The following lean six sigma cost savings case study example can provide some thoughts relative to cost practices for lean Six Sigma improvement projects.
One of my past students called this week with help estimating the savings for a project that reduced the number of re-runs of a test protocol. The retests were due to testing issues not the quality of the product. The savings ended up being around $120 a week, which probably does not pay for the improvement team effort.
Their Lean Six Sigma program was told to only work cost savings projects, nothing else. No revenue growth, no workforce issues, no anything. This is a tough constraint to a program. Especially when I heard the capacity issues.
During our conversation, it came up that their facility was only at 60% capacity, except at the end of each month when they pushed releases and output to meet the monthly goals. This business practice is troubling. I asked about the chance to save money by reducing capacity (let people go and idle equipment) and the management answer was no, they wanted to keep the capacity so they could catch up at the end of the month. My student also said that the management was not interested in level loading or balancing the releases.
What are the possible issues in this facility?
- Too much capacity for the current work load
- They do not manage the work load to avoid a rush at month end.
- Any overtime work should end, being at 60% capacity, all work should be during normal work hours.
- Only looking at cutting costs, not growing the business.
This facility is a captive supplier so they have very little control of their business volume and their on-time delivery performance is near perfect. Quality is good too. What should the Lean Six Sigma team recommend?
- Finding out (non-captive) business to justify keeping the capacity. This will also reduce cost of captive work by spreading out the overhead.
- Push for level loading and a Takt that exactly matches the customer needs so they can end the monthly rush.
- ? any more ideas, enter them as comments.
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