Operational Effectiveness: Uncovering the Hidden Dollars in Your Food Facility
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In food manufacturing and distribution, profitability is all about the details, including plant downtime and maintenance, overtime, purchasing practices, raw materials management, customer service practices, and measuring performance against goals. How do CFOs, controllers, and plant managers determine if they are bleeding cash through inefficiencies and lost opportunities? In this training webinar, Daniel Campos (Managing Partner, London Consulting Group), presents best practices for implementing operational performance improvement projects to help companies find and quantify areas where they can enhance revenue, reduce costs, and increase profits. As a result of assessments and the implementation of improvements, organizations typically achieve a variety of competitive advantages, including more accurate forecasting, improved communication between sales, production, and procurement, and a greater focus on profitable clients, products, and production lines. Takeaways from this presentation include: The importance of operational performance improvement assessments and the methodology behind them How to build a roadmap for the process How OEE and software solutions help increase the visibility of manufacturing efficiency in your food facility How the operational changes you make as a result of performance improvement assessments can yield better accountability from organizational leaders
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Operational Effectiveness: Uncovering the Hidden Dollars in Your Food Facility
- 1. Operational Effectiveness: Uncovering the Hidden Dollars in Your Food Facility Presented By: Daniel Campos, London Consulting Group Beyond Compliance Webinar & Podcast Series
- 2. Beyond Compliance Webinar Series SafetyChain.com The Series Webinar & Podcast Series BEYONDCOMPLIANCE
- 3. Beyond Compliance Webinar Series SafetyChain.com The Sponsor Food Quality Management System Food Safety Food Quality Supplier Compliance Learn more at SafetyChain.com
- 4. Beyond Compliance Webinar Series SafetyChain.com Before We Get Started HELPFUL TIPS Informal but professional format Ask Questions (Q&A at end) Only panelists are displayed Recording link will be shared Audio issues: use call-in number
- 5. TRAINING TOPIC Operational Effectiveness: Uncovering the Hidden Dollars in Your Food Facility Presented By: Daniel Campos Managing Partner, London Consulting Group
- 7. Over25years ofexperience Foundedin 1991wecurrently operate in the Americas and the Caribbean through 9 regional offices and headquarters in Monterrey,Mexico. NorthAmerica CentralAmerica SouthAmerica Caribbean
- 9. Our Experience Solutions Strategic Planning Marketing and Sales People & Organization Supply Chain Management Operations Information Technology Back Office / Shared Services Operational Due Diligence Certifications
- 11. Importanceofperformanceassessment Buildingaroadmap Methodologyandsolutions Bestpractices Topicstoday
- 13. Diagnostic process Goal: narrow thescope and quantify opportunities Pre-condition to asuccessful operations improvement project WhatisaPIA? ThePerformanceImprovementAssessment
- 14. Clearly defined scope Strategic perspective Change management process built-in Swift -days/weeks andnot weeks/months Well-trained resources withtools that everyoneunderstands Keystosuccess ThePerformanceImprovementAssessment
- 15. Scope:Complianceasa guideline ThePerformanceImprovementAssessment PestControl SiteConstruction MaintenanceandCalibration GMPs,Training Equipmentconstruction CleaningandSanitation ProcessingStandards WaterandIceSupply StorageandTransport SeparationofFunctions WasteDisposal Product Processing and Monitoring Surveillance: Verification and Validation SupplierManagement ComplaintsManagement Suppliers Customers Step 1 Step 2 Step 3 Step 4 Step 5 Form 1 Form 2 Form 3 Supporting PreRequisites
- 16. Structure Org. Chart Fixed Costs Company Culture IT Systems Other supporting structures Commercial and Planning Forecasting Budgeting Sales Planning Procurement Suppliers Operations Order Processing Material Handling Maintenance Manufacturing Quality Control Distribution Collections Customers Operational Excellence: Standardize, increase visibility and control Drive Efficiencies: Measure, baselines and goals, accountability Scope:BusinessCycleasa Guideline ThePerformanceImprovementAssessment
- 17. Strategic Perspective strategy processes structure measurement Compensation or incentive job profiles and experience ThePerformanceImprovementAssessment
- 18. SwiftTimeline ThePerformanceImprovementAssessment Process 1 Process 1 Proposal Three weeksPre-Assessment • Communication • Training • Expectations Weekly progress meetings Immediate Project Start
- 19. ProcessMapping Value stream maps document the procedures used to organize, procure, and deliver value to customers. We do this through interviews with the staff that performs the work. The tool captures ‘live documents’ to find where value is added or lost. The large format of the document enables group work and the consensus of where opportunities are, which is the first step in solving them. Org. Chart analysis Detailed description of how each step is performed (5W-2H) Candid comments from employees Live documents showcasing the systems in action ThePerformanceImprovementAssessment
- 20. Org. Chart analysis allows us to understand the company’s structure, fixed costs, and how decisions and accountabilities flow through the organization Multiple value stream maps on display Value stream mappings show all the details of activities including copies of ‘live documents’ that illustrate how systems and procedures work together Value Stream Maps uncover large-scale opportunities such as: • Disconnection between demand signals, forecast and production planning • Poor management of customers that can buy a higher variety of products or book increasing share of plant capacity • Purchasing function has poor visibility of in-stock, in-transit, pricing variance and usage forecast. The Performance Improvement Assessment
- 21. Detailed observations Observation studies show us a “Day in the Life” of key personnel. While the process described in the Value Stream is usually long-termed, the minute-by-minute perspective of the Observation Study provides details as the employee’s routine plays out. The intricate details of how the plan is executed become apparent, and we capture insights that are otherwise lost in the day-to-day. Snapshot of activities every 2 minutes Description of activities Candid comments from employees Total time invested, sorted by relative value of activity ThePerformanceImprovementAssessment
- 22. CSREPRESENTATIVE SUPERVISOR WHMANAGER The color coding of Observation Studies quickly provide an understanding of value addition, effectiveness of the organizational structure, development of supervisory skills, and robustness of the work systems that surround the workers. We often discover: • Supervisors in all areas lack a “Daily Routine” • Poor integration and communication between departments • Large portion of the day of supervisors doing administrative or manual work • Service standards that offer the same service to all customers • Use of manual tools that need constant updates and rework ThePerformanceImprovementAssessment
- 23. Proofisinthe Pudding Valid facts are the foundation of a sound project proposal. We use an array of analytical tools to ensure we are looking at confirmed trends and that the operational levers that drive financial performance are available. The analytics drive the estimation of potential savings, and are always developed together with operations and financial departments. • Sales and penetration • Manufacturing efficiency • Quality Control • Customer Service • Cost and expense control • Compliance to plans • Financials ThePerformanceImprovementAssessment
- 24. 21 days of analysis Cross-selling statistics feed sales campaigns during implementation ABC of Sales (@ Cost) ABC Cost on Hand A B C Grand Total A Number of Items 347 173 171 691 Days of cover 129 582 3,764 190 % of total cost OH 50% 16% 13% 79% B Number of Items 119 271 433 823 Days of cover 25 165 1,024 118 % of total cost OH 2% 6% 8% 16% C Number of Items 175 411 2001 2587 Days of cover 3 21 155 32 % of total cost OH 0% 1% 4% 5% Total Number of Items 641 855 2605 4101 Total Days of cover 93 213 690 141 Total % of total cost OH 53% 23% 25% 100% Unbalanced stock can increase stock value by up to 30% Changeover flushes vs. overall flushes show opportunities to increase yields / reduce scrap 15 11 11 13 15 8 12 12 9 15 14 12 18 0 2 4 6 8 10 12 14 16 18 20 Aug-02to Aug-06 Aug-09to Aug-13 Aug-16to Aug-21 Aug-23to Aug-27 Aug-30to Sep-03 Sep-06to Sep-10 Sep-13to Sep-17 Sep-20to Sep-24 Sep-27to Oct-02 Oct-04to Oct-08 Oct-11to Oct-15 Oct-18to Oct-22 Oct-25to Oct-29 Numberofflushesperweek Changeovers End Flush Total Flushes Observed OEE / TVQ (and its trending) can shed light on the varying performance between lines, products and shifts
- 25. Whatnow?
- 27. Prioritiesbasedon FinancialImpact Category Savings Source Current State Savings Goal GoToMarket Increase revenue from a re-defined pricing model (Regular) Regular customer with margin below operating expenses of 15% 15% $720,000 Selling Process Reduce cost to serve by transfering order processing to customer service service Balances customers assinged to Sales Representative and Customer Service. $370,000 Increase productivity in sales process process Average of 8 orders processed per per day per sales representative. representative. $2,000,000 Procurement Increase discounts for early payment 80% of purchased goods without $410,000 Warehouse Reduce employees overtime from Incoming Operation by increasing receiving productivity Average 41 pieces / hour $500,000 Reduce employees overtime from Outgoing Operation by increasing picking productivity Average 37 pieces / hour $250,000 Distribution Reduce employees overtime from Idle Idle Time 23% overtime of the working hours. $630,000 Savings Totals Savings Totals $4,880,000 EXAMPLE Settingchangeinmotion
- 29. Reducecomplexity–e.g.unitedisparateprocesses,simplify Thinkofsourcesofwaste–Defects,Overproduction,Waiting, Underutilized talent, Transportation,Inventory,Motion,Extraprocessing Notmeasuringoutcome Top-downinvolvement, driveaccountability KeyImprovementPrinciples Settingchangeinmotion
- 30. Buildtheroadmap Prepare a plan to correct the deficiencies and release the potential for both operational and financial improvement. Lay out the objectives and the financial benefits by process, the scope of the project to generate these benefits, a week-by-week, activity-by- activity work schedule, the required investment and expected return. • What are we changing? • Baselines • Goals and savings • Methodology • Detailed work schedule • Investment and return Settingchangeinmotion
- 31. Describethe Roadmap Settingchangeinmotion Efficient customer order processing Inventory control of FG Solid foundation for ERP implementation Automate components supply and centralize procurement Increase Sales by executing redefined GoToMarket strategies Inventory accuracy and control by implementation of best practices Process improvement along with ERP implementation support Full visibility and integration of warehouse management (components, WIP, FG) Standard Stores and Wholesale channels to minimize mistakes and increase potential Low hanging fruit to increase on-time deliveries, reduce cancelations/discounts and provide order processing visibility Current State Efficient Scheduling, Production, QA, fabric use Future State Replicate efficiencies in High Point
- 32. Methodology
- 33. ChangeManagement *stagesofthechangeprocess Fear Disbelief Urgency Accountability Satisfaction Analysis Project start-up Design Implementation Continuity Settingchangeinmotion
- 34. London Methodology - 3 Perspectives Applying our methodology we develop and implement the solutions needed to generate improved profitability via a results-oriented culture. • Analysis • Design • Training • Implementation • Documentation • Communication • Resistancetochange • Projectmanagement • Requirementsandobjectives • Trainingsessioncontent • Classroomtraining • Hands-onimplementation • Followup
- 35. Define“processowners”andmakethemawareoftheiropportunitiesandpotential for improvement.Develop solutionsthat: a)solvethepresentchallenges, b)avoidnewproblems c)significantly improveperformance. Weeklymeetings whereprocessownersupdateonprojectprogress TraintheenduserinthenewprocesstobuildonMechanicaluse,andthen Understanding andManagement. DriveAccountability Settingchangeinmotion
- 38. Q & A
- 39. Resources White Papers & Surveys Webinars & Videos Product & Partner Info Solution Consultation info@safetychain.com SafetyChain.com