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Production Planning & Control Possible cost reduction in manufacturing

Sep 22, 2016

When it comes to modern manufacturing intelligence, a lot has transformed over the years. Manufacturing concerns have grown more complex, while new technologies that have evolved to meet these challenges now require new knowledge to understand, implement and leverage effectively. The round-table feature analyses the importance of reducing costs in manufacturing and explains how this can ensure maximum productivity and output. A read on...

The prevailing surge in the manufacturing segment in India is plugged to be quite promising. With this new manufacturing opportunity, the industry is slated to be more skill-intensive, and the industry leaders also foresee India as well poised to take advantage of this transformation. This has also made companies under pressure for a more rapid adaptation of the latest technologies, adaptability to the local market conditions as well as a continuous improvement so as to optimise costs, quality and efficiency.

A major consideration in this regard is cost reduction that results in significant product cost saving, manufacturing cost saving and life cycle cost saving. Sharing insights on why and how reduction in costs ensures better productivity in manufacturing operations are Sunil Beloshe, Senior General Manager—Manufacturing, Godrej and Boyce Appliance Division, Shirwal; Sandeep Adkar, General Manager—Operations, Cummins Turbo and Pravinkumar Fatangare, Plant Manager—Mechatronics, KSPG Automotive India.

Hitting the right mark…

A momentum reduction in product cost makes it easier to build and assemble it, and then to market it in less time. But to achieve this excellence, along with retaining the required productivity and output levels, there are several challenges faced by manufacturing units today. While addressing such challenges, Beloshe says, “Identifying and understanding non-value added activities itself is a challenge because till you don’t consider it as non-value added activity, you will not eliminate it or minimise it. Carrying an attitude of continuously challenging the status quo and finding better ways to do things is lacking today.”

Opining the same, Adkar believes that poor demand forecasting, wherein the right prediction of sales units is needed to plan raw supply best is one of the major challenges. “Skilled manpower is a significant challenge. However, joint drives by organiations and government to enhance work skill development and develop a pool on state level will get desirable results. Also, transport network is a major issue. A vehicle fitness tests and cross border barrier delays need attention thro’ rules & strict adherence and a good road design & connectivity is helpful here,” he suggests.

What then needs to be explored are the reasons for the manufacturing industry’s uneven performances. As per Fatangare, Lean tools like visual management, value stream mapping, along with developing resource flexibility for workforce, facilities and equipment (mix model line) can be supportive to overcome the challenges posted due to cost incurred by the demand fluctuation. He further mentions, “Plant-within-plant or factory-within-factory concept implemented by dedicating all relevant core processes & key resources for manufacturing of a focussed product family leads to having competitive priorities within the team and have better performance in terms of delivery, quality and cost. Cross-functional team member empowered for the dedicated plant within plant can be supportive to have resource flexibility and responsiveness for the challenge of sales fluctuation.”

Implementing standard cost reduction policy

There has been standardisation on manufacturing processes, parts, materials, and other aspects. Introducing/implementing a standard cost reduction policy across various areas of manufacturing and its supply chain can be considered in this regard. As per Beloshe, “Standard cost reduction policy across various areas of manufacturing and its supply chain only helps us to work on low hanging fruits. For a breakthrough improvement or major improvement, one needs to deal with each process separately.”

In fact, when the manufacturing efforts are not generating profit margins as desired, one should consider a few key cost-reduction ideas. Elaborating more on such ideas, Adkar believes that some MNCs practice it, decides targets and reviews regularly. Emphasising this further, he avers, “This also drives team to think upon unconventional ways for cost reduction. The attempt is to nullify the inflation effect first, and then add some savings to perform well. Normally, OEMs ask for cost reduction YOY. On one hand, IM needs keen monitoring on consumption pattern, alternate materials, waste reduction, import substitutes, better methods or Kaizen to reduce consumption, etc. On the other hand, DM needs improvement in materials by R&D, design, cost competitive, easy-to-machine or with reduced machining, and makes the use of scale of economies considering reduced proliferation.”

Simplifying through supply chain network design

Today, effective supply chain network design can deliver significant reduction in the overall supply chain costs and incur improvements in service levels. Speaking on the various possibilities in this area, Beloshe suggests that industrial manufacturing is set to undergo a fundamental transformation with Industry 4.0. “This mainly talks about digitisation of manufacturing processes and supply chain. Digitisation will share real-time information, which will facilitate to take more informed decisions. Based on real-time contact methods, these services will provide secure access to information and applications in a mobile context,” he shares.

Adkar rightly points out four key participants in chain—supplier, transporter, user and customer. He furthermore explains, “To strengthen supply chain and reduce costs, suppliers should focus on improving production agility, productivity, reduce overall conversion cost and have a fair ratio of skilled permanent/temporary workforce. Parts should be able to travel fast and there should be faster order-to-payment cycle to keep supply chain cash strong. Also, suppliers should be developed and made to follow ‘produce local, consume local.’ Lastly, there should be an improvement on customer demand forecasting.”

In this context, Fatangare suggests that the manufacturing strategy of ‘make to stock’ and ‘make to order’ is defined with ground rules of sales volume, lead time, change-over time and inventory carrying cost that helps to establish a levelled production system with optimum utilisation. “Subsequently, supply chain activity of material picks up through consolidation of shipment and using milk run can enhance the service level in terms of material availability in a cost-effective manner,” he adds.

Role of Lean principles

Labour is one of the critical elements, which calls for optimisation in today’s demand-driven manufacturing world. So, how can Lean principles be used to improve workforce management? Answering this, Beloshe opines that Lean helps us to improve efficiency by standardising tasks, processes and use of technology to eliminate waste in processes. “It mainly talks about low-cost automation and not complex automations. Complex automations may reduce the need of people running the manufacturing lines, but adds the need of people maintaining automations. Also, it helps to increase flexibility and agility of labour by multiskilling and multitasking,” he avers.

As humans are involved, it needs practicing humanity, respect for each other, appreciation on achievements, development plan for certain weak aspects, ergonomically designed work stations, career path for bright ones, etc. As per Adkar, skilled workforce on shopfloor is vital for quality product. “When we focus on such points, people get attached with work and monitors waste elimination, good engagement, continuous improvement, level production and built-in-quality, which eventually contributes to achieve organisation goals via lean principles,” he asserts.

A Lean line design workshop for every new assembly line with operators, process engineers, material feeding and quality team supports to develop the assembly line with smooth flow and ease of operation. As per Fatangare, “Value stream map with current state and future state map has a strong potential to reduce the lead time and improve the service level. It can be effectively applied to improve the recruitment process, breakdown maintenance process, material feeding process, supplier payment process, etc.”

Ensuring reduction in costs

Tough times in business may lead one to research and implement cost-cutting strategies. Even businesses that are profitable can benefit from cost reduction strategies to create an even higher profit margin on its products or services. To ensure costs reductions, Beloshe believes, “Many studies shows that choices made during a design stage accounts for 70% of the lifecycle cost of the product. The choices made during this phase are very difficult or costly to change. So, a designer should use the real time supply chain data to evaluate design choices, keeping target costing and target process in mind.”

Design for manufacturability as one of the mandatory check point for design validation will support the robust process design. According to Fatangare, “Function and fit tolerances derived from design, if validated based on part assembly and validation trial with P-D-C-A approach, may lead to have less stringent tolerances without hampering the product performance at a reduced machining cost.”

To achieve the desired reduction, Adkar concludes some recommendations, that includes developing products with modular system; use of new-gen materials; design parts to avoid use of special Mcs/fixtures, special tools, special materials, hard-to-reach machining areas & intermittent cutting; promoting design & development in India to avoid heavy royalty to MNCs and encourage the private sector budget in R&D.☐

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