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Manufacturers implementing technology for financial reporting purposes often overlook efficiencies that can generate cash flow and reduce costs on the manufacturing floor. Accurate information that provides a business owner with the ability to make immediate, profit-boosting decisions about their operation is crucial during an economic downturn. If revenue is down and the market mood does not permit price increases, then profitability can only be realized by reducing costs. You must ask yourself, “What prevents me from 100% efficiency?”
Developing a PlanFocus on “faster and better.” Every asset, machine, tool, and person you have must be accountable and cycle more quickly. An airline cannot survive when planes are not in the air producing revenue. Your business cannot survive unless you know where your assets are and how they can be used efficiently.
Imagine being able to view the location of your tools and equipment at any moment so you can plan to transfer them to the next job. The ability to locate a unique asset when it is required on another active job helps to avoid downtime. What if you knew exactly how many hours were spent on each step in the assembly process and where the bottlenecks were? Inefficient situations can cause accelerated costs and reduced productivity.
Take a proactive approach by developing a plan. Under normal circumstances, a business owner/manager reviews financial information, overhead and direct operating margin at the end of a month or quarter. But this economy does not constitute “normal” circumstances. “Companies must plan their destiny and not look in the rearview mirror,” says Bill Allen of W.A. Allen Consulting. “Instead of flying blind until a work order is completed, it’s time to operate from a plan. Understand what prevents you from 100% efficiency.”
Buy-in happens from the top down. Start by developing a culture that compels events to conform to your plan. Anything that deviates from the plan is an opportunity for cost savings and efficiencies. Do you have too much time loss in non-direct labor areas (i.e., idle or downtime)? By evaluating what interrupts the workflow on a daily basis, you can uncover areas that, with improvement, will provide an increased bottom line.
It is up to the company to make a conscious decision to manage from a plan-and hold all employees accountable for following the plan-rather than react to circumstances. This transition will be easier with the adoption of the appropriate technological tools.
Identifying Problem AreasEvaluate your operations to determine where your technology dollars are best spent. For instance, can you reduce or minimize the time spent looking for machines, tools and other assets? Is it possible to plan maintenance and calibration to avoid machine downtime? A barcode tracking system can show where assets are at the time they are needed by tracing which job they were checked out for and by whom. In addition, an integrated maintenance scheduler flags required maintenance as it is due and ensures OSHA compliance.
Proper control of tools and inventory prevents costs that result from hoarding, irresponsibility or downright theft. It is up to the company management to declare that shrinkage is unacceptable and hold employees accountable for losses that are under their control. This policy is given “teeth” when assets and inventories can be effectively tracked using technology.
Bottlenecks in the production process slow down productivity. Although you may not be aware of all the bottlenecks in production, these are probably the most important variables. What are your capacities for output, and what is the optimal load of people, machines and tools to meet 100% capacity? How do you route the work to prevent downtime? A computerized system that tracks labor hours to a specific function within the assembly process and on the fly will help prevent these costly issues by identifying those points where workflow gets interrupted.
Does your staff spend unproductive minutes (or hours) manually recording transactions? Work hours devoted to manual recording and recordkeeping do nothing to increase revenue or control costs. Technology can provide the integrated systems control over asset use, capacity, maintenance, and location-and do it 24/7.
Implementing New TechnologyYou don’t have to be one of the “big guys” to afford technology. Today, reasonably priced systems are available to help avoid many of the costs consumed by inefficiencies in operations. Such systems can be purchased as stand-alone entities that are focused on one aspect of the business. Deciding where to start depends on which areas are losing the most money.
A time and attendance software package helps identify who is working when, on what job, and for how long, and can produce reports for payroll. It can be set up to account automatically for start and end times, breaks, lunch, etc. to reduce the time employees spend recording their time. Barcode scanning makes the input fast and easy.
Job costing software adds the ability to track inventory costs plus the labor hours consumed against the specific job while the job is in progress. Similarly, work in process (WIP) software is a subset of job costing and tracks a specific work order through the production process. It tells the scheduler and production manager the stage of each work order in the production process at any moment.
An inventory control software package accounts for stock parts and produces alerts when it’s time to reorder. It can issue parts to a work order or job and confirm that the correct items have been pulled. The software keeps track of finished goods inventories and reports replenishment requirements. Barcoded inventory makes it quick and easy to take an inventory count.
Barcode technology has been actively used for over 20 years in manufacturing, distribution, and retail to track inventory and jobs. The barcode terminals are similar to PDAs and provide immediate and accurate information. Barcode labels can be designed to withstand the dirt, grease and rough use experienced in many harsh environments, while other labels can be printed on a laser printer. Barcodes can easily be added to work orders in the form of a laser “font,” which allows parts, jobs, etc. to be barcoded on the work order.
Simplifying the JobMaking employees’ jobs easier by ensuring that they have what they need to perform at their best reduces stress. Showing employees that you are taking steps to increase profitability will provide them with more confidence in the company.
“Our…ability to readily locate critical tools, monitor routine maintenance schedules, and track broken equipment has saved countless labor hours and lowered the frustration level of our shop employees,” says Thomas Hortman, Project Manager for AAI Services Corp., a Division of Textron Systems. “By providing our employees with an efficient method for obtaining, maintaining, and tracking tools and equipment, the CheckMate Tool Tracking System has effectively helped lower our operating costs.”
While technology won’t cure the credit crunch manufacturers are facing, automated processes that improve cash flow and keep lenders in the loop demonstrate that a business “has its act together” and can go a long way in convincing lenders that their risk is low.
For additional information, contact Dynamic Systems Inc. at (800) 342-3999, ext. 208, or visit www.a-barcode.com.