ATTAINING MANUFACTURING OPERATIONS EXCELLENCE FOR LONG

TERM TOP LINE IMPACT

SITUATION SECTOR
A USD 140 M manufacturing client wanted to improve the capacity utilization of Storage Battery
its core manufacturing facility that lacked operational efficiency and strategic Manufacturing
approach despite a world-class infrastructure

Commercial viability low due to poor capacity utilization against fixed overheads
Operation and sales planning performed in an unstructured manner and plant
KEY ISSUES
unable to provide the right product mix to marketing on time
Lack of focus on quality & rejection resulting in increased market complaints

A three pronged approach towards triggering and connecting operations

effectiveness, people engagement & management infrastructure
APPROACH Focus on improving production by applying multiple levers simultaneously e.g.
materials, maintenance systems, quality systems, coordination and planning
Sustain improvements through organizational capability building and training

Reduction in cost of conversion by 52%, an annual saving of USD 4 MM

RESULT Increased the production by 70% creating an additional top line of USD 25 MM
A 64% reduction in internal rejection & 50% reduction in external rejection

SOURCE: RedSeer Knowledgebase | 0

LEAN TRANSFORMATION OF MANUFACTURING OPERATIONS
KEY PERFORMANCE INDICATORS
Capacity Utilization and Overheads and Conversion
Quality Improvements
Revenue Growth Cost Reduction
Revenue Growth Production Volume Material Conversion Cost 5% Rejection Percentage
In USD MM In Units 000 Per cent of Raw Material Cost In per cent of production
23% 22% 24%
21%
19% 20% 4%
17%
40 3.0%
34 36 127 3% 2.6%
2.8% 2.7%

91 29 93 Plant Overheads 2.1%

1.9% 1.9%
72 In USD 000 2% 1.6%
553 500 538
463 453 450 435
1%

0%
FY'11 Qtr4 FY'12 Qtr1 FY'12 Qtr2 FY'12 Qtr3 May Jun Jul Aug Sep Oct Nov Apr May Jun Jul Aug Sep Oct Nov

Step change in plant Direct & Indirect cost Reduction in plant

production by 70% by reduction of USD 1.5 MM rejection from 2.5% to
debottlenecking of critical p.a. by power & energy 1.0% for finished goods
processes in the value optimization, scrap Fall in external rejection
stream reduction, manpower by 50% resulting in
Capacity Utilization of the utilization improved market
manufacturing unit Working Capital reduction feedback and brand
improved from 25% to by inventory optimization, strengthening
45% floor space utilization,
lead time reduction

SOURCE: RedSeer Knowledgebase | 1

APPORACH TOWARDS LEAN TRANSFORMATION

Work streams Description Results

Identifying opportunity areas across the manufacturing Transparency on losses,
value chain, using lean tools to identify losses Bottlenecks, other key levers
1 Operating Applying multiple levers including maintenance systems, Fast track resolution of
Systems
quality systems, supply chain optimization maintenance, Material issues
Timely implementation tracking of pending issues and Root cause problem solving meeting
debottlenecking and implementation tracking

Establishing KPIs, setting targets and accountability Performance management system

Management (PMS) in place
2 Infrastructure Create shop floor visual management
Operator awareness and motivation
Timely performance tracking of business and individual
performance against baseline and targets Performance dialogue and feedback
mechanism
Standardize dashboards and tracking
Institutionalizing the PMS

Boot camps, workshops, training on lean manufacturing Mentoring client to build capability
People and problem diagnostic tools for a sustained improvement
3 Engagement
Focus on Frontline motivation and involvement through Employee Motivation and active
building ownership through shop floor meetings involvement in problem solving

Run Idea generation session (IGS) with the client team Continual improvement of mindset
& institutionalization of lean
Prioritize initiative areas & building implementation teams

SOURCE: RedSeer Knowledgebase | 2