Background
- Identified changes to manufacturing processes could drive a meaningful increase in the company’s market value in less than a quarter.
- These changes required 8 weeks to implement and a immediately demonstrated a 44% increase in production per labor hour
Our client was looking to seek new investors in a manufacturer of consumer products located in the Southeast Region of the US, and requested that we tour the operation.
Fortunately for everyone involved, we saw immediate opportunities for improvement. The company’s production runs were designed to manufacture 8-12 week supplies of any given SKU. Naturally, this was creating a feast or famine situation. Overproduced SKUs tied up capital, while fulfillment of items still in the queue was delayed and expensive. We believed that implementing Lean Manufacturing principles would result in a 40% increase in production per labor hour. This would dramatically impact the organization’s capacity, throughput and EBITDA.
Actions Taken
• Redesigned the factory layout and executed on that design
• Implemented Lean Manufacturing
• Streamlined processes to decrease materials handling and improve efficiency
• Reallocated staffing to realize additional capacity gains and reduced labor spend
ProAction illuminated the path forward for our client:
Re-designed Processes: The company’s throughput could be greatly increased by employing a one-piece flow manufacturing process instead of batching. This new Lean Manufacturing model is efficient enough to create labor and staffing reductions, and can drive a cycle of continuous improvement. It also substantially decreases lead times.
Improved Capacity: During our review we found that one particular product was accounting for 24% of the company’s sales. As we planned for the future state, it was clear to us that implementation of the one-piece flow system would allow the company to realize a 30% capacity improvement for this product with one less line and three fewer people.
Facility Layout Improvements: Layout changes dovetailed with the company’s new Lean Manufacturing to accomplish two goals. It made production processes more transparent, making oversight easier and ensuring abnormalities would be spotted quickly. It also reduced wasted travel and motion. The changes enable production rates to be set by product type, leading to more accurate scheduling and increased accountability.
Labor Balancing: When considering staffing reductions, we found that continuing the fourth packing line and filling it out with three employees who had become redundant elsewhere would increase capacity improvement from 30% to 38%. Co-locating the company’s two warehouses reduced staffing and expenses.
Measurable Results
• 44% productivity increase
• 25x return on dollars spent
• Full transition in less than 8 weeks
- 10% reduction in labor
- 38% increase in capacity
- 44% increase in productivity
- In excess of $300,000 reduction in direct labor spend alone
- Shorter manufacturing lead times
- More visible, easier to manage “one piece flow” process
- 5% to 15% additional savings in receiving, inventory control and shipping
About The ProAction Group
ProAction is an operational consulting firm that works with Private Equity to do three things:
1. Help you win good deals (and avoid bad ones!) through our pre-close “QofO”.
2. Help your management teams as they transition from an entrepreneurial approach to a scalable, process driven leadership path.
3. Help you maximize the value of your portfolio companies through the implementation of operational excellence.
We focus on three sectors: consumer products, manufacturing and distribution. We have experts in Lean Manufacturing, Six Sigma, Sales and Operations Planning, Inventory Strategy, Sourcing, Logistics and Human Capital Development. We were founded in 1995 and are headquartered in Chicago.
For Further Information
Timothy Van Mieghem
The ProAction Group, LLC
Chicago, IL
Tel: (312) 371-8323
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