Lean Six Sigma - Extrusion - Sales and Manufacturing Optimization
A company had the opportunity to increase sales in an extrusion product line by a 10 fold increase. The problem, the department was operating with 8 - 16 week lead times with on-time-deliveries in the 50% range. There were 3 primary products in the extrusion process with many size variations of each product. The company knew an increase in volume of just one of the products in this department was going to send the operation into a tailspin; but, were questioning the operation because the extruder equipment was only operating at 40% capacity.
A detailed study of the operation was performed. There were two critical issues involved in increasing the output of the extrusion product line. Understanding the demands of the customer for the new product and uncovering the issues involved with poor delivery at such low capacity levels.
The team was comprised of sales, accounting, engineering, operations, production scheduling, and R & D.
To solve the issue of customer needs, Voice of the Customer (VOC) was utilized to obtain critical data of price points, order quantities, and order frequency and potential customer demand. It was uncovered that customers were very willing to place blanket orders across the various sizes to meet their quick turn needs. This gave manufacturing breathing room given their current situation until we were able to resolve their issues of delivery and lead times. It also allowed manufacturing to group orders for less setups and maintain inventory for only committed orders but still allowed rush deliveries (1 day) for small emergencies. VOC also obtained the information needed to build a competitive advantage (delivery) in the future once the product line was stabilized. All other competition was overseas except for small shops which could not supply all of their needs. Finally, linear regression was utilized to help establish pricing in conjunction with VOC since many of the product sizes had not been produced.
To solve the capacity and delivery issues a value stream map was comprised to understand the flow of the process. Although capacity analysis had always been based and calculated on the extruders, it was discovered the extruders were not the capacity constraints but binder removal trays were the limiting factor which was the major factor in creating a process cycle efficiency = 0.036. With a 1% investment to potential new annual sales the product process increased 5 fold. Other areas were also address in multiple movements and flow inefficiencies which were driving up labor cost. As the one capacity constraint was removed as always a second was created thus still limiting the output to only 50% of the desired takt rate. A Design of Experiments (DOE) was set up on the 2nd capacity constraint to reduce processing time. (Processing rates were based on original development numbers from products with more extreme requirements). The DOE proved processing rates could be cut by 50% thus increasing the exit rate to equal the takt rate.
The resulting project was able to accomplish 4 major avenues.
- Enter into a new product market for additional sales volume.
- Reduce lead times from 8 - 16 weeks to 2 - 4 weeks or a PCE = 7.0 max
- The VOC uncovered blanket orders were acceptable and gave manufacturing time to correct the issues.
- Profit margins were increases from < 10% to >35%.
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