Folks,
The conclusion of the Bob and Fred break saga......
Phil stared, “The uptime on AXI's four SMT production lines is…….”
Fred and Bob were waiting for the good news of 38.1%.
“…9.8%.” finished Phil.
At this, Fred and Bob became red in the face and immediately shouted at Phil.
“We saw the numbers that Sarah took they showed a 38.1% uptime,” yelled Bob.
Neither Bob or Fred had noticed the different colored entries.
“That’s your ‘excuses uptime’,” said Phil.
“Your ‘no excuses uptime’ is 9.8%. It was 9.9%, but yesterday was a really bad day, and it went down %0.1% for the total time Sarah was tracking it.
“@#X*&^%,” said Fred and he looked like he might take a swing at Phil.
Finally Karl Hermann interrupted. He was a thoughtful, kind man, but when he spoke, Bob and Fred fell silent.
“Where are we losing the time?” he asked Phil.
Phil then went into a detailed discussion of misplaced stencils, component shortages, solder paste response to pause problems, etc, etc.
Phil then showed some profit calculations from ProfitPro™ software that he had performed the day before. Phil had essentially made a cost model of the entire AXI assembly business. To assure the accuracy of his model, he checked the final figures with AXI’s CEO.
“Currently each of AXI’s four lines produces $25M in sales and about $1.22M or about 5% profit, with uptime at 9.8%. The first line in the ProfitPro™ output shows these results,” Phil started.
He continued, “If we can increase uptime to at least 15%, which should be easy, we will achieve the results in the second line. Production increases by a little more than 50%, but profitability more than doubles. Oh, and this includes giving everyone a 50% raise.”
Phil had checked with Karl, to see if it was OK to share this interesting tid-bit. Karl had agreed, that would be the plan, if the gang could get uptime to 15% or more, the 50% salary input would stand.
Fred was digesting this and then said, “That’s impossible, profits can’t double if we only produce 50% more product.” But he was smiling at the thought of a 50% raise.
Phil responded politely, “Fred, you must not be aware of the ‘Exponential Law of Profits’.”
“The only Expo I know about is the one I went to a few years ago and drank a lot of beer,” Fred said with a smile.
After the chuckles died down, Phil continued. “When a small increase, say 3%, occurs in production, with no increase in fixed costs, such as labor, overhead, etc, each unit costs dramatically less to manufacture, versus the previous units, and 3% more are produced to sell, the result is often a 5 to 7% increase in profits.”
There was a murmur of understanding in the room.
Karl then asked, “But how do we improve our uptime?”
Phil suggested that he felt that the best way to solve the problem was to implement the productivity improvement plan as a Kaizen event with Fred and Bob as the lead implementers. At this note both Fred and Bob perked up. Phil then discussed his proposed action plan. All in the meeting added their suggestions and it was agreed that the Kaizen event would be immediately enacted.
In a Kaizen event, changes are made and implemented rapidly, typically off shift. As Fred and Bob normally worked from 7AM to 3:45PM, the Kaizen event started a 4PM and was to end at 10PM. The team asked Phil to lead a brainstorming session to identify lost time. Sarah and Juan participated enthusiastically in the process.
Phil wasn’t worried that they would get the uptime to 15%. He knew that having a systematic approach to manufacturing was critical, however, he rightly believed that if Fred and Bob were motivated to solve the misplaced stencils, component shortages at the line, etc, uptime would likely easily be 20% or more.
Epilogue:
After the Kaizen event, line uptime went to 21% and steadily grew to 25% or better. Everyone did get a 50% raise as Karl had promised. Karl even implemented an additional incentive, at the end of each month if uptime was greater than 20% the workers were awarded a bonus tied to the uptime percentage.
Cheers,
Dr. Ron