Verstegen+Associates -- Project Examples

PROBLEM: The acquisition, disposition, improvement, maintenance, and use of 100,000 intellectual and physical assets consumed 16 percent of overhead expense for an equipment manufacturer. Assets included buildings, computer programs, databases, electronic systems, grounds, inspection equipment, production equipment, technical documents, tooling, utility systems, and vehicles.

Production equipment reliability was poor in spite of an inventory investment in thousands of repair parts exceeding $8000 per employee. Management wanted to increase equipment reliability while decreasing total operating expense by five percent and supplies inventory by 80 percent.

SOLUTION: Verstegen+Associates conducted a study of asset management work processes. The study revealed that 40 information functions involving 500 employees could be integrated into one information system. Some of the functions included supply and service accounts payable transactions, asset acquisition budgeting, capital project justification, hazardous materials compliance, maintenance budgeting, machine reliability analysis, preventive and predictive maintenance management, process improvement tracking, purchase requisition, repairable spares tracking, stores inventory control and valuation, tooling project tracking, and work order planning.

The program scope included projects to select and install Computerized Maintenance Management System (CMMS) software, build the asset, inventory and proactive task databases, and train employees from operators to vice presidents. Deliverable documentation included the following items:

A set of 1000 keywords was developed to simplify management of more than 100,000 supply items and services. Keywords were also linked to a finite set of inventory control strategies. The linkage enforced consistency in using the item database and maintaining it with additions and deletions.

New work processes were defined for each function with procedures written for training each type of employee. The training plan made full use of product training available from the software supplier. Employee involvement in building and loading the databases enhanced their commitment to the program.

Inventory and operating expense reduction goals were exceeded. Improved equipment reliability continues to avoid wasting maintenance, operating, and administrative labor.

PROBLEM: Measurement and reporting of toxic and hazardous materials and supplies usage became more refined and demanding as EPA regulation increased in severity from year to year. Tracking and reporting receipt and issue of these materials became more labor intensive and expensive. Manual compliance work processes consumed more and more time for supervisors, material handlers, operators, maintenance technicians, and staff engineers.

SOLUTION: Verstegen+Associates defined the offending work processes in terms of their required forms and procedure narrative. Flow charts were not developed until the superseding procedures were designed. Data collection, entry, and reporting requirements were incorporated into the Asset Information Management System (AIMS) specifications.

Hazardous materials were received by AIMS in their bulk quantities and issued in smaller amounts just like any other supply item. Query reports were developed to extract periodic receipt and usage accounting in digital format for reports required by the EPA. The digital format produced by database queries could then be downloaded directly into required EPA reports.

Salary and wage labor for EPA compliance decreased from more than 5000 hours/year to less than 500 hours/year. Lead-time to produce the reports decreased from three weeks to three days.

PROBLEM: A traditional vehicle fabrication and assembly unit with 1500 employees was well-integrated with casting, machining, stamping, welding, heat-treating, painting, and assembly processes. The return on assets for the unit was well below management expectations. The plant layout had not been optimized for 40 years. Raw materials and parts were furnished by more than 1000 suppliers. The cost of quality and logistics exceeded 30 percent of the total operating expense.

SOLUTION: Verstegen+Associates was retained to plan and lead a three-year program to help the unit achieve five goals:

A plan was developed to identify the sequence and magnitude of physical, informational, and intellectual changes required for the transformation to flow manufacturing technology. Material flow through fabrication processes was synchronized to the assembly line by arranging 1500 machine tools into cells. More than 200 machines were made redundant and sold. Process characteristics such as product changeover delay were eliminated wherever they forced batch processing into the material flow.

A facility layout plan was developed to designate all of the new cell locations. Equipment operators and maintenance technicians were trained to do the final cell design. Maintenance technicians and several contractors did equipment relocation work in accordance with a master plan.

Raw material and in-process inventory investment was reduced by the equivalent of $20,000 per employee and 40 percent of the floor space was converted from inventory storage to production usage by merging another plant into the void. Training in quality improvement and process management was started before equipment relocation to help define the final cell design and layout.

Supplier quality improvement effort reduced their number by 50 percent. Inventory turns were increased from 7 to 32. Specifications were developed for new information systems designed to accommodate the rapid turnover of materials resulting from the transformation to flow production.

The transformation to one-piece flow reduced operating expense by 19.2 percent and enabled the Return on Net Assets investment (RONA) to exceed 15%.

1. PROBLEM: A packaging manufacturer was interested in increasing throughput on five-color printing presses to fulfill sales order potential. The manufacturer wanted to do this without an extensive capital investment in equipment and facility construction. Run time and changeover time together averaged about one hour for each order.

SOLUTION: Work-measurement studies identified opportunities to reduce changeover time from 30 minutes to 5 minutes and reduce the crew size from 10 to six for two presses. The sixfold reduction in changeover time increased throughput for all four presses from 96 to 160 orders per day, enabling a 2/3 increase in sales revenue. Re-balancing the work-load decreased the number of operators on three shifts from 60 to 36, a 40 percent reduction in labor expense.

2. PROBLEM: An electronic component manufacturer was approaching capacity on three insert-injection molding machines. The question was "how soon will we need another machine?"

SOLUTION: Work-measurement studies revealed that the changeover time could be reduced from 90 minutes to 9 minutes with both procedural and minor tooling changes. In-process inventory could be reduced from more than 20 to two days of sales by producing two days of sales for each of 32 different products every two days. Throughput could be increased by another 20 percent with standardization of work methods.

After all of the improvements were implemented, one machine was retired. The answer to the original question was "Perhaps never".

PROBLEM: Twenty years after start-up, a manufacturer of integrated control systems for web-process manufacturing operations was nearing market saturation with its initial product line developed for paper machines. A strategic decision was made to develop systems for other web-process markets. Candidates included roll calendaring and coating, textile finishing, and metal rolling.

Lead-time for market and product development of systems was more than three years. New electronics technology was being introduced to the market every six months. The development lead-time had to be reduced to less than nine months to prevent introducing technically obsolete products.

Twenty three departments with more than 600 scientists and engineers were involved in the marketing, engineering, production, and field service process for developing and introducing new products.

SOLUTION: Verstegen+Associates designed a matrix organization with a clear division of authority defined among department managers and program managers. Project management courses were developed and taught to more than 200 managers, scientists, engineers, and key technicians.

A master program plan template was developed for all program managers and department managers to follow. Work was organized into four two-month phases. Key customers and their account representatives were involved in the first phase of program planning.

Project management documentation was typically reduced from 3000 pages to less than 300. Program and department managers negotiated schedules for key contributors that kept all concurrent development programs on schedule.

More than a dozen new products and their markets were developed within two years. A completely new product line was developed for the original paper machine market during the same period. Sales revenues surpassed all previous records.

PROBLEM: Operating losses for a multi-national manufacturer with 6000 employees in 17 plants and 9 corporate departments were approaching $100,000 per day. Domestic market share had dwindled from 70 to 7 percent during a 25-year period. A complete business failure threatened. More than severe cost-cutting measures were required to reach a break-even status. The sale of several plants was being considered to raise capital.

SOLUTION: Verstegen+Associates lead the executive committee through installation of a performance improvement management work-process. The work-process had the capability to reduce total operating expense by up to 12 percent every year. In addition, it was designed to maximize cash flow with a combination of cost avoidance, cost control, and cost improvement disciplines.

Outstanding leadership capability among a few members of the executive committee was adequate to form a communications committee that worked with the company's public relations firm. Coordinators with leadership qualities were appointed to lead teams in each of 26 plants and departments. Teams were trained in process improvement techniques such as opportunity discovery, goal planning, project definition, and project management.

An initial set of improvement projects was defined for each team during their initial training period. An information system with a relational database was developed to coordinate corporate strategy for financial and market performance improvement among all of the teams.

Opportunities with the largest savings potential and shortest duration were funded first to speed financial recovery. After break even was achieved, the strategic goal was redirected to favor opportunities with the most market-share growth potential. More than 4000 opportunities were qualified and 1000 were completed during the first two years.

The reduction in operating expense for the first 1000 project completions was equivalent to 17 percent of net sales revenues. Opportunities included changes in distribution system design, information system design, material handling methods, product and process design, process equipment, and utility-system equipment. More operating expense improvement potential in the cost of quality and the cost of logistics was eventually realized.

The continuous performance improvement management work-process developed by Verstegen+Associates changed a loss approaching $100,000/day to a profit approaching $100,000/day within two years. The ability to deliver higher quality products at a lower price with reduced lead-time was a key factor in doubling market share within another two years. But most importantly, the process was sufficiently internalized by the time our work ended for it to continue reducing operating expense and increasing productivity to this day.

1. PROBLEM: A golf cart manufacturer and their supplier were both stocking a supply of molded fiberglass bodies to accommodate fluctuations in order demand for five different model configurations. Tooling to create each model configuration from a generic molding was maintained by the supplier.

SOLUTION: Verstegen+Associates recommended moving tooling to the manufacturer's assembly line where generic bodies could be finished as required to sustain one-piece-flow. The supplier was re-scheduled to produce generic bodies on a weekly schedule and ship them on a daily schedule. The quantity retained at either site was reduced to one shipment, representing a 90 percent reduction in inventory investment and storage space. Multiple handling was eliminated since each shipment went directly from the receiving dock to the assembly line.

2. PROBLEM: A durable goods manufacturer wanted to identify logistics cost improvement opportunities in bills of lading, supplier invoices, purchase orders, and receiving reports for materials and supplies purchased.

SOLUTION: An associate and an internal team evaluated each item to find out if it was using the most economic order quality, shipping quality, and usage quantity. They completed the study within two weeks. The recommendations were executed by the internal team within two months. The resulting annual savings exceeded $10,000 per employee.

3. PROBLEM: A durable goods item with 50 components needed analysis for logistics and production process cost improvement potential.

SOLUTION: Verstegen+Associates evaluated the product, and distributed specifications for purchased materials and components to potential suppliers. The potential suppliers were asked to provide proposals to reduce inherent cost due to product and process design and logistics requirements. Changes in product, process, and logistics design reduced product cost by more than 25 percent within two months.

4. PROBLEM: A packaging manufacturing process occupied two plants separated by an enclosed bridge. Fork-lift trucks were used to move pallet loads of in-process material between the two plants.

SOLUTION: An Automated (wire) Guided Vehicle (AGV) system was designed and installed to replace fork-lift trucks on three shifts of operation. Annual operating cost savings exceeded $200,000.

5. PROBLEM: A plant with 24 polyurethane extruders used fork-lift trucks to supply resin in 1000-pound containers.

SOLUTION: A bulk pneumatic distribution system was designed and installed which used silos to replace fork-lift trucks on three shifts of operation. Annual operating cost savings exceeded $250,000.

1. PROBLEM: A manufacturer relied upon manual work processes to requisition, approve, purchase, stock, and issue more than 100,000 different supply items for office, plant, warehouse, utility, and vehicle operations.

SOLUTION: Verstegen+Associates assisted 78 internal team members with the specification, purchase, and installation of an integrated information system and its database. The system linked all operating departments with supervision, purchasing, receiving, and stores functions.

Team members were taught how to use their new information system to simplify and automate supply replenishment work processes. Several supply contracts were negotiated to reduce both the number of suppliers and increase standardization of supply items.

As a result of the changes, supply inventory investment was reduced by several million dollars. In addition, the operational system required only one planner-buyer to support a unit with 1500 employees.

2. PROBLEM: A consumer product with only 12 components had been in production for several years. Management believed that all cost reduction opportunities had been exhausted, but sought assistance from Verstegen+Associates.

SOLUTION: Verstegen+Associates analyzed product design from a cost-function viewpoint to reveal further material cost reduction opportunities. We then recommended changes in product design and material specifications to reduce the material cost by 42 percent without increasing process cost.

The same analysis was applied to all similar products to reduce material cost by 24 percent or more. As an additional benefit, product design changes also reduced process cost for some products.

3. PROBLEM: A vehicle manufacturer with 20,000 production and service part numbers wanted to reduce direct material cost.

SOLUTION: Verstegen+Associates applied group technology in a systematic review of all purchased parts to reveal opportunities for simplification and standardization.

Several opportunities to eliminate duplication were revealed. For example, one part had accumulated seven different part numbers! Several families of parts were redesigned to accommodate both production and service applications with one part number. Substantial savings resulted from decreased inventory investment and transaction cost.

1. PROBLEM: A paper manufacturer requested industrial engineering services to specify a new finished goods warehouse.

SOLUTION: Process analysis by Verstegen+Associates revealed that the warehouse construction could be avoided if the storage policy could be changed from dedicated to random.

However, a reliable means of recording and retrieving random locations of finished goods orders was required to allow this change. Yet technology to accomplish this feat was not available.

A team of associates was formed to develop the world's first radio frequency link between fork-lift trucks and a warehouse management system. The RF subsystem was designed and built by integrating several existing technologies.

The installed system was successful in enabling the change from dedicated to random storage of finished goods. The paper manufacturer was able to cancel the warehouse construction project, avoiding a capital expenditure of $2.7 million.

2. PROBLEM: A durable goods manufacturer had a 100,000 square foot plant and a 66,000 square foot office and warehouse building and was concerned about occupancy costs.

SOLUTION: Verstegen+Associates led the transformation from traditional batch to flow manufacturing technology. The transformation reduced the need for inventory storage space enough to move the office into the plant building and vacate the 66,000 square foot office and warehouse building. The building was sold and all of its occupancy cost was eliminated.

3. PROBLEM: A manufacturer had a 1,000,000 square foot plant and a 250,000 square foot plant and was concerned about occupancy costs.

SOLUTION: Verstegen+Associates led the transformation from traditional batch to flow manufacturing technology. The transformation reduced the need for inventory space enough to move the small plant into the large plant. The small building was sold and all of its occupancy cost was eliminated.

4. PROBLEM: A manufacturer could not maintain an adequate temperature in their plant during winter months and wanted to know how much to invest in additional heating capacity before the next heating season.

SOLUTION: Verstegen+Associates conducted a thermal analysis of the plant, which revealed that the heating system reached equilibrium when the outside temperature was 0 degrees F. At equilibrium, a one degree decrease in outside temperature would result in a one degree decrease in inside temperature when all exhaust fans were operating. When exhaust fans were idle, equilibrium was reached at -30 degrees F.

Analysis of 100-year weather data revealed that the outside temperature could be below 0 degrees F during 20 to 120 winter operating hours. Production and exhaust fan usage could be scheduled to maintain the desired inside temperature with the existing heating system.

The scheduling strategy eliminated the need for an investment in additional heating system capacity and reduced heating cost during winter months.

1. PROBLEM: A golf cart manufacturer had a high incidence of warranty claims and other quality costs that had persisted for 20 years.

SOLUTION: Verstegen+Associates identified a list of 144 quality problems and arranged them into an improvement plan. Root cause analysis was applied to each problem and responsibilities assigned to appropriate problem-solving teams.

Most of the solutions that required procedural changes were effected within a few days. Designed experiments were used to find and correct root causes in operations such as welding. Other solutions required the design and building of new tooling to gain process control.

All of the problem causes were removed within 18 months. Annual savings exceeded 24 percent of labor and overhead expense.