MSACMT430A Improve cost factors in work practices

Contents
Contents
Getting started
Purpose
Scope
Learning outcomes
Developing employability skills
Assessment
Resources
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iii
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viii
Improve cost factors in work practices – An overview
ix
Chapter 1: Analyse cost components of a team’s function 1
1.1 Identify cost components in the product or process 2
1.2 Identify cost factors under the control of the team 12
1.3 Identify causes of variability in costs 18
1.4 Analyse impact of costs on production or process activities 25
undertaken by the team
Discussion topics 29
Checklist 29
Assessment Activity 1: Analyse cost components of a team’s function 30
Chapter 2: Improve the cost efficiency of team processes 35
2.1 Identify methods of improving productivity and/or reducing costs 36
2.2 Determine the cost/benefit ratio of alternative methods 41
2.3 Consult with stakeholders regarding changes 45
2.4 Recommend changes 52
2.5 Implement recommended changes 56
Discussion topics 59
Checklist 59
Assessment Activity 2: Improve the cost efficiency of team processes 60
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Contents
Summary: MSACMT430A Improve 61
cost factors in work practices
Final Assessment: MSACMT430A Improve 65
cost factors in work practices
Appendix 1: Process mapping 69
Appendix 2: Cellular manufacturing 73
Appendix 3: Brainstorming 75
Appendix 4: Competitive manufacturing – An overview 77
Employability skills 87
Verification of competency: MSACMT430A Improve 89
cost factors in work practices
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Chapter 2
Improve the cost efficiency
of team processes
A manufacturing organisation makes a major investment in physical
facilities, such as factory buildings and warehouses, and acquires many
specialised types of machinery and equipment. In order to carry out the
manufacturing process, the manufacturer purchases quantities of raw
materials, supplies and parts, and builds up a workforce of personnel who
convert these raw materials, supplies and parts into finished products.
Chapter 2: Improve the cost efficiency of team processes
Implementing processes or procedures within your workplace to improve
quality, productivity and customer satisfaction can control or substantially
reduce operating costs and improve productivity.
This chapter explains how to:
2.1 Identify methods of improving productivity and/or reducing costs
2.2 Determine the cost/benefit ratio of alternative methods
2.3 Consult with stakeholders regarding changes
2.4 Recommend changes
2.5 Implement recommended changes
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Chapter 2: Improve the cost efficiency of team processes
2.1 Identify methods of improving
productivity and/or reducing costs
What is process improvement
From a lean manufacturing perspective, all workers from every level of the
organisation must be involved in continuous improvement. Workers
within a team should take responsibility for their work and regularly
suggest ways they might change a process or work procedure within their
area of responsibility.
For example, you might suggest that changing the way the work area is
laid out will reduce the amount of time workers spend travelling to select a
tool or operate a piece of machinery. You might suggest that additional
training for staff to learn better techniques might result in less waste and
improved quality. Or you might suggest some team activities that will
boost morale so workers get on with their job more efficiently and don’t
waste time. By eliminating or streamlining work processes, organisations
can typically reduce inventory by more than 75%.
Any of these suggestions should lead to worker motivation because each
worker is involved in contributing to the benefits of the organisation as a
whole. It is important to ensure continuous improvement factors are
always considered in determining procedure or process change within the
team’s area of responsibility.
The following examples discuss some of the benefits in applying lean
manufacturing tools. These benefits can be identified as either:
• Tangible benefits – improvements to the process or workflow that can
be directly or objectively measured, such as: time, labour utilisation,
maintenance costs, tooling costs, energy costs, rejects, floor space etc.
• Intangible benefits – improvements that are more subjective or require
more work to measure, such as: morale, motivation and customer
satisfaction.
The following case study demonstrates some of the immediate benefits of
work area redesign and improved workflow at the AMCOR Heidelberg
packaging plant.
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Case study
Designing lean work areas
Cartons Heidelberg had been on a strict ‘lean regime’ over the past
three years, and according to operations manager, Brendan Rundle,
their figures had never been better. ‘Between raw materials, finished
goods and work in progress, we carried around $5 million of inventory,
and right now it is about $3.3 million. So an additional $1.7 million of
cashflow being available is significant,’ said Brendan. ‘And it’s all
possible because we adopted lean manufacturing as our guiding light.
’The driving factor is to manage with the minimum amount of
inventory and the minimum amount of manufacturing lead time,’
explained Brendan. ‘Part of lean manufacturing is forming
manufacturing cells to link processes. A logical benefit of a cell is if you
programme a job onto the printing machine, it will automatically flow
onto the cutting machine, the gluing machine and onto the customer.
‘This plant was set up functionally, with print crews who print a job
that goes into inventory. The cutters would do the same and the gluers,
hopefully, would be sending out finished goods. Getting all that
inventory within the plant out the door to complete an order used to
take anything from 28 to 35 days. And it could be, in fact, three months’
stock for a customer. Most of our work now moves through the plant in
three days. So that’s $700,000 or $800,000 of inventory that’s no longer
here.’
Chapter 2: Improve the cost efficiency of team processes
Reprinted with permission from Amcor Australasia.
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Chapter 2: Improve the cost efficiency of team processes
In the following example, the adoption of procedures to ensure a clean,
organised and efficient workplace yielded cost savings by reducing
accidents, production downtime and materials wastage. Creating a safe
and pleasant working environment increases employee engagement.
Case study
Canning line
A soft drinks company fills their products into cans. Product spillage
can occur on the floor area below the can filler owing to a malfunction
of the filling head, or a fault with the can. If product spillage is not
cleaned up the floor area surrounding the filler becomes slippery and
sticky. This presents a tripping hazard.
The company implements strict cleaning procedures to ensure spillages
are hosed away and the work area remains clean and safe. Ensuring a
safe working environment minimises workplace injuries and the costs
associated with employees being absent through workplace accidents.
Operators use water hoses to hose the spilt product down the drains.
These hoses are often left running, which wastes water and incurs
increased water costs and disposal costs.
Fitting trigger heads to hoses would automatically shut off the water
supply after use, reducing water usage and costs.
It is important to recognise that improvements designed to reduce costs
within the workplace should consider all OHS and quality implications.
There is no acceptable trade-off between quality, safety and cost. It is
always cheaper to get quality and safety right first time.
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Chapter 2: Improve the cost efficiency of team processes
Task 12
The following table details the resources (people, materials, production machinery
or equipment) that are required in the workplace, and the need to use them
effectively. Describe the actions taken within your team to control the cost of these
resources. Then consider what actions could be implemented within your team to
reduce costs and improve productivity.
Resource Requirement Action/processes
in place to control
costs
People
Machine
and/or
equipment
Materials
• Team members at work
• Team members capable
of doing job efficiently
• Equipment available and
in useable state
• Machine downtime
minimised
• Wastage of materials,
utilities and services
minimised
Improvements to
reduce costs/increase
productivity
• Rework avoided
• Minimise non-moving
work in progress (WIP)
Notes
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Chapter 2: Improve the cost efficiency of team processes
Example
Cost benefit analysis of quick changeover
A company had undertaken a cost benefit analysis for a quick changeover
program. Management established a functional team of people from the shopfloor
to identify and evaluate the process improvements. The team was made up of the
area supervisor, die-setters, machine operators and maintenance staff.
The team met and reviewed the set-up procedure. They concluded that by
addressing a key part of quick changeover, namely the conversion of internal
activities to external activities and small expenditures on tools and mobile tool
boards, they could reduce set-up times by about 25%.
They had been measuring the time required for set-ups and concluded that the setups
currently take an average of one hour, so they will save about 15 minutes per
set-up. The cost of new tools and tool boards for the changeover amounts to
$650.00. The question now is whether the cost of the tools and tool board is less
than the savings made by the set-up reduction.
The process map of the current state of set-ups on this machine is shown below:
The team proposed to reduce the set-up time by an ‘organisation-led’ changeover
reduction program. This meant improving set-up by focusing on how they were
doing things, rather than making large capital expenditures. This involved:
reduction in time spent locating tools
colour-coding dies so that they are easier to find
improving the accuracy/regularity of the daily workplan so that people know
when they will be called upon for a changeover
allocating set-up tasks to the operators who are not on production.
The total cost of this exercise was $650.00. The production line operates eight
hours per day, five days per week, therefore:
the forming machine has an average cycle time of five parts per minute (one
every 12 seconds)
if they save 15 minutes per day through the planned set-up reduction, they will
be able to produce 75 additional parts (5 x 15 = 75 parts)
the cost of each part produced by this machine is: $2.00
the total benefit is: 75 parts by $2.00 per part = $150.00 per day.
After five days, this activity will have saved the company $750.00 and paid for
itself.
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Discussion topics
Discuss the following topics with your team members or management to
increase your understanding of improving the cost efficiency of team
processes.
• Discuss how process improvements like quick changeover can lead to
batch size reductions. How would you measure increased space from
batch reductions
• How do you measure transportation in and out of storage
Are there any other issues you and your team members would like to
discuss
Checklist
Check that you know how to do the following.
Identify methods of improving productivity and/or reducing costs.
Determine the cost/benefit ratio of alternative methods.
Consult with stakeholders regarding changes.
Recommend changes.
Implement recommended changes.
Chapter 2: Improve the cost efficiency of team processes
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Verification of competency
MSACMT430A Improve cost
factors in work practices
The learner
has demonstrated competency in:
• Analyse cost components of team’s function
• Improve cost efficiency of team processes
and is therefore deemed competent in MSACMT430A Improve cost factors in work
practices.
Trainer
RTO
Organisation:
Organisation:
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(date)
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Verification of competency: MSACMT430A Improve cost factors in work practices
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