“What’s happening here? A small Midwest metal fabricator of light gage materials for everything from high-end consumer gas grills to helicopter loading equipment for the military is consolidating into a newer facility to improve the working environment and increase the output of the operations. Available cash is strained during the move by costs of ongoing work, new orders requiring outside manufacturing services, and the expense of the move. “I can’t afford to buy toilet paper,” complains the owner. “Why don’t I have more cash?”
The Situation as observed on the shop floor:
The business splits its work between one-time orders and several repetitive contract orders. The one military contract contributes nearly half of its revenue. Machining and assembly work first shift; forming and welding work first and second shifts. Half of the operators in forming and the majority of the welders concentrate on the major contract. Forming, welding, machining and assembly all operate in a batch process. That means each operator performs all necessary actions to create and finish his ‘batch’ of pieces, including the moving of materials, setting up tooling or fixtures, grinding, and inspecting. Pallets are stacked with material for new jobs, leftover material from completed jobs, and scrap. These pallets fill the open floor spaces between the machines and in the aisles.
Again, a too-typical mistake has been made by management in assuming that “better” quarters will translate, somehow magically, into improved productivity and profit. In fact, the inefficiencies of manufacturing that existed in the old building have simply been transported wholesale into the new, but now the cost of the move into the new facility is pulling over-all profit from black almost into red. The manufacturing process and the labor force are the same as before the move. The welders still perform more non-welding work than welding. The welder must move his own parts, load and unload the fixture, grind, inspect, stack and replenish his wire and fuel, which requires moving large, heavy tanks of gas. Any defective product is found only after the weldment is out of the fixture into which it was locked during the performance of all operations. Once out of that fixture, it cannot be put back in and repaired. Each welder welds only 10 minutes out of the 35 minutes he works on one sub-assembly. Two laborers in shipping unstack, inspect, test, and restack for shipping. There is much duplication of work between welding and shipping; the product is picked up and set down five different times. One sub-assembly alone weighs about 100 pounds. For one employee, lifting the weldment out of the fixture and stacking it is fatiguing, slowing him down, creating the potential for injury and also creating disincentive to start another part especially near the end of each work day. Even for the strongest, this part of the job is torturous. The overall business cost of labor is 24%. Moving did improve the work environment but left manufacturing costs per se unchanged.
The problem/opportunity begins in welding where 11 of the 13 welders work on the single major contract. The original plan by management, to meet the customer’s demand, divided the welding into smaller tasks so that more welders could work on different pieces. Art Stout revamped these operations to eliminate the duplicate work and inefficient use of resources by sequencing and coordinating the work being done. The solution was to reverse course and bring the welders and laborers together, helping each other complete one set at a time. Within a two-week period, all of the work was brought into one area. One welder now alternates between two fixtures, while two laborers unload and load for two welders and perform the other tasks, handling the product more easily and only twice. The components are delivered to the weld cell from the presses and staged visibly under or near the weld fixture. Scrap is minimal, because missed welds are caught in the fixture, as the two laborers now join the operator in checking the piece before releasing it.
Before the change, in both the old building and the new, welding produced 25-30 sets each day using two shifts, 11 welders and 2 laborers. Now, sequencing the work results in the production of 30 weldment sets during ONE shift, using 4 welders and 2 laborers. This change in process dropped labor costs significantly, improved cash flow and helped eliminate debt expense at a faster pace. Also, there is ample toilet paper.