Reducing Production Costs and Increasing Production Line Efficiency

The Challenge:

• The objective was to improve the profitability of the plant by reducing production costs and increasing production line efficiency.
• The budget for the current fiscal year was set with a savings requirement of $2.5 million over the previous year. The project team was required to generate an additional $3.2 million in savings for a total of $5.7 million. The total savings had to be demonstrated clearly enough to allow them to be built into the budget for the following fiscal year.
• It was determined that the financial impacts would be made in Direct Labor, Fixed Overhead, Variable Overhead and Production Count Variance (finished product shortages caused by processing errors).
• The operating areas selected to drive this improvement were determined to be Production, Quality, Maintenance and Scheduling.

The Results:

• The anticipated savings were realized within 9 months and fixed into the approved fiscal budget.
• The increased profitability of the plant represents a greater than 4:1 return on investment.
• Direct Labor production cost/case variance to budget improved by 26%, from an unfavorable variance to standard of 16.7% to a favorable variance of 9.9%.
• Production line Work Leads and Supervisors were trained to determine the root causes of downtime and implement permanent solutions to eliminate downtime. This methodology was successful in identifying over 150 process changes and captured an average of 9 minutes of uptime per hour throughout the five major production processes in the plant.
• Changes were made in the fundamental approach of the Quality department. Quality became responsible for reduction of Production Count Variance. Supervisors and Associates were trained to execute proactive activities to discover the causes of destroyed and held product, and implement process change to eliminate the causes permanently. PCV costs per case were reduced by 67% and the amount of product going on hold was reduced by 70%.
• The Maintenance department was trained to focus attention on improving process reliability by discovering the causes of mechanical downtime through process observation and implementing changes to eliminate downtime. The key indicator for the department – line efficiency increased by 24%.
• Significant improvements in scheduling methodology were made to determine optimal run strategies, increase the length of production runs (while controlling inventory levels) and reduce line downtime associated with product changeovers. Improved scheduling tools were developed to reduce manual work and increase scheduling efficiency. Changeovers per shift reduced by 52%.

The Client Experience:

“Carpedia proved to be very effective. Their results were greater than our initial expectations. More importantly, it appears as if the improvements will be permanent. The Carpedia employees proved to be the strength of the project. They were actively involved in the day to day operations. They were flexible in their approach and demonstrated a sincere desire to help the plant improve. Based on the results at Bloomsburg, Carpedia is being considered for other major projects.”

Manufacturing Manager, H.J. Heinz, Canned Products