maximizing capacity utilization 27 jul12

An Introduction to Valcon Management Consultants

N. Krishnan

CEO, Valcon India

Pathways to Growth for Indian SMEs

CII – Valcon Session, Ludhiana

27th July, 2012

2

Valcon overview

Valcon globally

� A leading operations and implementations

consultancy

� About 180 consultants placed in Denmark,

Sweden, Norway, India, China and Czech

Republic

� We serve global customers – typically from

Nordic based headquarters

Valcon India

� Specializing in implementation consulting

� 22 highly experienced consultants – and

growing

� Based out of Chennai, Bangalore and Delhi

� Practice areas

� Supply management (manufacturing &

operations excellence, procurement & supply

chain)

� Demand management (sales excellence,

growth, entry strategy, etc.)

� Strategic and market analysis (operations

due diligence, growth and sales potential,

market entry strategy)

� Customer References from: Caterpillar,

Biocon, Hero Group, Uniparts, Murugappa

group, Castrol, FLSmidth, Novozymes,

Novonordisk, Saint Gobain, CAMS, etc.

3

Valcon is a team of highly experienced consultants, drawn from the best companies in India

Our team

� Our consulting team is based out of Chennai,

Bangalore and Delhi

� Valcon is a group of ‘expert consultants’ -

minimum experience of our consultants is 6

years - having worked as either a consultant or

a line manager

� All our consultants have hands-on experience

of working in functional roles prior to consulting

� We are on “the shop floor” in close collaboration

with the client organisation when solutions are

implemented

� Our consultants are drawn from some of the

leading companies of different industries

Ford, Toyota, Maruti -Suzuki, Caterpillar, Saint

Gobain, Escorts Hospital, Motorola, Bajaj, PwC, ECS, Wipro, McKinsey, ZS Associates, Volvo, ISRO, Dalmia group, Asian Paints, Castrol, Ashok Leyland, Coca Cola, Schlumberger

4

Our approach to consulting and focus on results deliver strong benefits for our clients

• Our focus is on execution – how to change

• We are hands-on

• We ask questions & challenge thinking

• We focus on important issues

• We go for practical solutions

• We are on “the shop floor” - with the clients – to implement the solutions

• We act and create quick results

Client Industry

Valcon Intervention Benefits

Auto

Ancillary

Capacity release

assessment

• 20% output increase

potential identified

Renewable

Energy

New Product

Development

• Development time reduction

to less than 6 months

EPCProcurement

transformation

• INR 65 cr savings over 12

months

PharmaProduct evaluation

for in-licensing

• Technically superior product

selected

• Risk eliminated

RailwaysDriving speed

optimization• 16% energy cost reduction

Auto

Ancillary

Operational

Excellence

• Increased up-time by 20%-

30%

• In-process rejections

reduced from 2.4% to 0.06%

of net sales

5

Our offerings address key themes and challenges in our clients’ business operations...

� Deployment and execution of corporate strategy

� Technology and Operational due diligence

� Improving products and processes based on market knowledge

� Transparency in profitability for customers, products and markets

Procurement Production LogisticsMarketing andsales

After sales service

� Cost savings

� Performance measurement

� Risk management

� Supplier development

� Operations Excellence

� Cost reduction

� Quality improvement

� Throughput and capacity enhancement

� Inventory optimisation

� Inbound and outbound logistics optimization

� Sales Operations planning

� New customer acquisition

� Sales and price models

� Channel design and management

� Optimising price and profit

� Sales processes, tools and competence

� Spare part management

� Customer relationship management

Business Strategy Execution

Maximizing Capacity Utilization

Pathways to Growth for Indian SMEs

CII – Valcon Session, Ludhiana

27th July, 2012

Anirban Mazumdar

Associate Director, Valcon India

7

Do you face these situations?

& Do you think that adding machine/ plant is the only solution ?

Demand is stable but often we are not able to complete orders

Overtime & Extra Shift running are often used to ‘manage demand’

My Operators & Machines are idle some of the days but have to work extra time on other days

There is so much Inventory but still we are not able to meet requirements

8

Contents

Are You Utilizing Your Capacity Well?

How Can You Improve Capacity Utilization?

Case : Unearthing Hidden Capacity at Ancillary Unit

9

Focusing only on ‘servicing orders’ gradually leads to inappropriate capacity utilization

Manufacturer

Supplier

Supplier

Supplier

Plant was designed to service a certain demand at optimum utilization

• maximize output when demand is high

• finish plan early when demand dips

10

Focusing only on ‘servicing orders’ gradually leads to inappropriate capacity utilization

Manufacturer

Supplier

Supplier

Supplier

Plant was designed to service a certain demand at optimum utilization

• maximize output when demand is high

• finish plan early when demand dips

CustomerDistribution

DEMAND

DELIVERY

Even with change in demand pattern & fluctuations, working pattern doesn’t change.

Focus shifts to ‘meeting daily & month plans’ & We stop asking –

“Could we have produced more” or “Did we take too much time to complete the plan”

11

Are we utilizing our Capacity well?

DESIGN CAPACITY

EFFECTIVE CAPACITY

• Management Policies• Allowances• Accepted Scrap• Maintenance Time, etc.

ACTUAL OUTPUT

• Operational Losses• Process,

Manpower, Asset Performance

Efficiency (%) Efficiency (%) Efficiency (%) Efficiency (%) � ��

��

Utilization (%)Utilization (%)Utilization (%)Utilization (%) � ��

"�#�$% ��

12

Are we utilizing our Capacity well?

DESIGN CAPACITY

EFFECTIVE CAPACITY

• Management Policies• Allowances• Accepted Scrap• Maintenance Time, etc.

ACTUAL OUTPUT

• Operational Losses• Process,

Manpower, Asset Performance

Efficiency (%) Efficiency (%) Efficiency (%) Efficiency (%) � ��

��

Utilization (%)Utilization (%)Utilization (%)Utilization (%) � ��

"�#�$% ��

Medium & Small firms appear to be lagging in capacity utilization and need to take

measures to improve

Source : 77th Business Outlook Survey, CII

Mostly Large Sized Firms

Mostly Medium & Small Firms

13

So, How do we ‘lose Capacity’?

Policies & Standards

Bottleneck under-Utilization

Process under-Utilization

Capacity Imbalance

Capacity in-flexibility (Process, Operators & Plant)

1

2

3

4

5

14

Designed Policies & Standards often lead to capacity under-utilization which goes unnoticed

Purchase & Spares Policy

Inventory & Stores norms

Manpower Policy

Reward & Recognition Policy

Accepted ‘standards’ of process loss, set up time, etc.

‘Unwritten rules’ of production,…

15

Designed Policies & Standards often lead to capacity under-utilization which goes unnoticed

Purchase & Spares Policy

Inventory & Stores norms

Manpower Policy

Reward & Recognition Policy

Accepted ‘standards’ of process loss, set up time, etc.

‘Unwritten rules’ of production,…

Availability & Quality of Spares is impacted by Purchase policies

No machines are run during lunch time

Checks on the machine can be done only by the maintainers

“Set up can’t be done in night shift”

“Production shouldn’t do any quality checks”

…

16

Identification & utilization of bottleneck resource is one of the biggest challenges to capacity release

3592838880

22162

77624

30580

20736

CNC

Machining

Tempering Sand

Blasting

Pre-setting Inspection Painting

Estimated Capacity (pcs)

Plant capacity can’t be more than the bottleneck’s capacity

17

Identification & utilization of bottleneck resource is one of the biggest challenges to capacity release

3592838880

22162

77624

30580

20736

CNC

Machining

Tempering Sand

Blasting


Estimated Capacity (pcs)

Plant capacity can’t be more than the bottleneck’s capacityInability to identify the bottleneck

Changing product mix leading to shifting bottlenecks

Management’s focus on the ‘costliest machine’ than the bottleneck

Bottleneck machine treated in the same way as any other machine

Manual or non-production activities becoming bottlenecks

Inadequate maintenance of bottleneck – high downtimes

…

18

Contents




19

Capacity “release” needs to be undertaken systematically & in a phased manner

DESIGN CAPACITY

EFFECTIVE CAPACITY

ACTUAL OUTPUT

Achieving Effective Capacity• Operational Improvements

• Shop floor initiatives & systems

implementation

• High involvement of local team

members

• Localized improvements aligned to

bigger objectives

• Challenging work practices

Achieving Design Capacity• Management policies, designs,

processes and standards changes

• Initiatives & decisions driven by senior

management

• Cross functional initiatives – broad

based objectives

• Challenging mindset

20

Causes for losing Effective Capacity could lie across many areas in operations

Not Not Not Not ProducedProducedProducedProduced

Produced but Produced but Produced but Produced but lower outputlower outputlower outputlower output

Produced but Produced but Produced but Produced but couldn’t move outcouldn’t move outcouldn’t move outcouldn’t move out

Output Loss

No Plan Situation

No Material

No Manpower

Asset Downtime

Produced at Lower Rate

Rejected/ Reworked

Wrong Production

Flow Interruption

21

Multiple initiatives may be required to improve Capacity Utilization – the right ones need to be identified & prioritized

Output Loss

No Plan Situation

No Material

No Manpower

Asset Downtime


Rejected/ Reworked

Wrong Production

Flow Interruption

Cycle Time Variations

Poor Skill Levels

Inadequate Maintenance

Poor Planning

Low Manpower Utilization

Productivity Variations

Line Imbalance

Flow Imbalance

Material Quality/ Delivery Failures

Low Equipment Capability

Inadequate Layout

22

Multiple initiatives may be required to improve Capacity Utilization – the right ones need to be identified & prioritized

Output Loss

No Plan Situation

No Material

No Manpower

Asset Downtime


Rejected/ Reworked

Wrong Production

Flow Interruption

Cycle Time Variations

Poor Skill Levels

Inadequate Maintenance

Poor Planning

Low Manpower Utilization

Productivity Variations

Line Imbalance

Flow Imbalance

Material Quality/ Delivery Failures

Low Equipment Capability

Inadequate Layout

SUPPLIER DEVELOPMENT

PLANNING IMPROVEMENT

PLANNED MAINTENANCE

SKILL DEVELOPMENT

FLOW IMPROVEMENT

PRODUCTIVITY IMPROVEMENT

QUALITY IMPROVEMENT

23



PLANNED MAINTENANCE

SKILL DEVELOPMENT

FLOW IMPROVEMENT


QUALITY IMPROVEMENT

Supplier Performance improvement focuses on working closely with them to improve reliability

Supplier Quality

Supplier Delivery

Procure to Pay

Processes

Supplier Performance

• Equipment Capability• Process Stability• Quality Systems• Quality Audits

• Capacity Assessment• Planning & Scheduling

Systems• Flexibility

• Supporting Processes Adequacy

• Skill of People• Simplicity of Processes

24



PLANNED MAINTENANCE

SKILL DEVELOPMENT

FLOW IMPROVEMENT


QUALITY IMPROVEMENT

An ‘Integrated Planning’ model, customized for the companyhelps in ensuring uninterrupted production to plan

Raw Material Planning

Production Scheduling

Sales Order Book for M1

RCCP for M1 (W1 - W4)

RM ordering for Long Lead Items for M2, M3

RM Ordering for M1 (Low LT, Non ROP)

RM Check for M1 (Available + Ordered)

Next Week Fixed Plan

RCCP for M2/M3

Iterations

3/4 Days Fixed Schedule

Execution & Schedule Adherence

Execution & Schedule Adherence

Modific

ations

Confirmed RM Availability

In Store/ GIT (expected to reach in 2 days time)

Domestic Orders

Export Orders

Every Week

Twice Every Week Prioritizing & Sequencing

Rough Cut Capacity Planning

25



PLANNED MAINTENANCE

SKILL DEVELOPMENT

FLOW IMPROVEMENT


QUALITY IMPROVEMENT

A Planned Maintenance program implements maintenancesystems after equipment classification

Breakdown or Corrective maintenance

Routine maintenance

Preventive maintenance

Predictive maintenance

Improvement maintenance (proactive)

Most Critical Equipment

Critical Equipment

Non-criticalEquipment

Run to FailProactive

Maintenance

Reliability Centric

Maintenance

26

Flow Improvement would look at extended value stream and eliminate interruptions

Industrial Segment

Job Worker

OVERPRODUCTION

• Over planning to address poor yields

WAITINGINVENTORY

CORRECTION

• Many iterations in resorting• High rework on resorting• High inventory

WAITINGINVENTORY

CORRECTION

CONVEYANCE

• Multiple handling losses

• Deco Rework• High Inventory between

intermediate processes• Waiting for material

from plant

CORRECTIONCONVEYANCE

INVENTORY

CORRECTIONWAITING

• Many iterations in customer requirement

• Waiting periods for complete customer reqmt.

CORRECTIONWAITING • Mold Rework

• High Inventory• Waiting for complete mold information

• QA/ PDI rework• High material

movement within w/h• High Inventory



PLANNED MAINTENANCE

SKILL DEVELOPMENT

FLOW IMPROVEMENT


QUALITY IMPROVEMENT

27

Contents




28

Situation : The ancillary unit was ‘losing sales’ every month though analysis indicated sufficient ‘effective capacity’

35928 38880

25500

77624

3058025920

CNC

Machining

Tempering Sand

Blasting


Effective Capacity (pcs/day)

The Effective Capacity was identified to be 25500 pcs per day based on bottleneck capacity

29


35928 38880

25500

77624

3058025920

CNC

Machining

Tempering Sand

Blasting




35928 38880

25500

77624

3058025920

CNC

Machining

Tempering Sand

Blasting


Effective Capacity & Demand (pcs/day)

20000

There was a steady demand of 20000 pcs per day from the OEM every month

30


35928 38880

25500

77624

3058025920

CNC

Machining

Tempering Sand

Blasting




35928 38880

25500

77624

3058025920

CNC

Machining

Tempering Sand

Blasting



20000


35928 38880

25500

77624

3058025920

16942 18051 16834

Effective Capacity & Avg. Output (pcs/day)

The average daily output was however consistently below the effective capacity of the bottleneck

31


35928 38880

25500

77624

3058025920

CNC

Machining

Tempering Sand

Blasting




35928 38880

25500

77624

3058025920

CNC

Machining

Tempering Sand

Blasting



20000


35928 38880

25500

77624

3058025920

16942 18051 16834

Effective Capacity & Avg. Output (pcs/day)

The average daily output was however consistently below the effective capacity of the bottleneck

35928 38880

25500

77624

3058025920

18360 19440

CNC

Machining

Tempering Sand

Blasting


Utilization of Bottleneck

Analysis of the bottleneck output indicated that they were utilized only to the extent of ~72%

72% 75%

X

32

Analysis : Ineffective Maintenance systems and Inadequate focus on bottleneck were leading to high capacity losses

25500

17275

?3 hours (14% time) was being lost in Sand Blasting repetitive breakdowns everyday

Incomplete loading of Sand Blasting unit

Delays by operators between sand blasting cycles

Management focused on maximizing output of CNC machine – the costliest investment

Breakdown Maintenance being practised; checklists do not include ‘critical checks’

All Planning & Scheduling being done for CNC machine – NOT the bottleneck

Potential for reducing the sand blasting cycle time by 11% identified

For a simple process, a zig-zag layout used leading to multiple handling and stage inventories

Many Quality Circles working but none focused on improving sand blasting output

33

A roadmap was designed for ~25% increase in actual output & subsequently moving towards Design Capacity

EFFECTIVE CAPACITY

ACTUAL OUTPUT

25500

17275

• Design & Implement a Planned Maintenance system

• Simple automations to reduce Operator delays

• Reduce Minor Stoppages by Autonomous Maintenance

• Visual systems to improve loading of bottleneck

• Reduce loading & unloading time by use of fixtures

DESIGN CAPACITY

?

• Reduce & re-establish Sand Blasting cycle time

• Simplify layout into a flow• Design Planning model around sand

blasting utilization• Plant goals’ alignment to utilization

maximization• Align team objectives to improve

bottleneck output

Thank You

maximizing capacity utilization 27 jul12

Documents

demand pattern demand

valcon india

delhi valcon

demand ischange

demand dipscould

valcon overviewvalcon

experienced consultants

hidden capacity