there is opportunity for a substantial ROI on these efforts.  We can begin to reap these additional profits by following this five-step process.

  1. Define processes and sub processes
  2. Perform time studies and line balance
  3. Implement consistent training methods and train supervisors and line employees to the process
  4. Set productivity goals
  5. Monitor output and measure against goals

Practicing these steps is a great place to start unlocking the hidden profitability opportunities within our manufacturing processes!

Bulk Pack For Huge Savings in Display Fulfillment & Kitting Costs

Display fulfillment and kitting projects often require products packaged in their primary package, to be placed into an assembled display.  Likewise, kitting projects require packaged products to be combined and placed into a shipper carton.  Both processes require removing product from a container, typically a master carton.

Surprisingly, the quantity of product packed into this container/master carton has a big impact on the cost of fulfillment and kitting projects.  Consider that opening a master carton, removing product and breaking down the carton for recycling takes about 36 seconds.

While at first glance 36 seconds seems inconsequential, this is where the carton quantity has an impact.  Since it takes 36 seconds to open, remove and discard a master carton, these seconds become fixed.  Whether we are removing 3, 12 or 25 parts from a carton, it still takes at least 36 seconds to perform the product removal process.

Working with the assumption that 36 seconds is a fixed process time, the method to determine the product cost is to distribute process time evenly over the carton quantity. For example, if the carton quantity is 3, then divide 36 seconds by 3 parts equaling 12 seconds per product.

Carton Quantity

3

12

25

50

Removal Process Time Per Product (sec)

12

3

1.44

.72

Next, multiply the seconds per product times a fully burdened labor rate.  For example, 12 seconds times a $30/hr equals $.099 per product.  Therefore, the cost for simply removing one part/product from its secondary packaging is about $.10 per part.

Carton Quantity

3

12

25

50

Removal Process Time Per Product (sec)

12

3

1.44

.72

Cost per Product – $30/Hr Labor Rate   ($) $.10 $.025 $.012 $.006

Now, if the a finished display requires 50 parts per display, then the cost per display for simply removing the product from its carton is $5.  This chart below illustrates the impact carton quantities have on display fulfillment costs.

Carton Quantity

3

12

25

50

Removal Process Time Per Product (sec)

12

3

1.44

.72

Cost per Product – $30/Hr Labor Rate   ($)

$.10

$.025

$.012

$.006

Cost per Display – 50 Parts/Display ($)

$5

$1.25

$.60

$.30

To determine the cost per display project, multiply the order quantity 500 times the cost per display.  For example, 500 times $5 equals $2,500. The chart below illustrates the removal cost based on order quantity and the potential saving of bulk packing product for display projects.

Carton Quantity

3

25

Cost per Display – 50 pieces per Display

$5.00

$0.60

Cost per display order – 500

$2,500

$300

Cost Saving For 25 Carton Quantity

$2,200

 

Furthermore, bulk packing products that are going into display projects, reduces the amount of cartons needed, which reduces secondary packaging costs while reducing waste and garbage removal costs.  The chart below demonstrates the opportunity for material and waste reduction.

Carton Quantity

3

25

Product needed to fulfill display 50*500

25,000

25,000

Cartons per pack-out quantity

8,334

1,000

Material Saving For 25 Carton Quantity

7,334

 

Obviously, there are additional steps to a fulfillment process than simply opening, removing and discarding the secondary packaging of a product.  However, a simple change in secondary packaging quantities has the potential for huge labor, and material cost savings.

Why Not Minimize Labor Expenses and Maximize Sales Revenue Today?

A great way to minimize labor expenses and maximize sales revenues is to improve our processes.  Strategies such as, Business Process Improvement (BPI) and Total Quality Management (TQM), encourage organizations to change,  to communicate and to involve the whole organization in meeting the business objectives set in strategic planning sessions.

Supporting the strategic goals are the methodologies used to create change and improve processes.  However, even when a direction is set, and balanced scorecards and key performance indicators are established, it can be difficult to know where to start.  What processes need improvement, and where can we get our best return, are questions we might ask.

For those of us acquainted with Lean Principles, the answer might be to use Kaizen, for continual process improvement. Yet, for others it might start with processes that continue to produce poor quality.  Poor quality frequently indicates variability in our processes and where there is variability; often there is excess labor expense. Where this is the situation, perhaps a Six Sigma approach is employed.

Regardless of the strategies, methodologies or process used for improvement efforts, the implications of Return On Investment show how important it is do the work.

For example: If my fully burden labor rate is $30 per hour and I improve a labor process by 20 seconds, and the process produces 20,000 parts per month, I save $3,333.33 per month and $ 40,000.00 per year!

Process Time Saved Monthly Quantity Monthly Labor Expense Savings
20 Seconds 20,000 $3,333.33
Process Time Saved Annual Quantity Annual Labor Expense Savings
20 Seconds 240,000 $40,000

Taking this concept one step further is to consider that the opportunity described in the table above is only one process.  We all operate more than one process in our businesses.  What if we were able to save 20 seconds on 2, 3 and 4 other processes?

Process improvement is an investment and it can be difficult to develop initiatives, communicate, implement and maintain our efforts.  However, the benefits of our efforts surely out weigh the alternative.

We want to hear from you! What has your experience been with process improvements?


Click here to download your free Return On Process Improvement tool to start understanding how small process improvements can produce large savings throughout the life of your product. Get the information needed to start making process improvements today!

Do Lean Manufacturing Principles Apply to New Product Launches?

Yes, yes and yes, lean manufacturing principles do apply to new product launches. In our journey to launch new products, how many times have we faced one or more of the seven wastes identified in Lean Manufacturing such as:

  • Transportation
  • Inventory
  • Motion
  • Waiting
  • Overproduction
  • Over Processing
  • Defects

An obvious waste to discuss in a new product launch situation is overproduction. A typical definition of overproduction is to produce products in excess of customer demand.

Often in a new product launch, orders for the new product are created from an anticipatory perspective with the use of forecasts instead of live customer orders. Using anticipated demand systems and structures increases the opportunity for over production because forecasting demand is frequently ambiguous. We can engage in rigorous research efforts and still have errors in our calculations, add into the equation volitile demand, inflexible manufacturing systems and supply chains, and it becomes clear why overproduction regularly occurs in new product launches.

Interestingly, both the goals of a new product launch and the goals of a lean factory are striking similar. For example, in a new product launch, the desired outcome is to get our products to market as quickly, efficiently and cost effectively as possible. Like wise, the goal of Lean is to reduce cycle times, eliminate waste and reduce total costs.

Incorporating lean strategies in new product launches has many benefits including:

  • Reduced total costs by eliminating over production
  • Accelerated time-to-market by reducing lead times
  • Meeting emerging customer needs by reducing process cycle times

The launch is a crucial stage in the product development process. Applying Lean principles to this stage can create tremendous opportunities to maximize returns on our new product development efforts.

What have your experiences been with lean launch strategies and methods?

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