Industry supplier case

(current turnover approximately 20 BSEK, whereof division concerned 2 BSEK)

 

The program initiative was initiated by executive management and the main issue was operating margin improvement. The current operating margin performance was poor even in a positive market situation. The change program's first approach was to completely change the production system, improve productivity and lead time and later to improve performance on product configuration, product design and purchased material.

 

Initially the resistance from factory management was strong and their attitude was negative. We started a dialogue with the factory management and team leaders involving them in describing the target and approach of the program. The team participated in basic lean training and was involved in manufacturing process mapping and collection of manufacturing time data. The manufacturing management and staff changed attitude and took active roles in the program. People was directly involved in the analysis of current process and manufacturing data and participated in drawing conclusions from the same. Later the people took part in redesigning the manufacturing process and methods. The end result was a stream lined order to delivery process cutting lead time from 26 days to 3 days (less 88%) and increasing productivity by 150%, i.e. less 70% manufacturing cost. This was implemented in less than 1 year, including a completely new factory layout.

 

The next step was facilitated by the culture change created in factory and manufacturing engineering. Our focus was now product specification, design and purchasing. The approach was value engineering, cost analysis and function cost analysis. A number of master products were split physically and prepared including reorganization of cost in product function groups to better understand what value or function the systems and components give. Competitor material was arranged in parallel. This is a critical prerequisite enabling performance workshops and result. The workshops generated some hundred proposals including cost reduction strategies in general and for action plans on product, system and component levels. The stratgegies, plans and proposals were evaluated from feasibility, cost reduction potential and time to implement enable efficient evaluation and implementation. The result was impressive, gross potential from workshops -40% on product cost and implemented results amounted to approximately -25%.

 

To conclude - the concept works and it requires a culture change. In total the program enabled an operating margin improvement (EBIT) from 3% to more than 11%. This was done, only by involving people, show them respect and confirmation to make them perform above their own expectations.