How To Control Costs Through Time Tested, Real World Techniques

23/04/1023/04/10 Center for Organizational ExcelleCenter for Organizational Excellence and Effective Changence and Effective Change

11

HOW TO CONTROL COSTSHOW TO CONTROL COSTS

Cost Control Training for Team Cost Control Training for Team Leaders; Supervisors; Support Leaders; Supervisors; Support

Staff; and ManagersStaff; and Managers


22


BENJAMIN FRANKLIN SAID:BENJAMIN FRANKLIN SAID:“ “ WATCH THE PENNIES AND THE WATCH THE PENNIES AND THE

DOLLARS WILL TAKE CARE OF DOLLARS WILL TAKE CARE OF THEMSELVES.”THEMSELVES.”

What he was referring to is that if we focus on the What he was referring to is that if we focus on the small things, the larger problems will often “seem small things, the larger problems will often “seem to take care of themselves”.to take care of themselves”.

Conversely, if we focus only on the large things, the Conversely, if we focus only on the large things, the small things will still be there and still cost us small things will still be there and still cost us time, money and effort.time, money and effort.


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WHY SHOULD I WORRY ABOUT WHY SHOULD I WORRY ABOUT CONTROLLING COSTS?CONTROLLING COSTS?

• CompetitionCompetition• Ability to be the “Supplier of Choice”.Ability to be the “Supplier of Choice”.

• ProfitabilityProfitability• Your Personal “Profit” in the CompanyYour Personal “Profit” in the Company

• OUR FUTUREOUR FUTURE


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Just like you and I Just like you and I make choices on make choices on

what we purchase what we purchase based on quality; based on quality; performance and performance and

costcost

So do your So do your Customers!!!Customers!!!

Organizational Life Spans

69%

38%27% 22%

0%

20%

40%

60%

80%

1 Year 3 years 5 years 7 years


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YOU ARE THE FRONT TEAM IN THE YOU ARE THE FRONT TEAM IN THE ORGANIZATION AND THE PIVOTAL ORGANIZATION AND THE PIVOTAL POSITIONS TO INFLUENCE COSTS POSITIONS TO INFLUENCE COSTS AND PROFIT MORE THAN ANY OTHER AND PROFIT MORE THAN ANY OTHER POSITION IN THE ORGANIZATIONPOSITION IN THE ORGANIZATION


66


ONE OF YOUR MOST CRITICAL TASKS IS TO ONE OF YOUR MOST CRITICAL TASKS IS TO ANALYZE WHAT HAPPENS ON “GOOD DAYS” ANALYZE WHAT HAPPENS ON “GOOD DAYS”

WHEN EVERYTHING SEEMS TO GO “RIGHT” AND WHEN EVERYTHING SEEMS TO GO “RIGHT” AND THEN FIGURE OUT HOW TO STANDARDIZE THE THEN FIGURE OUT HOW TO STANDARDIZE THE

CRITICAL ELEMENTS THAT MADE IT “GO RIGHT”.CRITICAL ELEMENTS THAT MADE IT “GO RIGHT”. IF YOU INCREASE THE NUMBER OF “GOOD DAYS”IF YOU INCREASE THE NUMBER OF “GOOD DAYS”

SO THE “GOOD DAYS” BECOME THE SO THE “GOOD DAYS” BECOME THE STANDARD YOU WILL BE SUCCESSFULSTANDARD YOU WILL BE SUCCESSFUL

IT SHOULDN’T BE “JUST IT SHOULDN’T BE “JUST LUCK”!!!!!!!LUCK”!!!!!!!


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Regardless of what most people think, Regardless of what most people think, profits in most companies are not profits in most companies are not “huge”.“huge”.

The main reasons for profits not being The main reasons for profits not being higher is due to higher is due to EXCESS COSTSEXCESS COSTS..


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TRADITIONAL MODELTRADITIONAL MODEL

COST + PROFIT = SALES PRICECOST + PROFIT = SALES PRICE

NEW MODELNEW MODEL

SALES PRICE – COSTS = PROFITSSALES PRICE – COSTS = PROFITS

YOUR PERSPECTIVEYOUR PERSPECTIVE MAKES A BIG MAKES A BIG DIFFERENCE ON PROFITDIFFERENCE ON PROFIT


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There are three ways to reduce costs:There are three ways to reduce costs:

- Sell more product- Sell more product

- Raise prices - Raise prices

- Increase productivity- Increase productivity

WHICH WAY IS THE “BEST WAY”?WHICH WAY IS THE “BEST WAY”?


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REDUCING COSTS THROUGH REDUCING COSTS THROUGH IMPROVED PRODUCTIVITY IS THE IMPROVED PRODUCTIVITY IS THE

BEST CHOICEBEST CHOICE

ANDAND

THAT IS WHY COST SAVINGS IS THAT IS WHY COST SAVINGS IS

YOUR RESPONSIBILITYYOUR RESPONSIBILITY


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WHAT EVERY MANAGER, SUPERVISOR, WHAT EVERY MANAGER, SUPERVISOR, TEAM LEADER, INSPECTOR, TEAM LEADER, INSPECTOR, ENGINEER, PARTS HANDLER, ENGINEER, PARTS HANDLER, STAMPING PERSON, TOOL MAKER, STAMPING PERSON, TOOL MAKER, MAINTENANCE PERSON HAS TO LOOK MAINTENANCE PERSON HAS TO LOOK FOR THE ‘TIME LEAKS” IN THEIR AREA FOR THE ‘TIME LEAKS” IN THEIR AREA


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“ “Time waste is the easiest of all Time waste is the easiest of all waste to have and the hardest to waste to have and the hardest to correct because it does not litter the correct because it does not litter the floor”—Henry Fordfloor”—Henry Ford


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Finding the “time leaks” and solving Finding the “time leaks” and solving them will allow you to add valuable them will allow you to add valuable process time (value-added time) to process time (value-added time) to

your team’s work performance your team’s work performance without adding more equipment; without adding more equipment;

adding more space; or adding more adding more space; or adding more people.people.


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WAIT TIMEWAIT TIME- Often the easiest time loss to identify and a Often the easiest time loss to identify and a

good place to start your “cost savings”.good place to start your “cost savings”.

- As you look around your area of As you look around your area of responsibility, find “Wait Time”.responsibility, find “Wait Time”.

- Waiting for parts; Waiting for Team Leader; Waiting for parts; Waiting for Team Leader; Waiting for QC; Waiting for Equipment to be Waiting for QC; Waiting for Equipment to be fixed, Waiting for Information; Waiting for fixed, Waiting for Information; Waiting for

Tools;.Tools;.


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““WAIT TIME” CAN ALSO BE “HIDDEN”.WAIT TIME” CAN ALSO BE “HIDDEN”.

- - Production Sheets may not list all the “wait Production Sheets may not list all the “wait times”times” which prevents you from seeing the problem. which prevents you from seeing the problem.

- - People sometimes think that showing “wait People sometimes think that showing “wait time” will show that they have a problemtime” will show that they have a problem. However, . However, you cannot fix what you do not know.you cannot fix what you do not know.

- - People are not trained to walk through their People are not trained to walk through their area with their “eyes openarea with their “eyes open” so they can see the “wait ” so they can see the “wait time”.time”.


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- People may “pace” themselvesPeople may “pace” themselves so they are not so they are not transferred to another job or task if they complete transferred to another job or task if they complete their own job before the end of the shift (OR THEY their own job before the end of the shift (OR THEY WANT OVERTIME)WANT OVERTIME)

- Look for “machine controlled” processes Look for “machine controlled” processes where someone is standing “waiting for the where someone is standing “waiting for the machine”.machine”. How can you utilize this type of wait How can you utilize this type of wait time? Speed up the machine? Integrate another job time? Speed up the machine? Integrate another job with the first job?with the first job?

- Ask yourself, “Is my team doing all they can”? Or Ask yourself, “Is my team doing all they can”? Or “Are they doing all I supply them?” There is a “Are they doing all I supply them?” There is a difference!!!difference!!!


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““Wait Time” can also be “Hunting Time”.Wait Time” can also be “Hunting Time”.

- If people have to go off and “hunt” - If people have to go off and “hunt” for tools, materials, gauges, Team for tools, materials, gauges, Team Leaders, or information, then this is Leaders, or information, then this is “wait time” and will increase your costs “wait time” and will increase your costs and reduce your value-added time.and reduce your value-added time.


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LEAN LAW #1LEAN LAW #1

EVERY PROCESS CAN BE EVERY PROCESS CAN BE IMPROVEDIMPROVED


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HOW TO CONTROL COSTSHOW TO CONTROL COSTS LEAN LAW #2LEAN LAW #2

90-95% OF THE TIME MATERIAL SPENDS IN A PLANT 90-95% OF THE TIME MATERIAL SPENDS IN A PLANT IS WASTE(NON-VALUE ADDED)IS WASTE(NON-VALUE ADDED)

ONLY 5-10% IS VALUE-ADDEDONLY 5-10% IS VALUE-ADDED

YOUR TASK IS TO GO AFTER THE 90-YOUR TASK IS TO GO AFTER THE 90-95% WASTE TIME OR NON-VALUE 95% WASTE TIME OR NON-VALUE

ADDED TIME IN EACH PROCESS/TASKADDED TIME IN EACH PROCESS/TASK


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THERE ARE FOUR MAIN CATEGORIES THERE ARE FOUR MAIN CATEGORIES TO FIND THE 90-95% WASTE THAT TO FIND THE 90-95% WASTE THAT

EXISTS IN EVERY PROCESS:EXISTS IN EVERY PROCESS:

- MATERIALSMATERIALS- LABORLABOR

- METHODSMETHODS- EXPENSESEXPENSES


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LET’S TALK ABOUT LET’S TALK ABOUT MATERIALS MATERIALS FIRSTFIRST

THERE ARE TWO TYPES OF MATERIALSTHERE ARE TWO TYPES OF MATERIALS• DIRECT- USED DIRECTLY IN MAKING DIRECT- USED DIRECTLY IN MAKING

PRODUCTPRODUCT• INDIRECT- SUPPLIES TO SUPPORTINDIRECT- SUPPLIES TO SUPPORT


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LETS TALK ABOUT LETS TALK ABOUT LABORLABOR NEXT NEXT

THERE ARE TWO TYPES OF LABORTHERE ARE TWO TYPES OF LABOR

* DIRECT LABOR (DIRECTLY * DIRECT LABOR (DIRECTLY MAKING PRODUCT(VALUE-ADDED LABOR)MAKING PRODUCT(VALUE-ADDED LABOR)

* INDIRECT LABOR- EVERYONE * INDIRECT LABOR- EVERYONE ELSEELSE


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LETS TALK ABOUT LETS TALK ABOUT EXPENSESEXPENSES

WHILE SUPPLIES ARE ESSENTIAL, WE NEED TO WHILE SUPPLIES ARE ESSENTIAL, WE NEED TO FOCUS ON CONTROL OF SUPPLIES JUST AS FOCUS ON CONTROL OF SUPPLIES JUST AS

MUCH AS WE DO ON LABOR AND MATERIALSMUCH AS WE DO ON LABOR AND MATERIALS


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LET’S FOCUS ON LET’S FOCUS ON METHODS METHODS NEXTNEXT

HOW A PROCESS IS PERFORMED, WHAT TASKS ARE HOW A PROCESS IS PERFORMED, WHAT TASKS ARE REQUIRED; THE MOVEMENTS THE OPERATOR REQUIRED; THE MOVEMENTS THE OPERATOR

MAKES, THE EQUIPMENT RELIABILITY/CAPABILITY, MAKES, THE EQUIPMENT RELIABILITY/CAPABILITY, HOW MATERIAL IS DELIVERED OR TAKEN AWAY HOW MATERIAL IS DELIVERED OR TAKEN AWAY LARGELY DETERMINE THE PROCESS TIME PER LARGELY DETERMINE THE PROCESS TIME PER

PIECE.PIECE.


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WHAT IS THE DIFFERENCE IN RESULTS WHAT IS THE DIFFERENCE IN RESULTS IF A PERSON “WASTES” 10 MINUTES IF A PERSON “WASTES” 10 MINUTES

IN “WAITING” OR PERSON SPENDS 10 IN “WAITING” OR PERSON SPENDS 10 MORE MINUTES PER HOUR DOING A MORE MINUTES PER HOUR DOING A

JOB DUE TO POOR METHODS?JOB DUE TO POOR METHODS?

NONE!!!!!NONE!!!!!


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OUR JOB IS TO DELIVER QUALITY OUR JOB IS TO DELIVER QUALITY PRODUCT TO OUR CUSTOMERS, ON PRODUCT TO OUR CUSTOMERS, ON TIME, EVERY TIME, AT PRICES THAT TIME, EVERY TIME, AT PRICES THAT

THEY ARE WILLING TO PAY AND WITH THEY ARE WILLING TO PAY AND WITH THE REQUIRED QUALITYTHE REQUIRED QUALITY


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• IN ORDER TO ACCOMPLISH THAT, WE IN ORDER TO ACCOMPLISH THAT, WE DEPEND ON PEOPLEDEPEND ON PEOPLE

• PEOPLE TAKE TIMEPEOPLE TAKE TIME TO DO THINGS. TO DO THINGS.

• TIME = MONEY TIME = MONEY

• THE PROPER CONTROL OF TIME IS THE THE PROPER CONTROL OF TIME IS THE FIRST RESPONSIBILITY OF EVERYONE.FIRST RESPONSIBILITY OF EVERYONE.


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Suppose you want to move to a new home. You figure Suppose you want to move to a new home. You figure that you and a friend can do the job with a rented that you and a friend can do the job with a rented truck.truck.

One of the first things you do is determine how much One of the first things you do is determine how much the truck rental is going to cost.the truck rental is going to cost.

Next you start planning your move so that you save as Next you start planning your move so that you save as much time moving things, loading and unloading much time moving things, loading and unloading process, to minimize time and maximize productivity.process, to minimize time and maximize productivity.

Isn’t this the same thing we are asking Isn’t this the same thing we are asking people to do in their jobs?people to do in their jobs?


2929


YOU CAN DO A LOT ABOUT HOW YOU CAN DO A LOT ABOUT HOW PEOPLE SPEND THEIR TIME AT WORK.PEOPLE SPEND THEIR TIME AT WORK.

YOUR SAFETY; QUALITY; YOUR SAFETY; QUALITY; PRODUCTIVITY AND COST PRODUCTIVITY AND COST

PERFORMANCE ARE A DIRECT PERFORMANCE ARE A DIRECT RESULT OF HOW WELL YOU RESULT OF HOW WELL YOU

MANAGE PEOPLEMANAGE PEOPLE..


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YOU MANAGE IN FOUR WAYS TO CONTROL COSTSYOU MANAGE IN FOUR WAYS TO CONTROL COSTS

- HOW - HOW EFFECTIVELYEFFECTIVELY PEOPLE PERFORM THEIR PEOPLE PERFORM THEIR TASKSTASKS

- THE - THE METHODSMETHODS THEY USE TO PERFORM THE THEY USE TO PERFORM THE JOBJOB

- THE - THE AMOUNT OF TIMEAMOUNT OF TIME THAT IS WASTED. THAT IS WASTED.

- WHAT THEIR - WHAT THEIR MOVEMENTSMOVEMENTS ARE TO PERFORM ARE TO PERFORM A TASK.A TASK.


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THE PEOPLE WHO CAN HELP YOU THE MOST TO THE PEOPLE WHO CAN HELP YOU THE MOST TO SUCEED ARE YOUR OWN PEOPLE.SUCEED ARE YOUR OWN PEOPLE.

JUST AS IMPORTANTLY, JUST AS IMPORTANTLY, THE PEOPLE ON YOUR THE PEOPLE ON YOUR OWNERSHIP TEAM CAN HELP YOU SUCCEEDOWNERSHIP TEAM CAN HELP YOU SUCCEED..

THEY CAN HELP YOU THE MOST WHEN YOU GET THEY CAN HELP YOU THE MOST WHEN YOU GET THEM INTERESTED IN HELPING YOU AND THEM INTERESTED IN HELPING YOU AND

UNDERSTANDING WHY IT IS IMPORTANT TO HELP UNDERSTANDING WHY IT IS IMPORTANT TO HELP YOUYOU

THEY CAN HELP YOU SAVE MONEY AS WELL AS THEY CAN HELP YOU SAVE MONEY AS WELL AS SPEND MONEY.SPEND MONEY.


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THE TIME OF PEOPLE IS THE THE TIME OF PEOPLE IS THE MOST IMPORTANT ITEM TO MOST IMPORTANT ITEM TO

WATCH IN GETTING THE BEST WATCH IN GETTING THE BEST RESULTS FROM YOUR TEAMSRESULTS FROM YOUR TEAMS


3333


““People adopt the style of the Leader People adopt the style of the Leader they work for”.they work for”.

WHAT IS YOUR STYLE and WHAT DOES WHAT IS YOUR STYLE and WHAT DOES IT COMMUNICATE TO YOUR TEAM?IT COMMUNICATE TO YOUR TEAM?


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IT COSTS THE SAME PER MINUTE WHEN IT COSTS THE SAME PER MINUTE WHEN PEOPLE ARE ADDING VALUE AS WHEN PEOPLE ARE ADDING VALUE AS WHEN

THEY ARE STANDING WAITING FOR THEY ARE STANDING WAITING FOR SOMEONE OR SOMETHING.SOMEONE OR SOMETHING.

HOWEVER,HOWEVER, Y YOUR CUSTOMERS ARE OUR CUSTOMERS ARE ONLY WILLING TO PAY FOR THE ONLY WILLING TO PAY FOR THE

VALUE ADDED.VALUE ADDED.


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• You must be consistent on what is You must be consistent on what is acceptable.acceptable.

• You must teach people the proper You must teach people the proper ways to do their work.ways to do their work.

• Check up regularly to insure that Check up regularly to insure that they understood what you wanted.they understood what you wanted.

• Take immediate action when a Take immediate action when a problem is found.problem is found.


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INJURIES, WAIT TIME, LOST TIME, INJURIES, WAIT TIME, LOST TIME, EXTRA WORK, POOR METHODS, EXTRA WORK, POOR METHODS,

POOR MATERIALS, REWORK, AND POOR MATERIALS, REWORK, AND POOR QUALITY WORK ARE TIME-POOR QUALITY WORK ARE TIME-COST EXTRAS THAT COST EXTRAS THAT YOU AND YOU AND

YOUR PEOPLE CAN CONTROLYOUR PEOPLE CAN CONTROL


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CONTINUAL IMPROVEMENT COMES CONTINUAL IMPROVEMENT COMES FROM SAVING THE TIME THAT IS FROM SAVING THE TIME THAT IS

BEING WASTEDBEING WASTED


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HOW TO CONTROL COSTSHOW TO CONTROL COSTS PRODUCTIVITY DEPENDS ON SEVERAL DIFFERENT PRODUCTIVITY DEPENDS ON SEVERAL DIFFERENT

KINDS OF TIME USES:KINDS OF TIME USES:

• The The work pacework pace of people. of people. (Concept of 100% pace)(Concept of 100% pace)

• WhatWhat methods methods are they using? are they using?

• How How much time do they losemuch time do they lose that could be prevented? that could be prevented?

• What part of their production/process is What part of their production/process is scrap or reworkscrap or rework??

• How How much “extra” workmuch “extra” work are they performing that could are they performing that could be eliminated?be eliminated?


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THE ACTUAL COST OF A PRODUCT IS IN THE ACTUAL COST OF A PRODUCT IS IN DIRECT RELATION TO THE PLANNING, DIRECT RELATION TO THE PLANNING,

METHODS, TRAINING, ATTITUDE, METHODS, TRAINING, ATTITUDE, MATERIALS, EQUIPMENT THAT IS MATERIALS, EQUIPMENT THAT IS

USEDUSED

IN A PROCESSIN A PROCESS


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IT IS NOT THE HOURLY RATE YOU PAY IT IS NOT THE HOURLY RATE YOU PAY THAT DETERMINES COST, BUT THAT DETERMINES COST, BUT

RATHER THE PRODUCTIVITY THAT RATHER THE PRODUCTIVITY THAT YOU RECIEVEYOU RECIEVE


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HOW MANAGERS, TEAM LEADERS HOW MANAGERS, TEAM LEADERS AND SUPERVISOR CONTROL COSTSAND SUPERVISOR CONTROL COSTS

RATE OF PAY/HR

PIECES RATE OF PAY/HR

PIECES

LABOR

COST/MIN

PER HR

PER HR

$11.00

50 $0.22

$12.00

53 $0.22

$12.00

50 $0.24

$13.00

53 $0.24

$13.00

50 $0.26

$14.00

53 $0.26

$14.00

50 $0.28

$15.00

54 $0.27

LABOR COST/MIN

THE POSITIVE IMPACT OF PRODUCTIVITY ON COSTS


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WASTED TIME HAS THE SAME WASTED TIME HAS THE SAME IMPACT ON COSTS AS RAISING IMPACT ON COSTS AS RAISING

YOUR PRICES PER PART.YOUR PRICES PER PART.


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NON-VALUEADDED TIME

　 10MIN

8 MINS

6 MINS

4 MINS

2 MINS

0 MINS

　　　　　　　　

VALUE-ADDED TIME

　 50 52 54 56 58 60

　　　　　　　　

PIECES/HR 　 50 52 54 56 58 60

　　　　　　　　

TIME PER PART

　 1.2 MINS

1.15MINS

1.11MINS

1.07MINS

1.03MINS

1.OO M INS


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SCRAP OR REWORK HAS THE SAME SCRAP OR REWORK HAS THE SAME IMPACT ON COSTS AS RAISING IMPACT ON COSTS AS RAISING

YOUR PRICES PER PART.YOUR PRICES PER PART.


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HOW TO CONTROL COSTSHOW TO CONTROL COSTS　　　　　　　　

TOTAL PARTS RAN

　 225 225 225 225 225 225

　　　　　　　　

GOOD PARTS 　 225 222 220 218 215 210

　　　　　　　　

SCRAP PARTS 　 0 3 5 7 10 15

　　　　　　　　

TIME PER PART

　 2..00MINS

2..02 MINS 2..5 MINS2..06

MINS2..09 MINS 2..14 MINS

　　　　　　　

% INCREASE IN TIME

　 0%1.4 %INCREASE

2.3%INCREASE

3.2%INCREAS

E

4.5%INCREASE

6.7%INCREASE


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TOOLING EXPENSETOOLING EXPENSE • A common source of excess expense is tooling in terms A common source of excess expense is tooling in terms

of wear; care; breakage, loss.of wear; care; breakage, loss.• If the tool(s) you or your team are using are If the tool(s) you or your team are using are not the not the

right toolsright tools for the job, then you will have “waste” on for the job, then you will have “waste” on replacing tools.replacing tools.

• People need to People need to be trainedbe trained on how to properly use on how to properly use tools.tools.

• People need to be People need to be held accountableheld accountable for improper use for improper use of tools; breakage due to their carelessness; or failing to of tools; breakage due to their carelessness; or failing to properly take care of the tool when they use the tool.properly take care of the tool when they use the tool.


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MATERIAL COSTSMATERIAL COSTS• Material costs are the single largest Material costs are the single largest

cost in making many products.cost in making many products.• Any “waste” that can be eliminated with Any “waste” that can be eliminated with

material costs will have a significant material costs will have a significant impact on our overall costs and profits.impact on our overall costs and profits.

• Internal Scrap impacts your costsInternal Scrap impacts your costs because you pay twice for the material because you pay twice for the material and labor to make parts.and labor to make parts.


4848


• Are we careless about the “small” Are we careless about the “small” material costs?material costs?

• This is very common because the This is very common because the “small” costs are so small for each “small” costs are so small for each item that we think the impact is item that we think the impact is minimal.minimal.

• But is that really true?But is that really true?


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HOW TO CONTROL COSTSHOW TO CONTROL COSTSCost Per Part 　

Total Number Scrapped

　 Total Cost

　

.$01 per part 1000 $10.00

$.01 per part 100,000 $1,000.00

$.01 per part 250,000 $2,500.00

　

　

　


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You need to You need to make people more aware of make people more aware of the cost of materialsthe cost of materials and its impact on and its impact on your profit and competitiveness when your profit and competitiveness when material “waste” exists.material “waste” exists.

You need to create and You need to create and develop a mindset develop a mindset that “material scrap” is “wasted that “material scrap” is “wasted moneymoney” and you need to develop a sense of ” and you need to develop a sense of urgency on eliminating material waste.urgency on eliminating material waste.


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HOW TO CONTROL COSTSHOW TO CONTROL COSTSCost Per Part # of Parts Scrapped Cost

$20.00/part 3 $60.00

$25.00/part 3 $75.00

$15.00/part 10 $150.00

$26.00/part 30 $780

　　

How many times do you scrap parts 　

and not realize how much money you 　

are throwing away? 　

If it costs you $2500 per day in internal scrap

that is equal to 24 people working for 8 hours at $13.00/hour/person

　　


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The material cost on the previous The material cost on the previous chart really is double that cost since chart really is double that cost since you will have to run additional parts you will have to run additional parts to replace the scrap.to replace the scrap.

That is why EVERYONE NEEDS TO BE That is why EVERYONE NEEDS TO BE URGENT ABOUT SCRAP ESPECIALLY URGENT ABOUT SCRAP ESPECIALLY

SCRAP THAT IS PREVENTABLE.SCRAP THAT IS PREVENTABLE.


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MAINTENANCE COSTSMAINTENANCE COSTS

True or FalseTrue or False

It is the responsibility of the PE Team It is the responsibility of the PE Team for the equipment in my area.for the equipment in my area.


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FALSEFALSEIt is It is the responsibility of all the the responsibility of all the

following peoplefollowing people for the operation and for the operation and care of their equipmentcare of their equipment

• OperatorOperator• Team LeaderTeam Leader

• PE MemberPE Member• PC MemberPC Member• QC MemberQC Member


5555


Each Person listed on the previous Each Person listed on the previous slide is responsible for working slide is responsible for working

together as a TEAM to insure that together as a TEAM to insure that equipment is being cleaned; properly equipment is being cleaned; properly

cared for; correctly operated; cared for; correctly operated; properly repaired when necessary properly repaired when necessary and done so in a timely mannerand done so in a timely manner


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Team Members; Team Leaders; Team Members; Team Leaders; Supervisors; Managers all need to Supervisors; Managers all need to take a more proactive and timely take a more proactive and timely

position for insuring that the position for insuring that the equipment costs are minimized in equipment costs are minimized in their areas of responsibility while their areas of responsibility while insuring that safety; quality and insuring that safety; quality and

productivity goals are achievable with productivity goals are achievable with good working equipment and tools.good working equipment and tools.


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• Do you take an active role with the PE Team in Do you take an active role with the PE Team in finding the “Root Cause”finding the “Root Cause” for recurring for recurring equipment breakdowns so the cause can be equipment breakdowns so the cause can be eliminated?eliminated?

• Does the Does the PE Team have a “production” and PE Team have a “production” and “Customer” focus“Customer” focus when it comes to equipment when it comes to equipment maintenance and operation?maintenance and operation?

• Are you Are you always “putting a band aidalways “putting a band aid” on your ” on your equipment problems?equipment problems?

• If you are not satisfied with your equipment If you are not satisfied with your equipment performance and reliability, performance and reliability, do you discuss it do you discuss it with your PE Team?with your PE Team?


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THE MINDSET FOR CONTROLLING THE MINDSET FOR CONTROLLING COSTSCOSTS

• STUDY ALL PROCESSES.STUDY ALL PROCESSES.

• ELIMINATE UNNECESSARY STEPS.ELIMINATE UNNECESSARY STEPS.

• IF YOU CANNOT ELIMINATE ANY STEPS CAN YOU INTEGRATE IF YOU CANNOT ELIMINATE ANY STEPS CAN YOU INTEGRATE OR COMBINE TASKSOR COMBINE TASKS

• IF YOU CANNOT ELIMINATE OR INTEGRATE CAN YOU IF YOU CANNOT ELIMINATE OR INTEGRATE CAN YOU AUTOMATE?AUTOMATE?


5959


• Why are we doing this process this way?Why are we doing this process this way?• Why do it at all?Why do it at all?• Work on the “small things” that you Work on the “small things” that you

directly control and do not need directly control and do not need approval for.approval for.

• You can get a lot of improvement You can get a lot of improvement without having to spend a lot of money.without having to spend a lot of money.


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• A 1% improvement in productivity is A 1% improvement in productivity is achieved by finding just 4.5 minutes achieved by finding just 4.5 minutes of “waste” to eliminate in an 8 hour of “waste” to eliminate in an 8 hour day.day.

4.5 minutes per shift


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• Observe each operation and determine Observe each operation and determine how many steps the operator(s) take and how many steps the operator(s) take and find ways to eliminate the “excess steps”.find ways to eliminate the “excess steps”.

• Observe each operation’s parts delivery Observe each operation’s parts delivery process and find ways to reduce the process and find ways to reduce the number of parts on the line and the number of parts on the line and the operator’s movements to get the parts.operator’s movements to get the parts.


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Remember the “Multiplier Effect” Remember the “Multiplier Effect” when determining costs savings---when determining costs savings---

Small per piece savings can be really Small per piece savings can be really large savings if you run a lot of parts large savings if you run a lot of parts

or use the same part at several or use the same part at several operations.operations.


6363

HOW TO CONTROL COSTS HOW TO CONTROL COSTS

• Ten 1% improvements gives you the Ten 1% improvements gives you the same result as one 10% same result as one 10% improvementimprovement

• Yet it might be easier to find and Yet it might be easier to find and implement the 1% improvements implement the 1% improvements than the one 10% improvement.than the one 10% improvement.


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INDIRECT LABORINDIRECT LABOR

Indirect Labor costs must be controlled Indirect Labor costs must be controlled just like direct labor.just like direct labor.

While it may be more difficult to While it may be more difficult to “standardized” the indirect work, if “standardized” the indirect work, if you don’t, your costs will increase.you don’t, your costs will increase.


6565


There are 3 categories of Indirect Labor:There are 3 categories of Indirect Labor: - - NecessaryNecessary- Have to have - Have to have - - OptionalOptional- Nice to have but do not - Nice to have but do not

really need.really need. - - LuxuryLuxury- Extra that we have because - Extra that we have because

we can afford it.we can afford it.

Evaluate your indirect labor and see Evaluate your indirect labor and see how many fit into the Necessary how many fit into the Necessary category- eliminate all the rest!!!category- eliminate all the rest!!!


6666


You need to monitor the work that each You need to monitor the work that each Indirect Labor Member does just like Indirect Labor Member does just like you do a Direct Labor Member.you do a Direct Labor Member.

If your Indirect Labor Member is If your Indirect Labor Member is “wasting time” it increases your labor “wasting time” it increases your labor costs just like if a Direct Labor costs just like if a Direct Labor Member “wastes” time”Member “wastes” time”


6767


One of the problems with Indirect One of the problems with Indirect Labor tasks is the level of efficiency Labor tasks is the level of efficiency

and work pace that the indirect tasks and work pace that the indirect tasks are done at.are done at.

If you have a 40% effective work pace If you have a 40% effective work pace being performed, you are losing 60% being performed, you are losing 60% available time for that job and your available time for that job and your

labor costs go up.labor costs go up.


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By By using the concept of “100% Normal” using the concept of “100% Normal” pacepace, you will find that you can improve , you will find that you can improve the productivity of your Indirect Labor the productivity of your Indirect Labor Members without spending money on Members without spending money on equipment, space or additional people.equipment, space or additional people.

NOTE:NOTE: Train each person on what the “100% Train each person on what the “100% Normal” pace is visually and then assign Normal” pace is visually and then assign

them a project to evaluate all indirect jobs them a project to evaluate all indirect jobs and determine the effective work pace.and determine the effective work pace.

How To Control Costs Through Time Tested, Real World Techniques

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