Plant Total Management (PTM)

I like to think that best practice for plant management and control cannot exclude the following 9 subjects:

1_ 4M – 3W – WTD analysis “Man, Machine, Material, Method” – “3Whys” – “What to Do”

2_ PDCA

3_ 5S (Sort, Set in Order, Shine, Standardize, Sustain)

4_ HR – extensive, deep and detailed care of the people, training

5_ Speed in execution of plans and Team Play

6_ Reduction of fix costs

7_ Reduction of variable costs

8_ Reduction of hidden costs. The MUDA

9_ Financial Results:

** Study Case: 5M$ upswing in profit **

1_ 4M – 3W – WTD analysis “Man, Machine, Material, Method” – “3Whys” – “What to Do”

Initially a thorough 4M analysis was conducted with the support of the technical leader. This initial step is super important, because all the activities that are generated can last more than a year. Take the time it needs, as the output must be shared and agreed with the main actors of your team. The four “M”s are MAN, MACHINE, MATERIAL, METHOD. This team job, based on interviewing key people of the organization, has to be done in a very friendly atmosphere: they have to feel easy to talk and express themselves without constrains. No time restrictions, be relaxed and think positive.

The first decision to make is to proceed or not with the fix, because it is paramount to determine the priorities. Just to explain a little more about MAN, 5 are the highlighted issues: on two of those, we decide not to intervene, focusing on “missing operators”, “run production during quality issues” and “low motivation”. The 10 WTD (What To Do) actions pushed all the improvement: the key point at this stage is “believe 100% in the plan and start with the end in your mind”: sometimes the urgent will partially hide the important, but the helm has to aim always toward the same direction.

2_ PDCA

The PDCA is the core of the Total Management. The idea itself is not that innovative: everybody has surely operated using PDCA many times, not being aware that there is a professional name to the method; for example, when we plan a vacation or a tour, our mind automatically switches to “PDCA” mode: we design the itinerary, we plan the costs, we think we are good enough to predict a good number of mishaps. Then we start our journey and enter the “DO” mode: if we are smart, we check as we proceed in our trip and we act , or react, according to our checks. The way I interpret the PDCA is “production oriented”: the KPI (key process indicators) that are generated during the “Do” step are mostly related to the quality and the profitability of the production floor, where the most important processes take place. The boards are very simple and daily the main actors meet around the stand-up table to listen and decide. We typically do not discuss much: people meet to share results and data have been already prepared and studied. At the gemba meeting (from the Japanese terminology “gemba” = production floor) almost all the executive decisions are made and the plans are decided. The person in charge takes ownership of the assigned project and he/she is accountable for the result. No involvement, no commitment; no commitment, no result. So, the involvement of the people takes place at the gemba point, where their results are displayed and commented. People are publicly thanked (but privately scolded). The meeting does not last longer than 20 minutes.

Not everything is managed at the gemba point: of course, longer and more complex projects are discussed only from time to time, like those who involve design and customers.

Simple rules manage the gemba boards.

3_ 5S (Sort, Set in Order, Shine, Standardize, Sustain)

The 5 English words actually translate the Japanese ones: Seiri, Seiton, Seiso, Seiketsu, Shitsuke. There is a lot of literature about the 5S discipline. 5S not only is a set of rules to be respected at work, but it should become the mindset for a highly efficient life. By personal experience, the majority of people live their lives in a state of disorder and waste a lot of their time just because they are not able to organize themselves in the surrounding environment. How many times in a day aren’t we able to immediately find a tool or something we often use? This is a luxury that a modern organization cannot afford. Everything has to be on hand, well kept and ready to be used. The transformation takes usually long: people show the famous “resistance to change”, especially when it comes to their habits; but on the long terms, the results are sure. Day after day their level of attention to details gets better and they begin to feel the pleasure of coming to work in a nice place. When they treat their work place the way they do with their homes, the mindset transformation has happened: they have turned themselves into 5S generators. 5S discipline never fails. A clear example of bad 5S application is shown: even though the condition of the warehouse overall seems to be good, on the left side the identification rule looks different: floor signs are used and the max stacking level line is missing. As corrective actions, the left bank has been standardized and the simple note that explains the meaning of the horizontal line has been written in order to prevent re-occurrence. This is the level of 5S in the plants/office/building we have to target.

4_ HR – extensive, deep and detailed care of the people, training

There is not the golden rule to get the best out of the people we work with: It is case by case. Nonetheless, there are some principles that are undeniable. I spend a considerable amount of time in communicating with my co-workers, applying the “active listening” method (basically: understand before explaining). I don’t want “grey” areas during a talk and I do not promise what I cannot keep. I’m a “one word person” and it gives me a profound frustration when I cannot fulfill it. I want to achieve my personal knowledge of a person because I want to rely as least as possible on third parties for a review or a feedback. I believe in training, meritocracy and motivation and empathy. When facing the challenge of turning a deep red ink company into a very black ink one, do not hesitate to gather the workforce and tell, for example, them these simple words: I will pass to you a 5 to 15% negotiable raise when we start make profit out of “our” lines. The reaction is stunning: if sales keep strong, the results will come shortly.

An overcrowded (120 direct people) and inefficient production floor was costing $7.1M in labor ($59.1k/worker). By motivation (salary increase to those who deserved) and other activities, we could finally break-even after 700 days (BE = 650,000 pieces produced / operators). Beyond the BE point, the whole AV (Added Value) is transformed into bottom line profit. With a 40% AV, it was easy to fulfill the promise and gain the incredible turn-around in profit. The salary raised from 59.1k to 84.3k and a $5M swing was established. In order to “play” this way with numbers, a perfect vision and understanding on the company PL details is needed. This policy, if applied in unstable labor marketplaces, can help stop the massive in-out flow and reduces the never-ending issue of training new employees.

But it is not always about money: many people need a hope, in most cases they need a cozier workplace where they can feel friendship and understanding of their problems and where they can see that they will be awarded if they improve. I have always been willing to study also “compromise” solutions not to lose good workers (example: wife and husband in the same shift, find out schedule solution for kid care, etc…).

A creative method to improve their skill can be that of building a career ladder by filling those missing positions needed to see a possible growth path. The following new roles were originated: Machine Controllers, PM mechanics, Junior Technicians and Technical Supervisors. The scope of adding new professional roles is that of giving more space to find a better position inside the company and so giving the best possible contribution. Furthermore, more attention must be given to adjust salaries to actual competence.

The transformation from frog to prince charming is possible: the day operations were moved elsewhere, a lot of guys were in tears.

5_ Speed in execution of plans and Team Play

Once the decision is made, we must aim straight to the conclusion of the project and often we personally help, if we can, with special tasks: during the execution of the plan, we must be good team players and put our knowledge at disposal of the project manager.

6_Reduction of fix costs

When it comes to fix costs reduction, often this means to reorganize the workforce, which frequently implies to reduce the number of employees: but it isn’t always the case. When sales and workforce are not balanced, the other way to equalize them is to re-gain competitiveness, lower production costs and become appealing again from the product price prospective. When following this route, the customer is willing to buy more, therefor lay-off campaigns can be compensated by sales increase. This way also avoids additional training processes.

It isn’t the most enjoyable moment when you decide to let someone go: for this reason, recruiting process is crucial and it is needed only when we understand that in no longer protractible, like a job replacement; in this case, a trial to “stretch” the workforce can be done, with some “motivation” if needed, instead of going into a crowded situation again (especially when this is an issue inherited from the previous management). When we design an activity which considers a workforce reduction, we want to synchronize it with the retirement period of co-workers who might be willing to accept a company help for a good exit, like severance packages or lump sums.

Another class of fix costs belong to the “hidden costs”, of which I will talk later.

7_ Reduction of variable costs

The variable costs are mostly related to the cost of the goods produced. Where and when the company has the possibility (technological and financial) to produce the parts in house, I suggest going for it. Transformation of raw material into piece parts, if injection press or metal blanking machines are saturated, is always profitable. The incidence of labour on the total cost of a piece part does not usually exceed 30% for plastic parts, even less for metal parts. A plastic injection machines can be defined as the classic “milking cow”: it brings easy around 50 to 100 k$/year if it works in saturation (around the clock, better if 7/24). I know manufacturing companies that host injection machines in every available spot. I want to have my suppliers as close as possible to the facility, especially if we talk of producers. Sometimes this concept clashes against the idea of getting the cheapest supplier, but often this isn’t the case. As far as technical parts are concerned, I suggest minimizing production down-times due to bad quality issues and material shortages due to logistic delays. At the same time, we must develop our suppliers and bring them to the next level in terms of quality: working with oversea companies on improvement plans for custom parts is very difficult and time consuming: when you base your business on high efficiencies and operation ratios, you cannot afford the smallest disruption to your production floor; this is the reason why the cheapest suppliers do not always bring the highest profit.

Even if the status quo is that of buying parts from sister companies, I always suggest going scouting new and more aggressive vendors: pay a lot of attention to the quality of the product, but keep always searching for better suppliers. Use alternative vendors as leverage to negotiate cost reductions by the current ones, but be ready to switch if the negotiation does not bring the wanted results. Usually, 90% of an excellent set of suppliers can be found within 150 miles. Stray away from niche vendors, that means have at least two companies able to supply the same part; when a double source is active, assign even a small percentage to one of them in order to be ready in case of emergency.

8_Reduction of hidden costs. The MUDA

The muda is the Japanese translation for WASTE. Exactly like the 5S discipline, the Muda discipline is never-ending. In the Japanese culture, 5S and Muda reduction go hand in hand: they can be seen as two sides of the same coin and they both have to shape the mindset, year after year:

1_ Overproduction,

2_ waiting,

3_ transportation,

4_ useless processes,

5_ stock,

6_ movement,

7_ defective product:

these are the 7 areas where 90% of the waste is hidden. There must be none of the above waste that we have not attacked during our work-life: there are rules to learn how to fight against muda, but the best one remains the human creativity and the ability of observation. The ability in spotting a muda is also depending on the level of people’s involvement / commitment into the company. The same person, when motivated or in his best mood, is much more inclined to find sources of waste.

About the product waste, also called scrap, the automotive managers pay a maniacal attention to minimize it: not only for cost reduction purposes, but also to kill the likelihood to produce a non-conforming part that might potentially shipped to a customer.

I have developed a special tool to guide the entire organization in the battle against scrap (see the article about scrap). All the production lines have been mapped in terms of machines and sub-systems and hour by hour, shift by shift, the software visualizes the level of scrap that every single station is producing. Then a number of macros give the Pareto analysis of the main contributors in order to determine the priorities to follow in fixing the bad processes.

9_ Financial Results

A company that had posted negative results (around -$2.5M in profit in the past 2 years) has been lifted in two years to reach +2.7 M$. Around 5M$ upswing: from -10% to +4.3% . The methods used to revamp this facility are not related to the particular kind of product: the excellent manager has to master all the disciplines and harmoniously play with them and create a blameless and appealing environment.