Conclusion - Cummins

Vicki Pafumi
Reduce Expense
to Sales Ratio
(Branches – Muswellbrook and Emerald)

2
Reduce Expense to Sales Ratio
Project: Reduce Expense to Sales ratio (Branches – Muswellbrook and
Emerald) from 30.3% to 21.4% while maintaining Gross Margin
Belt: Vicki Pafumi
Sponsor: Col Russell & Shane Jones
RDO/ Distributor / Entity: South Pacific
Net Annual Saving: $1,684,967
Days to Close: 160
Project closure date: 21/7/2008 (as on 6S database)
Project closure status: Green
CFSS: No

3
Project Savings –
Financial Model Project Closure

4
Outstanding Aspects of the Project
� The significant improvement in the “Y” variable which equated to $1.7M US.
� The “Y” variable has continued to improve due to an effective and detailed control plan
increasing the savings to $2M US.
� Excellent experience for the two Branch Managers with respect to the involvement in a
6S project and 6S awareness, all the specific training they received and also substantial
financial support to maximise their PBIT.
� When the Labour rate model was produced this was utilised for all locations
� The effective policies and procedures have impacted all of the business.
� The “How To” manual has continued to improve to a stage where all branches
now have an effective Service Manual. This has been developed and implemented by
Ainslie Perkins. Fantastic work.
� The Tool Box Sessions and audits have ensured compliance.
� The review of the ASSW form has ensured all ASSW jobs are authorized and that follow
up on what training and / or support the technician or apprentice should receive.
� The key to this project was the rigorous training of both the Branch Managers
and Service Administrators especially in Emerald where they had all new staff.

5
Project Y variable, as of Dec’08/Jan’09
Since project closure the Y has improved from 15.2% to 12.45%

6
Project Y variable, as of Dec’08/Jan’09
Highlight that
Baseline Cpk
baseline of
-0.173 to Post
Closure value
Cpk of 0.439
I have changed
the LSL to 10 to
reflect the lower
numbers we are
now seeing

7
C&E Break Points & Taking to FMEA
Reality Check of What’s Appropriate to Take to FMEA
� Taking top 5 Process Inputs from C&E
� These are:
– Hours charged to all service work
– Hours allocated on timesheet
– Standard Cost per hour
– Transfer of hours at the end of the job
– Rework on jobs C&E Break Points
600
500
400
300
200
100
0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17
Series1

8
FMEA – Summary
� Through the FMEA process the key inputs increased to 13 due to
more than one failure mode per input. However, these can be
combined so in fact 4 main inputs will go through to the next process.
– Hours Charged is Labour Utilisation
– Lost Time
– Standard Cost
– Rework

9
Multi-vari Plan

10
Multi-vari Study – X1
Conclusion on X1
� Using One way Anova R2 Adjusted denotes that X1 has 38% impact
on your Y variable
� P value < .05 therefore there is variation between two branches
� If we improve variation between locations and improve Emerald
up to Muswellbrook we will have a big impact on our Y

11
Multi-vari Study – X4
ASSW % of COS
Exp % Sales
0.5
0.4
0.3
0.2
0.1
0.0
Fitted Line Plot
Exp % Sales = 0.2607 + 0.6379 ASSW % of COS
0.1
0.2
ASSW % of COS
Conclusion: Slope of �tted line =/ zero therefore there is correlation
0.3
0.4
S 0.0936579
R-Sq 35.0%
R-Sq(adj) 29.1%

12
Multi-vari Study – X4
ASSW % of COS
Regression Analysis: Exp % Sales versus ASSW % of COS
The regression equation is
Exp % Sales = 0.2607 + 0.6379 ASSW % of COS
S = 0.0936579 R-Sq = 35.0% R-Sq(adj) = 29.1%
Analysis of Variance
Source DF SS MS F P
Regression 1 0.052041 0.0520409 5.93 0.033
Error 11 0.096490 0.0087718
Total 12 0.148531
Fitted Line: Exp % Sales versus ASSW % of COS
Conclusion : Using regression R2 Adjusted denotes that X4 has 29.1%
impact on your Y variable, P Value < .05 significant correlation

13
Schedule of Improvements
1
2
3
4
5
6
7
8
9
10
No.
Release Policies
Improvement
Update Labour Rate
Policy toolbox sessions & Random
Audits
Add estimated job hours to hard card
Review and release of Short Term
Relocation Policy
Review TM’s project
“How To” for Service Administrator
Implement ASSW Correction Form
Audits on ASSW to review
authorisation
Branch Manager Training
Service Administrator Training
AP
BM’s
All / CR
VP
AP / VP /
RC
BM’s
Resp
BM’s / RC
BM’s / VP /
AP
VP / AP /
BM’s /
SA’s
Due Date
30/6/2008
31/4/2008
31/4/2008
4/7/2008
20/6/2008
20/6/2008
5/6/2008
20/6/2008
3/6/2008
30/6/2008
10/6/2008
4/7/2008
Comp Y / N
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y

14
Control Plan
This control plan has given the Branch Managers the effective tools to manage
crucial parts of their business. Four of these items are automatic uploads of data
so are very easy to manage

15
Project Savings –
Financial Model Project Post Closure
Since project closure
the “Y” has continued
to improve to 12.5%
this equates to USD
$1,995,797 savings