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OPERATIONAL EFFICIENCY
BEST PRACTICES AUTOMATION
Mark Castaldi February 9th 2018
Main Areas To Be Discussed :
* Why is Op Effic & Automation Important ?* What is Op Effic & Automation ?* Best Practices to Achieve O.E. * Types of Automation* Justification
Why is Operational Efficiency and Automation Important?Current Industry Environment:
• Tightening Labor Market/Rising Wages• Competition From Non Ag Industries• Slowing Wine Sales Growth Rates• Constraints For Price Increases• Margin Compression
Why is Operational Efficiency and Automation Important?Current Industry Environment:
• Tightening Labor Market/Rising Wages• Competition From Non Ag Industries• Slowing Wine Sales Growth Rates• Constraints for Price Increases• Margin Compression
ANSWER: TO REMAIN COMPETITIVE !!
Achieving Operational Efficiency and/or Increasing Automation is a Means toEnsure a Scalable & Sustainably Profitable Business.
Regardless of Winery Size
OPERATIONAL EFFICIENCY
What is Operational Efficiency ?
What is Operational Efficiency ?
Definition:The ratio between an output gained from the business and an input to run a business operation. When improving operational efficiency, the output to input ratio improves.
What is Operational Efficiency ?
A Slightly Better Definition:Delivering products or services in the most cost-effective manner possible while maintaining the quality and consistency of those products, and services.
What is Operational Efficiency ? Preferred Definition:Creating a Culture/Environment Which Empowers, Recognizes, and Rewards Individuals to Challenge the Status Quo and Embrace, Support, and Implement Positive Change for the Purpose of Maximizing Profitability, Ensuring Safety, and Consistency of Quality.
Two Common Myths Regarding Operational Efficiency
“ Operational Efficiency Requires a High Degree of Automation and Capital Investment ”
“ Automation Will Ensure Operational Efficiency “
EXAMPLE: Two Wineries Belonging to the Same Parent Company: One Less Than 5 Years Old and Highly Automated, and One Built in the 1940s and Relatively Non-Automated
Cellar Labor($/Gal)
Bottling($/Case)
Crush Labor($/Ton)
$0.89
$2.67$308
Automated Winery - Operating Costs
Cellar Labor($/Gal)
Bottling($/Case)
Crush Labor($/Ton)
$0.61
$1.72$236
Non Automated Winery - Operating Costs
Winery Cost Comparison
There is More to This Than Bricks & Mortar (Automation)
Creating the Right Culture is Equally as Important
How Do You Create Operational Efficiency ?
CREATE the RIGHT CULTURE
OPERATIONAL EFFICIENCY
DEFINE & STREAMLINE THE PROCESS
MINIMIZE REDUNDANCIES & WASTE
LEVERAGE EXISTING RESOURCES
OPERATIONAL EFFICIENCY4 KEY COMPONENTS
CREATING THE RIGHT CULTURE
Step 1:Achieving Operational Efficiency
Creating the Right Culture Getting the Team Engaged:1) Ask the Team the Following Question:
a) What 3-5 Things Contribute to & Support Operational Excellence ?
Creating the Right Culture Getting the Team Engaged:1) Ask the Team the Following Question:
a) What 3-5 Things Contribute to & Support Operational Excellence ?
b) Conduct a Self Audit on the Items Identified by the Team
Creating the Right Culture Getting the Team Engaged:1) Ask the Team the Following Question:
a) What 3-5 Things Contribute to & Support Operational Excellence ?
b) Conduct a Self Audit on the Items Identified by the Team
c) Prioritize the List and Include as Part of Ongoing Performance Evaluations
Creating the Right Culture Getting the Team Engaged:1) Ask the Team the Following Question:
a) What 3-5 Things Contribute to & Support Operational Excellence ?
b) Conduct a Self Audit on the Items Identified by the Team
c) Prioritize the List and Include as Part of Ongoing Performance Evaluations
2) Continually Seek Team Input & Re-Evaluate
Creating the Right Culture Getting the Team Engaged (Cont):3) Develop & Implement an Incentive Plan
a) Recognition b) Title/Responsibilityc) Financial Compensation
Creating the Right Culture Getting the Team Engaged (Continued):3) Develop & Implement an Incentive Plan
a) Recognition b) Title/Responsibilityc) Financial Compensation
4) Transparency & Visibility Into Financial Infoa) Budgetsb) Costs & Marginsc) Overall Profitability
Identify What Creates Operational Efficiency
DEFINING & STREAMLINING THE PROCESS
Step 2:Achieving Operational Efficiency
Defining & Streamlining the Process For Each Major Operational Area:1) Map Out the Process 2) Identify Potential Bottlenecks3) Determine True & Realistic Timelines4) Utilize for Ongoing Production Planning5) Identify Ways for Improvement & Streamline
Map Out & Define the Process
MINIMIZING REDUNDENCIES & WASTE
Step 3:Achieving Operational Efficiency
ENTER INVENTORY
CREATE WORK ORDER
LOCATE & MOVE FULL BARRELS
IDENTIFY & PREP TANKS
SET-UP PUMPS & HOSES
RINSE EMPTY BARRELS
DE-BARREL INTO TANK
FILL BARRELS FROM TANK
MOVE BBLS TO BBL ROOM
SANITIZE EMPTY TANKS
RINSE EMPTY BARRELS
DE-BARREL INTO TANK
SET-UP PUMPS & HOSES
CREATE WORK ORDER
LOCATE & MOVE FULL BBLS
IDENTIFY & PREP TANKS
CREATE WORK ORDER
LOCATE & MOVE EMPTY BBLS
IDENTIFY & PREP TANKS
GAS EMPTY BARRELS
MOVE EMPTY BBLS TO CELLAR
SANITIZE EMPTY TANKS
ENTER INVENTORY
SCENARIO 2: EMPTY & FILL SEPARATELYSCENARIO 1: EMPTY & FILL SIMULTANEOUSLY
TWO BARREL SCENARIOS
21 STEPS
11 Steps
FILL BARRELS FROM TANKS
RINSE EMPTY BARRELS
SET-UP PUMPS & HOSES
MOVE FULL BBLS TO BBL ROOM
SANITIZE EMPTY TANKS
SANITIZE PUMPS & HOSES
SANITIZE PUMPS & HOSES
ENTER INVENTORY
SANITIZE PUMPS & HOSES
An Example: Barrel Cellar Labor
Sheet1
Highly Automated WineryNon Automated Winery
Cellar Labor ($/Gal)$0.89Cellar Labor ($/Gal)$0.61
Bottling ($/Case)$2.67Bottling ($/Case)$1.72
Crush Labor ($/Case)$3.08Crush Labor ($/Ton)$2.36
Automated Winery - Operating Costs
Cellar Labor ($/Gal)Bottling ($/Case)Crush Labor ($/Case)0.892.673.077647058823529
Non Automated Winery - Operating Costs
Cellar Labor ($/Gal)Bottling ($/Case)Crush Labor ($/Ton)0.611.722.3576470588235292
Sheet2
TWO BARREL SCENARIOS
SCENARIO 1: EMPTY & FILL SIMULTANEOUSLYSCENARIO 2: EMPTY & FILL SEPARATELY
CREATE WORK ORDERLOCATE & MOVE FULL BARRELSIDENTIFY & PREP TANKSCREATE WORK ORDERLOCATE & MOVE FULL BBLSIDENTIFY & PREP TANKS
RINSE EMPTY BARRELSDE-BARREL INTO TANKSET-UP PUMPS & HOSESRINSE EMPTY BARRELSDE-BARREL INTO TANKSET-UP PUMPS & HOSES
FILL BARRELS FROM TANKMOVE BBLS TO BBL ROOMSANITIZE EMPTY TANKSGAS EMPTY BARRELSMOVE EMPTY BBLS TO CELLARSANITIZE EMPTY TANKS
11 StepsENTER INVENTORY SANITIZE PUMPS & HOSESENTER INVENTORY SANITIZE PUMPS & HOSES
CREATE WORK ORDERLOCATE & MOVE EMPTY BBLSIDENTIFY & PREP TANKS
FILL BARRELS FROM TANKSRINSE EMPTY BARRELSSET-UP PUMPS & HOSES
MOVE FULL BBLS TO BBL ROOMSANITIZE EMPTY TANKSSANITIZE PUMPS & HOSES
21 STEPSENTER INVENTORY
In the Preceding Example, 10 Redundant Steps Were Eliminated by Combining 2 Processes (Empty & Fill)
No Additional Capital or Automation Was Required to Achieve This
Implementing Process Improvements Requires Three Things:1) Good Planning Process 2) Absence of “Strategic Myopia”3) Willingness to Implement Change
All 3 Items are Linked to “CULTURE”
LEVERAGING EXISTING RESOURCES & INFRASTRUCTURE
Step 4:Achieving Operational Efficiency
LEVERAGING EXISTING RESOURCES For Each Major Operational Area:1) Maintain Metrics to Track Efficiencies 2) Develop Bench Strength Within the Team3) Create Incentive Program(s) for Items 1 & 2
Before a Process Can be MANAGED it Must First be MEASURED
Leveraging Existing Resourcesand Infrastructure
Examples of Production Metrics:1) Barrels Filled/Emptied Per Man-Hour2) Barrels Filled/Emptied Per Shift3) Labor Cost/Barrel – Fill/Empty4) Bottling Change Over Times5) Bottling Line Run Efficiency6) Packaging Materials Shrink
Metrics Can be Used for the Following:a) Determining Trends in Productionb) Labor Utilization & Efficiencyc) Incentive Programs
Leveraging Existing Resources and Infrastructure
“I Have Been Working Here for X Number of Years and Haven’t Received a Decent Raise “
Leveraging Existing Resources and Infrastructure
COMPENSATION
SKILLS
TENURE
Developing Bench Strength
Leveraging Existing Resources and Infrastructure
SKILLS ASSESMENT MATRIX
EMPLOYEE Tank Sanitation Blending Additions FermentationPump Overs
Transfers Filtration
#1 3 3 3 3 3 3 3#2 3 3 3 3 3 3 3#3 3 3 3 3 3 3 3#4 3 3 3 3 3 3 3#5 3 3 3 3 3 3 3#6 3 3 3 3 3 3 3
AssesmentRating 1 Individual Has Little or no Experience With the Task & Requires Supervision/TrainingRating 2 Individual Has Prior Experience With the Task But Requires Some OversightRating 3 Individual is Completely Proficient With the Task and Can Train/Supervise Others
Cellar Activities
Degree of Proficiency
Skills Assessment Matrix Uses:1) Improve Overall Bench Strength of the Team2) Management Tool for Future Compensation
Main Benefits:1) Minimize Down Time & Lost Productivity2) Ensure Consistency of Production3) Improve Employee Retention
Leveraging Existing Resources and Infrastructure
AUTOMATION
We Have Come a Long Way Since the Steam Engine
What is Automation ?
What is Automation ? Definition:A Method of Managing a Process For the Following Purposes:1) Reducing Overall Human Intervention 2) Improving Quality & Consistency,3) Reducing Waste and Losses4) Reduce Overall Expenses
What is Quality ?
As it Pertains to Production & Operations, Quality Can be Defined as:
“The Absence of Variance ”
Why Automate ?
Main Benefits:1) Reduction in Labor Requirements2) Reduction in Production Costs3) Improved Quality/Consistency4) Safety & Hazzard Avoidance
How is Automation Justified ?
Factors to Consider:1) Financial Justification2) Potential Sensory Impacts3) Operator Skill Level & Expertise4) Spare Parts Inventories Requirements5) Maintenance Requirements & Bandwidth
Methods To Achieve Automation
Two Approaches :
Managerial:A change in process or procedure which results in reduced human involvement, but does not require any additional capital investment
Capital:Implementation of new infrastructure which requires an investment in capital to achieve reduced human involvement
Traditional Method(Pump at Bottom)
- Method Has Been InUse for a Long Time
- It Works
- So Why Change it ?
Managerial Automation ExamplePump - Over
Traditional Method Modified Method(Pump at Bottom) (Pump on Top)
Managerial Automation ExamplePump - Over
Pump-Over Example: Advantages:1) Reduced Labor Requirements
(Cost Savings)2) Reduced Risk of Cross Pump-over
(Quality Risk Avoidance)3) No Additional Capital Required
Automation Was Achieved By Adopting a New Procedure & Process
Examples of AutomationRequiring Capital Investment
Degree of Automation & Capital Investment
Degree of Automation
CapitalInvestment
Low Capital Requirements* SS Transfer Lines* BBL Top/Sulfur* SS Must Lines* CIP Systems
High Capital Requirements* Barrel Lines* Bottling Lines* Lab Analysis (FOSS)* Cross Flow Filtration
Financial Justification Financial Measures:1) Payback Period (Years/Months)2) Return on Capital Investment3) Improved Flavor Profile4) Reduction in Waste5) Safety Issues
Identify Where Your Highest Labor Requirements Are. Target those Areas That Yield the Biggest Benefit Relative to the Investment
Automation - RisksHidden Costs:1) Spare Parts Inventories2) Maintenance Skill Levels3) Availability of Tech Support
These Items Are Difficult to Quantify, But Need to Be Considered With any Automation Endeavor Requiring a Capital Expenditure
Final Thoughts on Automation
Is It Possible to “Over Automate” ?
Two Case Studies
DTC Order Fulfillment Business
Case Study 1: Third Party Order Fulfillment Service Provider
Case Goods Warehousing
Case Study 2: Winery Expansion & Automation Project
The Paradox of Automation As the Degree of Automation Increases, Humans are Less Involved in the Process, But Their Involvement Becomes More Critical
WHY ?
When an Automated Process Creates an Error, That Error Will be Duplicated & Multiplied Until it is Corrected Through Human Intervention
QUESTIONS ?
Mark [email protected]
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