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FMCG Profit Improvement
- 1. Profitability Improvement in FMCG Manufacturing Operations SSA embarked its journey to expand and serve, to international markets and Indian MNCs abroad, in the year 2011. During this course, SSA came across varied industries like FMCG, Machine Manufacturing and other service industries, across Africa and Asia, who in specific had requirements to improve their operational profitability. This was because industries around the world were challenged with increase in labour, material cost and other operating costs. ABC Pty (a subsidiary in Indonesia of an Indian MNC giant) is one such FMCG who was facing these challenges. The following article describes how SSA had handheld and supported ABC to deploy ‘Profitability Improvement & Cost reduction drive’ using process improvement tools and techniques. Business Challenge ABC Pty is an FMCG serving Indonesia and nearby Southeast Asian markets with Home Care and Body Care products, with a turnover of approx. INR 1500 Cr. ABC recently came across two major challenges in their business, which was eating away their available operating gross margins. One of them was, rise of about 55% in minimum wages as enforced by the local government; and the other major challenge was devalue of local currency which increased their cost of material that was imported from different parts of world. This led to an immediate need for a Cost reduction drive across the plant operations, which can help themcompensate against the current challenges raised. It is not the strongest of the species that survives, Or the most intelligent that survives. It is the one that is the most adaptable to change. - Charles Darwin SSA partnered with ABC Pty to initially diagnose and identify the focus areas for Cost reduction and define a time bound approach to achieve the desired financial savings, which delivers a perpetual result for the Organization. Diagnosis SSA has a unique approach to diagnose and prescribe roadmap for profitability improvement. This diagnosis is carried out across all the organization’s elements like Sales & Marketing, NPD cell, Product Design, Production Planning, Procurement, Production, Supply chain and Warehouse. The focus of Diagnosis is to identify profit leakages, identify opportunity for process optimization, calculate Cost of Poor Quality & financial losses and finally estimate the potential savings opportunity across the organization.
- 2. Approach to Improvement Based on the diagnosis and identified focus areas in product manufacturing lines, SSA took a three pronged approach to deploy Operational cost reduction initiative at ABC. The basic focus was to deploy process improvement techniques to achieve the financial goals using these three methodologies – Lean Manufacturing, DMAIC problem solving and Total Productive Maintenance (TPM). Project Deployment ABC has about 25 to 30 products and each product category has a separate manufacturing line setup. At ABC Pty plant almost 13 production lines had an opportunity to improve productivity by deploying Lean. The focus of deployment was to eliminate wastage in material movement caused due to convoluted layout, eliminate over-processing, improve resource utilization through capacity balancing, reduce process cycle time of manual operations through Kaizens and reduce WIP through flow balancing. Following Rapid Lean approach was deployed to achieve necessary productivity and financial goals:
- 3. PrintingDryingCutting Start Arrange for sheets Open the pack of sheets and arrange on table Check and refill the ink, if required Printing - place sheets on machine for continuous printing Halt for paper arrange ment Arrange sheets in set of 100 post printing Move sheets to common WIP area sheets waiting for next process 1000 pcs 7 for 6 machines 6 for machine and 1 for WIP arrangement Move sheets from WIP table to Spray feed table Arrange sheets for feed Feed sheets to Line - 2 at a time Automated Spraying operation Automated 1st drying operation Check for Unsprayed sheets and remove them Sheets collected in Tray post 1st drying Halt due to spray issues Lot of halt issues Halts are done afetr every 6 to 8 pages Sheets arranged at the tray 8 for 2 machines 4 for feeding 2 spraying experts 2 at collection 400 pcs Arrange Sheets for Sizing Size the sheets before cutting - 300 sheets sized together Arrange sheets for Cutting Cut sheets to small pcs - 300 sheets Cut together to prepare 9000 pcs Arrange the cut pcs in Trays Move Tray to packing tables Pcs waiting in Trays 2 for 2 machines used for cutting sheets to small pcs Sheets Process Flow - Before 1800 pcs Arrange tray & pcs on machines to pack Feed the machine with 3pcs in each slot for Packing Machine to Pack the pcs in sachet Collect 12 sachets and rubber band around them Sachets waiting for next operation - till 12 rubber packs are made At collection, check for proper paking PrintingDryingCuttingof3Spcs Start Arrange for sheets Open the pack of sheets and arrange on table Check and refill the ink, if required Printing - place sheets on machine for continuous printing 100 pcs 6 for 6 machines 6 for machine and Arrange sheets for feed Feed sheets to Line - 2 at a time Automated Spraying operation Automated 1st drying operation Check for Unsprayed sheets and remove them Sheets collected in Tray post 1st drying 6 for 2 machines 2 for feeding 2 spraying experts 2 at collection 400 pcs Arrange Sheets for Sizing Size the sheets before cutting - 300 sheets sized together Arrange sheets for Cutting Cut sheets to small pcs - 300 sheets Cut together to prepare 9000 pcs Slide to Cutting table 2 for 2 machines used for cutting sheets to small pcs Arrange tray & pcs on machines to pack Feed the machine with 3pcs in each slot for Packing Machine to Pack the pcs in sachet Collect 12 sachets and rubber band around them Sachets waiting for next operation - till 12 rubber packs are made At collection, check for proper paking Collect 12 rubber packs bags to wait till 4 Prepare Fill each carton Seal the Carton Process Flow - After Sample Lean Deployment in a production line: Let us consider one product ZRoll. ZRoll is one of the highest selling products for ABC Pty. The ideal production line has a capacity to produce about 30,000 pieces per day, based on the capacity of constraint process. As against this, the line was producing about 22,000 pieces per day, which is almost 73% of the bought capacity. The target was to improve the productivity and produce at least 90% of the bought capacity. Rapid Lean was deployed for the line and a detailed analysis was done through Production stream mapping, Gemba walks and Capacity analysis. Significant improvement was brought through Layout Changes, Capacity re-balancing along with manpower re-allocation and Kaizens. Sample section analysis and before & after condition: Process Flow - Before Process Flow - After
- 4. Kindly note, multiple activities were eliminated in post improvement conditions, reducing the overall lead time, individual process cycle time and resources engaged in wasteful activities.
- 5. Specific DMAIC projects were taken in material filling, liquid filling and gas filling production lines to reduce loss of material due to process variation, spillage and leakage issues. These projects followed the regular roadmap of Define, Measure, Analyze, Improve and Control. Detailed brainstorming was done to identify potential root causes and then statistical analysis was done to identify and verify the causation. Appropriate technical solutions were implemented and optimal process parameters were defined with standard SOPs to obtain the desired financial gains. Many product manufacturing lines in ABC Pty were highly dependent on semi-automatic machines. The downtime of these machines was a major issue identified during the diagnosis and hence TPM (Total Productive Maintenance) was initiated for 6 machines in 4 specific production lines. Following roadmap was implemented by SSA to deploy TPM at ABC Pty: It’s a unique 3 phase approach for TPM which focuses on bottom line profitability and builds autonomous maintenance culture across the plant. TPM initially focused on increasing the uptime of machines by: Eliminating deviations identified in machine during basic machine evaluation Solving chronic machine issues Give basic knowledge to workers on different machine systems like Mechanical, Lubrication, and Hydraulics etc. These basic steps in itself supported in reducing the downtime and increased per shift production, thus resulting in substantial annual benefits in running these machines.
- 6. Following is a sample of deviation analysis performed by team: Deliverables: SSA looked into ABC’s current production practices and identified opportunities for cost reduction and productivity improvement With Lean tools and techniques, SSA enhanced Labour productivity and eliminated flow issues in specific production lines Identified areas for improving point efficiency and eliminated issues like spillage, leakage, material loss and process variation through DMAIC problem solving Improved asset utilization, machine performance and thereby increased production per shift by building TPM culture Results achieved & financial gains Following were the monetary results achieved by the team Initiative Savings Generated Lean Deployed in 13 production lines, it achieved an improvement of 20% in productivity in $ 5,45,000
- 7. these lines DMAIC Deployed in 5 production lines, it achieved 30% reduction in material loss and process leakages $ 3,20,000 TPM Deployed in 4 production lines, it achieved 26% improvement in machine availability, directly helping to save shift running cost $2,70,000 So an overall annualized savings of 1 million USD and above was achieved for ABC Pty through this Profitability improvement initiative by SSA.