NEWSLETTER Arête

Vol 18 April 2019

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Arête Vol 18.0

Dear reader, we are delighted to

bring you yet another edition of

Arête. We have endeavoured to

make each edition of Arête as fresh

and content rich as possible. This

time around we have added new

case studies and knowledge

nuggets, which we’re sure you will

find intriguing and enlightening.

Please feel free to share your

thoughts and views by writing to us at

knowledge@ssa-solutions.com.

Happy reading!

Case 1: Strategic Cost Management

Knowledge Nugget: SCAMPER

News 1: NC delivers a lecture on Pragmatic Leadership

Chairman's desk

Lean Tip: Concept of Takt time

Case 2: Lean Implementation in Plastic Engineering industry

Upcoming Events

News 2: Value Stream Mapping workshop in Pharma industry, Sri Lanka

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Pragmatic Leader of the Month: Mr. Ashish Desai - by Mr. NC 8

Chairman's desk

Dear reader, welcome to a new edition of Arete. In this edition we feature two insightful case studies: One talks

about how we helped a client in reducing their inventory through the application of strategic cost

management. The other case study is about how we implemented Lean in a plastic manufacturing firm. The

knowledge nugget section features SCAMPER, a powerful brainstorming tool; in the Lean tips section we

feature the principle behind Takt Time. In news, we feature a lecture that I delivered on Pragmatic Leadership

at the University of Visual and Performing Arts, Colombo, Sri Lanka and a Value Stream workshop we

conducted on for a Pharma company in Sri Lanka. In the,“Pragmatic Leader of the Month” section I am

introducing another inspiring leader Mr. Ashish Desai who is the Managing Director of Jyoti Plastics Works. Last

but not least, we are excited to announce our upcoming conference in New Delhi on April 27 on “Scale-up”.

Wish you a happy reading and, as always, I welcome your feedback!

Case Study 1: Strategic Cost Management

Situation: The application of Strategic Cost Management was implemented in an FMCG industry. The company manufactures and distributes various personal care products like toothpaste, bathing soap, hair oil, detergent powder etc.

Actions taken: SSA applied the Strategic Cost Management (SCM) approach to bring about the transformation. The initial step was value identification followed by identification of value stream elements. Next step was estimating associated cost and exposing the deficiencies in business design. This was followed by implementing necessary changes including creating a pull-system for inventory replenishment.

Results: Inventory reduction and savings due to reduction in Inventory carrying cost, improvement in service levels and revenue growth. The overall financial impact of the project was to the tune of $382,000.

What is Strategic Cost Management (SCM)?

SCM is a cost management technique that aims at reducing costs while strengthening the position of the business.

It is a process of combining the decision-making structure with the cost information, in order to reinforce the business strategy as a whole.

It measures and manages costs to align the same with the company’s business strategy. Why SCM? It is an updated form of cost analysis, in which the strategic elements are more clear and formal

and improves the overall position of the company. It uses cost information specifically to govern the strategic management process – formulation,

communication, implementation and control. It helps in identifying the cost relationship between value chain activities and its process of

management to gain competitive advantage. The strategic cost management must be implemented at the initial stages of production, so as

to reduce heavy cost failure.

Situation – deep dive

Strategic Cost Management was implemented at a FMCG company which manufactured

various personal care products like toothpaste, bathing soap, hair oil, detergent powder, etc.

The Supply Chain model typically consists of following elements:

The Finished Goods inventory had started to accumulate and was rapidly increasing. The

company had ran out of storage space due surging inventory levels and had to resort to third

party warehouse. This high level of FG inventories were also leading to a number of problems at

the warehouse. This is when SSA stepped in.

Forecasting Manufacturing Distribution

Actions Taken – deep dive

Strategic Cost Management (SCM) approach to understand the warehouse problem was applied in following mentioned steps :

Identify Value: The first step in the process was to identify the Value delivered. After discussion, it was arrived that Value delivered by warehouse is “On Time In Full” delivery and “Safety of Goods”.

Identify Value Stream Elements: Following were identified as the elements of Value Stream – Inbound: Receiving the Finished Goods; Operations: Storing goods; Outbound: Transporting to distributors; Returns: Getting unsaleable goods back. These core elements are supported by support elements like Infrastructure, Technology and Human Resources.

Estimate Associated Costs: For overall warehouse and each of the elements, quantum of work handled was recorded and the cost associated with that element was calculated. This information was used to estimate “Cost per transaction or unit of work handled”.

Identify gaps in the Business Design: After estimating the cost per unit under various functions, the various factors contributing to that costs were identified. Analysis was done and deficiencies in the Business design were identified. These strategic choices led to escalated costs. The Business Design deficiencies in all the elements were identified and the impact estimated.

The current system of the organization consisted of preparing an annual forecast and breaking it down into monthly demand plan. Based on the monthly demand plan, production schedule (Supply Plan) was prepared. The plant would produce based on the Supply Plan and push the finished goods to warehouse. On receiving orders from distributors, the warehouse would supply the available goods.

Strategic change was initiated to convert this Push System into Pull System

Results – deep dive

Following results were achieved:

The average inventory was reduced from 2.4 million units to 1.7 million units.

Service levels improved from 95.67% to 100%.

Inventory reduction amounted to savings on Inventory carrying cost of about $70,000.

Improvement in service levels improved the revenue by about $100,000.

The overall impact of the study was to the tune of about $ 380,000.

Knowledge Nugget: SCAMPER

It can often be difficult to come up with new ideas when you're trying to develop or improve a product or service. This is where creative brainstorming techniques like SCAMPER can help. This tool helps you generate ideas for new products and services by encouraging you to think about how you could improve existing ones.

The main underlying principle of SCAMPER is that any new idea stems from the alteration of something that already exists.

SCAMPER is a simple yet powerful and effective solution-generating technique that promotes creative thinking by asking a series of questions about the existing product/service.

S C A M P E R Substitute Combine Adapt Modify Put to other

use Eliminate/

Erase Reverse/

Rearrange

SCAMPER….

Below is an application of SCAMPER technique to find solutions to root causes identified in a six sigma project to reduce ink specks on the product while printing.

Sr. No.

Prioritized Root Causes S C A M P E R

1. Wrong / high set point of viscosity

Viscosity Set point to be standardized according to type of message and ink type (DOE to

be conducted)

2.

Ink is not dried in printing reservoir before transfer to camera

1. Extend Printing machine sorter frame and provide fan for drying

ink on the machine itself

2. Provide perforated holes and blower arrangement in Printing

machine reservoir

3.

Empty diluter bottle not refilled by operator

Establish diluter addition point as a part of shift starting

checklist

Provide level sensor in alcohol dosing jar

4.

Auto diluter addition manually kept off

Establish diluter addition pipe check

as a part of shift starting checklist

Fixed arrangement for auto diluter addition to be

provided on machine

Case Study 2: Lean Implementation in Plastic Engineering industry

Situation: The plastic manufacturing function of ABC group was mainly concerned about its throughput. Few customers had set an open demand, i.e. customer was ready to buy maximum number of parts everyday. ABC could not produce over 2500 parts per day.

Actions taken: SSA adopted its RMAOR© approach to cater to the challenges faced by ABC. Since, lean implementation through the entire plant becomes complicated and chaotic, it was decided to choose a group of most profitable products for which lean could be applied. Lean, for the selected products, was implemented end to end; right from marketing to the dispatch of the products.

Results: The throughput per shift saw a tremendous uptrend with Injection molding section increasing by 125%, whereas in the Assembly section, it went up over 430%.

Situation – deep dive

ABC Ltd (name changed to protect confidentiality) is a pioneer in the

provision of solutions to corrosive nature of metal components. ABC

was mainly concerned about its throughput, especially when there was

a market to capitalize upon. Few of their customers had set an open

demand, i.e. they were ready to procure maximum number of parts

possible from ABC.

Given the scenario, ABC’s current capacity to manufacture and release

a maximum of only 2500 parts per day posed as a hurdle in their way of

making the most of the opportunity.

They engaged SSA to help their plant deal with the same. The project

had a clear focus on improving the throughput at Injection Moulding

(IM) section from 40% to 100% against the planned throughput; and

from 20% to 100% in the Assembly section.

Actions Taken – deep dive • Recognize Phase: After detailed analysis of the products that ABC produces, Pump parts

were found to contribute to over 30% of the total value and hence the family of pump parts was selected for lean implementation.

• Measure Phase: SSA identified the effectiveness of the current processes and established a baseline for future transformation. Current state layouts, Spaghetti diagram, Value Stream Map and Process analysis were some of the tools used.

• Analyse Phase: The problems identified were analysed in this phase using Time & Value analysis. In depth analysis of spaghetti and current state VSM led to the formation of Future state VSM. Lean tools namely, Cell formation, U-shaped layout, Supermarket and Kanban systems and SMED were identified for achieving the future state VSM. 7 Kaizen projects were identified to convert the future state map into a reality.

• Optimize Phase: For every Kaizen project, data was collected specific to them and Fishbone diagram was created to find the root cause of the issues. After root cause prioritization, solutions were ideated and for instances where multiple solutions were possible, solution prioritization was used as a tool to select a single solution. A systematic solution implementation plan was put in place with well defined roles, responsibilities and deadlines.

• Repeatability Phase: The task of this phase was to monitor the improvements put in place and ensure their sustenance. An improvement monitoring template was created for ABC to facilitate the same with essential parameters such as important measures, Operational definitions, procedure for tracking, accountability/responsibility, etc.

Before & After

Spaghetti Diagram (Before)

Lean Plant Layout (After)

Results – deep dive

The following table shows the impact of the lean transformation at ABC industry:

Increase in throughput in Injection moulding section – 125% Increase in throughput in Assembly section – 430%

Reduction of excessive movement of materials and workforce with the help of a cellular layout played a key role in reducing the production time.

Many non-value adding activities were eliminated and a balanced line was put in place so that the assembly could take place at the pace of part production and thus obtain a continuous flow.

Attribute Section Before After

Throughput per shift

Injection Moulding 2400 5400 Assembly 1017 5400

Lean Tip: Concept Of Takt Time

“Takt Time is the rate at which a system must produce the output in order meet the customer demand”.

Takt time was first introduced as a production management tool in

German aircraft industry in 1930s. It is most commonly used in

production or assembly lines in which a product passes through

series of operations with predefined tasks. As takt time is demand

driven it is highly influenced by change in customer demands.

Toyota typically reviews takt time for a process every month, with

a tweaking review every ten days.

Benefits of calculating Takt time: • Can help eliminate the waste of overproduction by producing to actual customer demands. • Highlights the bottleneck processes and workstation with high downtimes. • Motivates to eliminate non-value adding activities and develop the standardised work instructions.

News 1: NC delivers a lecture on Pragmatic Leadership

Mr. NC Narayanan, CMD - SSA Group of companies, delivered a lecture on “Pragmatic Leadership” at the University of Visual and Performing Arts, Colombo, Sri Lanka on 21st March, 2019.

News 2: Value Stream Mapping workshop in Pharma industry, Sri Lanka

SSA, on 8th April, conducted a value stream mapping workshop for a well known Sri Lankan pharmaceutical industry. This workshop was conducted as a part of an on-going continuous improvement & LEAN transformation assignment with the client. The workshop was facilitated by Mr. NC Narayanan, Founder Chairman and Mr. Abhidyna Mahatekar, COO of SSA APAC.

Ashish Desai, the Managing Director of Jyoti Plastics is our 'Pragmatic Leader' of this month. He is one of those 'Transformation Leaders' who can sense the pulse of the environment and internal weaknesses of the enterprise to take them to a new orbit. His principle centric approach and people engagement skills are outstanding. He could break the old paradigms and lead through example for creating prosperity for everyone around. His innovation & convincing skill is typical of any 'Pragmatic Leader’. To know more about Jyoti Plastics, please visit www.jyotiplastic.com To know about their other products, visit www.myunica.in

Pragmatic Leader of the Month: Mr. Ashish Desai – by Mr. NC

Key Takeaways: • Create your 3 year scaling up roadmap. • Increased profits within 6 months • Learn from entrepreneurs who have scaled up 6X in last 6 years

“THE SCIENCE OF SCALING UP” in association with SKC World, New Delhi 27th April, 2019, 9:30am to 5:pm IST Venue: Crowne Plaza, New Delhi, Okhla Phase 2

Key Speaker:

Mr. NC Narayanan Founder Chairman, SSA Group of Companies

Upcoming Events

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