I was visiting a customer’s factory the other week, hoping to meet Derek. He had just taken over the business unit, and was walking me through his big plans to improve operations. I decided to plant a seed to help him see another idea. We walked over to his loading dock and saw his outbound product shipping in two layers – on the floor and mid-way on a shelf. “Derek, every week we ship your parts on just the bottom of the truck. Two thirds of our trucks (the upper two thirds) are shipping empty.” Immediately Derek saw the cost savings.
By my calculations, a truck load delivery in the region is about $800 so his annual shipping costs would be about $41,600. If he could fill the upper two thirds of the truck, he would be able to cut 66% of his delivery costs and save about $27,500/yr. But how could he ship bulky metal parts filled to the top of the truck? Surely the truck would “weigh out”, exceeding the weight limit of the truck. The parts on top could also crush the ones at the bottom. The only way to avoid these problems would be to stack the parts vertically, not horizontally. Fortunately for Derek, we’ve done this!
We mostly use wood kan-ban bins to fill orders for our JIT customers, but we also make transportation racks for the food industry. The best solution for Derek is to make custom part racks that could handle the weight of his parts and could easily roll out of our factory, in/out of the trucks and on to his factory floor. It currently takes us 30 minutes to load each truck and presumably 30 minutes to unload the truck on his end. Assuming $1/min for labor cost, Derek is spending $3,120 just on handling. Rolling carts could easily cut this in half, saving him another $1,500/yr.
“Once the parts come off the truck, where do they all go?” I asked Derek. “They go up in these racks until we need them and then we pull one pallet down for each part to feed assembly.” Derek has over 20 sheet metal parts, several of them stored on longer pallets. My estimate was that he needed 5000 SF just to lay the pallets out to find his parts. We ran into the same problem when we are getting ready to ship his sheet metal. Why not kit his parts as they are coming off our machines? No more stacking and packing at our location, at the powder coaters, or even at Derek’s place. We save him another $1,500/yr in handling within our factory and our painter saves the same at his place. If Derek and ETM both free up 5000 SF, at $5/SF NNN, we also save at least another $50,000/yr.
In this new scenario, Derek places one order for 3 weeks of kits, saving him almost 3 hours each month in purchasing and A/P time ($2,000). ETM makes the sheet metal and loads up the kit carts, moves them to powder coating, and then directly to Derek. At Derek’s shop, the racks are gone and most of the floor space is reassigned to other production. The kit carts roll off the truck and are placed in line behind his assembly stations. As his assembly teams go through the parts, they signal Derek to order the next 3 weeks of kits.
But what about the added expense of the rolling metal kit carts? He’ll need 20 carts at $1500/cart for a total of $30,000 over 3 years. Derek is currently paying $500/wk in pallets or $26,000 a year. A clear savings difference, simply by changing shipping strategy.
Derek’s Annual Cost Savings:
- $27,500 in reduced trucking costs
- $1,500 in eliminated packing/unpacking
- $3,000 in ETM and powder coater part handling
- $50,000 in factory floor space
- $2,000 in purchasing and A/P time
- $16,000 in reduced pallet costs
Total Annual Savings = $100,000
Now maybe Derek has higher priority projects he needs to work on, but you might need to save $100K quick before your next annual review. If this sounds like a good way to save, contact us and we can get you going in a matter of weeks.
from ETM Manufacturing http://etmmfg.com/3502
from American Quality Management http://aqmauditing2014.tumblr.com/post/124240373265
No comments:
Post a Comment