Reducing labor expense and increasing cash through inventory reduction
As a Canadian manufacturer of wood products in southern Ontario, Tayco has experienced many competitive forces in the past decade putting increased pressure on the bottom line. Additionally as customers demand better service and quicker turn-around times, the necessity to carry more inventory has all had an adverse impact on financial performance.
The challenge at Tayco was to review the operational processes from front to back, reduce expenses, improve their cash position while increasing delivery performance to customers. The key areas of focus were as follows:
• Review quotes & customer service to determine opportunities to consolidate and balance workloads.
• Develop the framework in all production and non-production areas to schedule work centers based on planning guidelines and reduce expenses by managing temporary labor out of the business.
• Review on-hand inventory requirements and reduce days-on-hand.
• Develop a Management Operating System to assist area leaders with better overall planning, execution, and performance measurement.
• Strengthen the leadership team with coaching & training and overlay a structured approach to the timely use and review of data required to manage the business.
The following key changes and results were achieved:
• A 5% annualized reduction in overall operating expenses.
• A 25% reduction in Quotes & Customer Service labor was realized by consolidating job functions along with more equitable distribution of work.
• A 16% improvement in both direct & indirect production labor was generated primarily by eliminating the use of temporary labor.
• A 9% improvement of other expenses tied to courier and logistics was accomplished by managing freight carriers.
• Materials management was a key focus including clean-up of BOMs, developing accurate ERP planning parameters, and installing material substitution rules lending to an 11% decrease in raw material inventory needs.
• Developed a management system creating better planning tools and visibility to production resource requirements along with daily/weekly performance reporting.
• Trained all managers on the principles of Active Management.