8/9/2019 Carbon Event Food Nw Cost Reduction Techniques Part 1
1/28
8/9/2019 Carbon Event Food Nw Cost Reduction Techniques Part 1
2/28
Background
Activity started Oct 2009
Worked with 20 companies
Dairy, Bakery, Red Meat
Delivered cost savings in individual companies
Improved information flow & product flow through thesupply chain
8/9/2019 Carbon Event Food Nw Cost Reduction Techniques Part 1
3/28
8/9/2019 Carbon Event Food Nw Cost Reduction Techniques Part 1
4/28
Project Objectives
Remove waste
Reduce costs
Increase profit
Free up capacity
Drive Sustainability
8/9/2019 Carbon Event Food Nw Cost Reduction Techniques Part 1
5/28
Demand Growth – Dairy Products
2009 - 2018 % growth forecast
EU 10.0%United States 20.2%China 25.0%India 44.6%Algeria, Egypt 30.5%Brazil 26.4%
(Source: OECD) www.dairyuk .org/component/option,com_docman/task.../Itemid,308/
8/9/2019 Carbon Event Food Nw Cost Reduction Techniques Part 1
6/28
Supply Growth – Dairy Products
“On the supply side dairy farming will present an opportunity for manyregions around the world”
“Conceivable that there could be a rapid growth in production around theworld in low cost countries”
“implementing changes in farm structure in any country is generally a slowprocess”
“Realistically it will be difficult for low cost countries to produce in line withforecast increases in demand”.
“Consensus opinion that demand will outstrip supply in the medium term.”
Source: Investment Prospects for British Farmers – September 2009
High Cost Base = Threat
8/9/2019 Carbon Event Food Nw Cost Reduction Techniques Part 1
7/28
.
8/9/2019 Carbon Event Food Nw Cost Reduction Techniques Part 1
8/28
Waste Definition
What types of waste
would you findIn a Food Manufacturer?
8/9/2019 Carbon Event Food Nw Cost Reduction Techniques Part 1
9/28
Waste Definition
Activity that adds cost
but does not add value
8/9/2019 Carbon Event Food Nw Cost Reduction Techniques Part 1
10/28
.
UK Supply Chain Associates Ltd
8/9/2019 Carbon Event Food Nw Cost Reduction Techniques Part 1
11/28
MethodMapping :
Select and Map a product line/processObserve & analyseQuantify waste
Identify opportunities for improvementAgree improvement plan
Implementation:Implement plan
Remove wasteReduce costFree Up Capacity
8/9/2019 Carbon Event Food Nw Cost Reduction Techniques Part 1
12/28
Lean Manufacturing Techniques
Kaizan – Process improvement teams5S – Sort, Set out, Shiny clean, Standardise,Sustain
5 Whys – Root cause analysis7 WastesFishbone – Cause & EffectKanban – Stock replenishmentHijunka – Scheduling box
and there are many more....
UK Supply Chain Associates Ltd
8/9/2019 Carbon Event Food Nw Cost Reduction Techniques Part 1
13/28
Kaizen Definition
Kaizen (Japanese for "improvement")
A Japanese philosophy that focuses on continuous improvement
It is the key thrust to maintaining or achieving competitive advantagethrough a dynamic change process
The Japanese process of continuous improvement using problem-solving and analysis
8/9/2019 Carbon Event Food Nw Cost Reduction Techniques Part 1
14/28
Lean Manufacturing Techniques5S programme to tidy the workplaceCurrent state versus the 7 WastesTotal facility Layout (plan optimum layout)Work flow, material flow
Visual flows (label areas)Visual Storage (shadow boards, improve storage oftooling)Schedule communicated to shop floor (SchedulingBox)Reduce machine set up times (box-up tooling priorto job)Dedicated areas (Walkways, paint floors, GoodsIn/Out)
UK Supply Chain Associates Ltd
8/9/2019 Carbon Event Food Nw Cost Reduction Techniques Part 1
15/28
Challenges
Gain buy-in at all levelsDrive from the topFree up people to trainFire fighting – break the routineClashes with short term prioritiesOperator discipline – recording job timesChallenge the accuracy of dataKeep it simple
Sustaining the gain UK Supply Chain Associates Ltd
8/9/2019 Carbon Event Food Nw Cost Reduction Techniques Part 1
16/28
Types of Waste
Scrap – cost of raw material
Rework – labour cost
Downtime – labour cost & lost opportunity
Giveaway – cost of raw material
Food miles – Logistics process
8/9/2019 Carbon Event Food Nw Cost Reduction Techniques Part 1
17/28
NW Bakery Scrap – Bakery Co.
the raw material cost of the scrap.Actual Cost of Scrap per year = £235,000 (10%)
9%-11% product scrapped (measured & observed)Breakaway on the cake baseFailures in middle section of pans coming out of ovenCaused failure a later stage on the line aftertopping/filling applied.
.
8/9/2019 Carbon Event Food Nw Cost Reduction Techniques Part 1
18/28
NW Bakery
Scrap: the raw material cost of the scrap.
Actual Cost of Scrap per year = £444,600(9,500 units – small cakes- scrapped per day)
Damaged by machine & manual proceduresRejected manually on lineRejected manually at packing pointScrap sent for animal feed & to landfill
8/9/2019 Carbon Event Food Nw Cost Reduction Techniques Part 1
19/28
NW BakeryActual Cost of Scrap per year = £24,700(due to machine failures)
Plus packaging required to handle product from machine
failuresActual Cost of Packaging used thenscrapped per year = £92,400
Downtime 20% = run Sat AM = £30,160Total cost of scrap £147,260
8/9/2019 Carbon Event Food Nw Cost Reduction Techniques Part 1
20/28
NW Bakery Giveaway – Bakery Co.
the cost of raw material which has been given away for free.Actual Cost of Giveaway per year = £819,500 (19%)
Overuse of ingredients 6% - 114%Topping weight varied – overweight by 29%Filling weight varied – Overweight by 76%Hoppers filled manually – labour intensiveAs the hopper weight reduces then variance in toppingoccurs.Product RFT = 8%
.
8/9/2019 Carbon Event Food Nw Cost Reduction Techniques Part 1
21/28
Other Wastes Identified Waste streams on line not being segregated. Mixtureof food, & packaging. This will contribute to land fillcosts
Energy – Conveyors observed running through breaks& left running when not in use.
Quality – A number of unit cakes pass through the lineat a substandard quality level without detection.
Floor waste – High value components being lost on thefloor.
.
8/9/2019 Carbon Event Food Nw Cost Reduction Techniques Part 1
22/28
NW Dairy Company - Cost Savings Summary
• £190k - Saving by improving cheese yield - achieved by reducing the
amount of milk used to produce one tonne of cheese.
• £250k – Reduce downtime and improve Output per employee by 66.4t
• £93k – Reduce the amount of downgrading from 0.77% to 0.50%
• £500k – Reduce stock through the supply chain and reduce external warehousing costs
• £122k – Avoid sending waste product to Landfill
8/9/2019 Carbon Event Food Nw Cost Reduction Techniques Part 1
23/28
NW Dairy Company - Cost Savings Summary
Total potential savings
= £4.4m
Any cost savings increase profits at this companyAs it is a Farmers Cooperative
any increase in profitsgoes back to the Farmers
8/9/2019 Carbon Event Food Nw Cost Reduction Techniques Part 1
24/28
Implementation PlanKaizen Intervention 1 - Not Right First Time
Reduce rejects, scrap, rework
Kaizen Intervention 2 - Setup Reduction
Reduce Downtime
Kaizen Intervention 3 - 5S in the workplaceTarget the ingredient weighing area.
Kaizen Intervention 4 - Process Measurement and Data Capture Need to improve data capture as this is fundamental to any Leanimplementation.
8/9/2019 Carbon Event Food Nw Cost Reduction Techniques Part 1
25/28
Outputs
2010Opportunities Identified £21,000,000(Cost Savings Signed Off £ 5,320,000Additional Business Won £ 4,000,000Total of 202 Jobs Saved)
2011Opportunities Identified £ 14,000,000
TOTAL £35,000,000
8/9/2019 Carbon Event Food Nw Cost Reduction Techniques Part 1
26/28
Benefits of Lean
More productive labour utilisationReduced Manufacturing Costs (lower unit cost)
Lower stock levels / reduced working capitalOptimised space utilisation
Fewer defects, less scrap & reworkImproved Quality RFT
Reduced changeover timesShorter cycle times
Improved machine utilisationIncreased Facility Capacity.
UK Supply Chain Associates Ltd
8/9/2019 Carbon Event Food Nw Cost Reduction Techniques Part 1
27/28
Benefits of Lean
Improved delivery performance at lower costIncreased customer satisfaction (QCD)
Improved data collectionMore accurate data collectedIncreased Management Controls
Empowered & more flexible work forcePride in the work place
UK Supply Chain Associates Ltd
8/9/2019 Carbon Event Food Nw Cost Reduction Techniques Part 1
28/28
Thank you for your time
I will now take your
questions