A recent project Case on Unlocking Capacity for an auto components client by my team.

1. Valcon helps an auto components manufacturer to identify
opportunities for unlocking capacity
Valcon Management Consultants .
FL No 608A .
6th Floor .
Spencer Plaza .
768/769 .
Anna Salai .
Chennai 600002 .
www.valcon.in
Business challenge
A leading manufacturer of plated auto components, and having
the world’s largest bicycle and two-wheelers manufacturers as
customers, was facing a supply-demand gap leading to :
ƒƒ Sales loss to the OEMs
ƒƒ Inability to service demand fluctuations
ƒƒ Lost opportunity to expand into the high-margin after-market
ƒƒ Pressures on margins due to inadequate capacity utilisation
The company was planning to launch its own brand of two wheelers
but the project was delayed due to working capital pressures,
amongst other reasons.
Valcon was invited to identify opportunities to improve capacity
utilisation for the plant as also for improvement in quality
performance at the critical plating section.
How Valcon took the client further
ƒƒ Valcon conducted a Scoping Study and identified the
opportunities to increase the output at the bottleneck
section by 76% of the existing average production output.
This translated to:
ƒƒ Approximately 9% increase in annual turnover of the group
ƒƒ Improved margins through better utilisation of assets
ƒƒ Identified opportunities for reduction in quality rejections by 3%
subsequently leading to cost reduction to the tune of 1% of the
annual group turnover
How Valcon helped
The Valcon team studied the manufacturing cycle times, loading/
unloading times, shift change-overs, machine speeds etc., and
established the Design Capacity and Effective Capacity of the plant.
Figure 1: Establishing capacitiy
Figure 2: Utilisation levels of the bottleneck operation
Throughput
Asset
utilisation
Capacity balancing
Process performance
Manpower performance
RM/PM availability
Planning and
scheduling
Rejection & rework yield
 Management policies
 Allowances
 Accepted scrap
 Maintenance time, etc.
Design capacity Effective capacitiy Actual output
 Operational losses
 Process, manpower,
asset performance
The analysis of the capacities and study of the average existing
output highlighted that the crank machining section was the
bottleneck process leading to scale back in the production of
a coupled part-chain wheel. The crank machining process was
operating at just ~55% of the effective capacity.
Figure 3: Throughput analysis model for discrete manufacturing
Valcon used the throughput improvement model for discrete
manufacturing to identify opportunities for capacity release. Further
analysis into the bottleneck process enabled Valcon to identify the
causes for capacity loss and identify initiatives to bridge the gap
between the realistic output possible and the current output.
Valcon identified the various possible causes that were leading to
output loss:
No plan situation
No material
No manpower
Asset downtime
Produced at
lower rate
Rejected/
reworked
Flow interruption
Wrong production
43% output loss
Not produced
Produced
but lower output
Produced
but couldn’t
be despatched
Figure 4: Factors leading to output loss (light blue)
Effective
capacity
Average daily
demand
Actual production
June
Actual prodction
July
Actual prodction
August
Actual average
June-August prodction
54%
50%
67%
57%
43% loss
97% of effective capacity
700
900
1,100
1,300
1,500
1,700
1,900
Effective capacity v/s Average daily demand v/s Daily production
(Cranksets/dayproduction)
% of effective capacity

2. Valcon Management Consultants .
FL No 608A .
6th Floor .
Spencer Plaza .
768/769 .
Anna Salai .
Chennai 600002 .
www.valcon.in
Valcon also identified the root-causes that were adversely impacting
the utilisation of the plant resources. The five major areas of
concern were:
1. Series of planning and execution issues affecting the total
production output at the crank machining section. Some of them
are:
ƒƒ Delay in releasing firm orders to forging suppliers
ƒƒ Erratic supplies from suppliers
ƒƒ Changes in production plan post release
ƒƒ Negligible in-house forging inventory
ƒƒ Inventory mismatch between finished goods and customer
requirement
2. Capacity loss due to material shortage at plant resulting from
shortfall in supplies from forging suppliers
3. Loss in production due to lower manpower utilisation resulting
from :
a) Labor shortage
b) Extended breaks
c) Low labor productivity
d) Material unavailability at station
4. Reduction in overall output due to lower rate of production at the
bottleneck operations
5. Loss in capacity due to rejections and reworks of incoming
forgings and post crank machining
Valcon’s approach to improvement
There was a need to initiate improvements simultaneously for
increasing throughput and improving quality. Valcon uses the
20Keys® model in which each key is a detailed program, from
Figure 5: Capacity loss areas
Additionally, root cause analysis of the defects occurring at the
plating section highlighted the following systemic deficiencies:
1. Lack of effective “poka-yoke” (mistake proofing) systems for
process controls
2. Lack of standard operating procedures and operating training
3. Lack of preventive maintenance for equipment leading to quality
inconsistency
identifying and establishing the current state to implementing
the systematic approach to improve equipment, personnel and
process. In the first phase six keys focussing on Cleaning and
organising to make work easy, Kaizen of operations,
Maintaining machines and equipment, Quality assurance,
Production scheduling and Efficiency control were identified
for implementation.
Figure 6: Valcon’s 20 Keys model
1. Clean and organise (5S)
2. Define goals and systems (KPI)
3. Small group activities
4. Reduce work in progress
5. Fast restructuring (SMED)
6. Continuous improvement (KAIZEN)
7. Zero-monitoring in production
8. Flow-linking the cells (Kanban)
9. Maintenance of equipment (TPM)
10. Discipline at the workplace (5S)
11. Quality assurance (QA/QS)
12. Supplier development (SCM)
13. Eliminate waste (VSM)
14. Give responsibility and authority
15. Versatile expertise
16. Efficient production planning
17. Efficiency control
18. Active use of IT systems
19. Save energy and materials (ECO)
20. Become a technology leader
Valcon identified the following deliverables from the improvement
initiatives:
ƒƒ Increased throughput from the existing facility by 76%
ƒƒ Reduction of quality defects at the plating section by 3%
ƒƒ Improved raw material availability and supplier performance
by implementation of planning and scheduling systems while
optimising working capital requirements
ƒƒ Build competencies in employees on structured quality
systems, process control and instill culture to drive continuous
improvements in the plant
Summary
The comprehensive improvement program designed for the client
had the potential to improve its revenues by 9% (~ INR 9 Million
per annum) while delivering cost benefits of INR 1.8 Million/Annum.
These improvements not only support the client’s ambition to grow
sales to current customers but also venture to newer markets.
Valcon has strong credentials in enhancing capacity utilisation and
improving plant throughput for its clients across industries such as
automotive and auto-ancillaries, engineering & EPC, and consumer
goods. Valcon’s engagements have resulted in increasing output by
15-20% from invested capacities and in some cases, even higher.
Valcon uses its robust framework and approach for sustainable
change and these engagements are executed by highly experienced
consultants with deep understanding of industry and manufacturing
processes. This ensures a quick realisation of benefits by client
organisation as also high returns on investment made for the
engagement.
Effective
capacity
Average
demand
Material
shortage
Manpower
utilisation
loss
Quality
rejections
Unaccounted
loss
100%
200
400
600
800
1,000
1,200
1,400
Losses from effective capacity to actual output (crank sets/day)
(Cranksets/day)
1,600
2,000
1,800
97%
Actual
output
20%
13%
8%
3%
56%