Manufacturing Cost Optimization – Where Should You Start?

Today’s manufacturing intelligence is different than it was even a couple of years ago. With the rapid growth and technological advancements of the Internet of Things (IoT), Industrial Internet of Things (IIoT), Industry 4.0, the Connected Enterprise, etc. – where should you start? Faith Technologies helps our clients optimize manufacturing costs by engaging their employees with proven methodologies, implementing smart manufacturing intelligence solutions.

It’s not rocket science, but optimizing manufacturing costs is a journey, and requires a deep understanding of manufacturing operations and their alignment and balance in relationship to the supply chain. When considering manufacturing cost optimization, manufacturers today must understand that traditional approaches will not get you there. It’s vitally important to include raw material costs, warehouse management, inventory reduction and control, labor management, material flow management (including genealogy and traceability), quality, energy usage and maintenance. In addition to production on the plant floor, substantial amounts of data must also be collected throughout.

With a focus on visibility and control, manufacturers can optimize their manufacturing costs and do so at the individual site level and/or globally. Faith Technologies has developed a manufacturing cost optimization program with the following five areas of focus.

1. Inventory carrying costs represent a significant impact to real-estate and cash flow. An organization was pulling inventory from their warehouse, often directly off the shipping dock to try to keep up with production, utilizing up to 10 fork trucks to feed the line. At some points during the week the warehouse was overrun, and at others it was empty, grinding production to a halt.

Using a creative and agile approach, we introduced four automated guided vehicles delivering just-in-time to a line-side inventory, enabling the line operators to maintain maximum production capacity with significantly more manageable warehousing processes. This reduced overproduction, underproduction and excess storage, and had significant positive impact on overall manufacturing costs.

2. Optimize the entire process holistically, and not its parts individually. Changes made to part of a process may improve the metrics associated with that specific process and stress out another, leading to a reduction in optimal performance. Think about the interdependencies of one cell to another and the entire line.

For example, a client wanted to better understand the accuracy of his overall equipment effectiveness (OEE) related to his packaging equipment. We developed a scope of work on some equipment at the end of the line that provided data we used to start identifying bottlenecks, undefined work stoppages and quality/scrap issues. We began to make small adjustments to these pieces of equipment and saw improvements in the packaging area, but negative performance up line. We immediately stopped the advancement of the packaging OEE initiative and re-developed the scope of work to include all equipment on the line. The net result was an overall increase in line OEE from 45% to 68% in just 90 days. Return on capital investment (ROCI) for the entire project was achieved in less than nine months.

3. Manage your energy consumption. Too often, energy as an ingredient in the cost of operations is overlooked. Faith worked with a manufacturer who developed a single pain of glass visualization tool set that combined their energy and manufacturing data. We were able to maximize energy efficiency on the line and correlate that data back to a reduction of overall manufacturing costs. What started with electricity was eventually advanced to include compressed air, water and chilled media. The result was a decrease in energy spend by 25%, and led to continuous improvement activities on other production equipment and overall line equipment effectiveness.

Energy is likely your second highest cost, behind labor. Consider how water, air, gas, electricity and steam (WAGES) are purchased and used in your manufacturing process. What would happen if you slowed down or sped up a specific operation? Would it reduce your energy consumption and the cost of energy as an ingredient of what you are producing? Corporate energy management should be a significant part of your overall sustainability program(s). If you’re not monitoring and managing your WAGES through that visibility, you’re likely paying too much.

4. Optimize your workforce. Providing advanced production scheduling will enable you to better calibrate the demand of your operators to production decisions. Reducing overtime and matching skills to tasks can be major sources of cost reduction.

5. Lower the cost of regulatory compliance and quality. Enterprise quality intelligence enables the avoidance of production mistakes, while root-cause analysis drives quicker corrective actions and proactively drives down manufacturing costs.

Faith Technologies can help you develop a manufacturing cost optimization program to reach and sustain world class decision-making capabilities, to maximize asset efficiency and meet your customers’ demands at the most optimized cost.

The next step in effective manufacturing cost optimization is engaging your people in the change acceleration process. Stay tuned for an upcoming blog with more on this important component.