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Background

Activity started Oct 2009

Worked with 20 companies

Dairy, Bakery, Red Meat

Delivered cost savings in individual companies

Improved information flow & product flow through thesupply chain

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Project Objectives

Remove waste

Reduce costs

Increase profit

Free up capacity

Drive Sustainability

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Demand Growth – Dairy Products

2009 - 2018 % growth forecast

EU 10.0%United States 20.2%China 25.0%India 44.6%Algeria, Egypt 30.5%Brazil 26.4%

(Source: OECD) www.dairyuk .org/component/option,com_docman/task.../Itemid,308/

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Supply Growth – Dairy Products

“On the supply side dairy farming will present an opportunity for manyregions around the world”

“Conceivable that there could be a rapid growth in production around theworld in low cost countries”

“implementing changes in farm structure in any country is generally a slowprocess”

“Realistically it will be difficult for low cost countries to produce in line withforecast increases in demand”.

“Consensus opinion that demand will outstrip supply in the medium term.”

Source: Investment Prospects for British Farmers – September 2009

High Cost Base = Threat

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Waste Definition

What types of waste

would you findIn a Food Manufacturer?

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Waste Definition

Activity that adds cost

but does not add value

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UK Supply Chain Associates Ltd

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MethodMapping :

Select and Map a product line/processObserve & analyseQuantify waste

Identify opportunities for improvementAgree improvement plan

Implementation:Implement plan

Remove wasteReduce costFree Up Capacity

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Lean Manufacturing Techniques

Kaizan – Process improvement teams5S – Sort, Set out, Shiny clean, Standardise,Sustain

5 Whys – Root cause analysis7 WastesFishbone – Cause & EffectKanban – Stock replenishmentHijunka – Scheduling box

and there are many more....

UK Supply Chain Associates Ltd

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Kaizen Definition

Kaizen (Japanese for "improvement")

A Japanese philosophy that focuses on continuous improvement

It is the key thrust to maintaining or achieving competitive advantagethrough a dynamic change process

The Japanese process of continuous improvement using problem-solving and analysis

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Lean Manufacturing Techniques5S programme to tidy the workplaceCurrent state versus the 7 WastesTotal facility Layout (plan optimum layout)Work flow, material flow

Visual flows (label areas)Visual Storage (shadow boards, improve storage oftooling)Schedule communicated to shop floor (SchedulingBox)Reduce machine set up times (box-up tooling priorto job)Dedicated areas (Walkways, paint floors, GoodsIn/Out)

UK Supply Chain Associates Ltd

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Challenges

Gain buy-in at all levelsDrive from the topFree up people to trainFire fighting – break the routineClashes with short term prioritiesOperator discipline – recording job timesChallenge the accuracy of dataKeep it simple

Sustaining the gain UK Supply Chain Associates Ltd

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Types of Waste

Scrap – cost of raw material

Rework – labour cost

Downtime – labour cost & lost opportunity

Giveaway – cost of raw material

Food miles – Logistics process

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NW Bakery Scrap – Bakery Co.

the raw material cost of the scrap.Actual Cost of Scrap per year = £235,000 (10%)

9%-11% product scrapped (measured & observed)Breakaway on the cake baseFailures in middle section of pans coming out of ovenCaused failure a later stage on the line aftertopping/filling applied.

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NW Bakery

Scrap: the raw material cost of the scrap.

Actual Cost of Scrap per year = £444,600(9,500 units – small cakes- scrapped per day)

Damaged by machine & manual proceduresRejected manually on lineRejected manually at packing pointScrap sent for animal feed & to landfill

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NW BakeryActual Cost of Scrap per year = £24,700(due to machine failures)

Plus packaging required to handle product from machine

failuresActual Cost of Packaging used thenscrapped per year = £92,400

Downtime 20% = run Sat AM = £30,160Total cost of scrap £147,260

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NW Bakery Giveaway – Bakery Co.

the cost of raw material which has been given away for free.Actual Cost of Giveaway per year = £819,500 (19%)

Overuse of ingredients 6% - 114%Topping weight varied – overweight by 29%Filling weight varied – Overweight by 76%Hoppers filled manually – labour intensiveAs the hopper weight reduces then variance in toppingoccurs.Product RFT = 8%

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Other Wastes Identified Waste streams on line not being segregated. Mixtureof food, & packaging. This will contribute to land fillcosts

Energy – Conveyors observed running through breaks& left running when not in use.

Quality – A number of unit cakes pass through the lineat a substandard quality level without detection.

Floor waste – High value components being lost on thefloor.

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NW Dairy Company - Cost Savings Summary

• £190k - Saving by improving cheese yield - achieved by reducing the

amount of milk used to produce one tonne of cheese.

• £250k – Reduce downtime and improve Output per employee by 66.4t

• £93k – Reduce the amount of downgrading from 0.77% to 0.50%

• £500k – Reduce stock through the supply chain and reduce external warehousing costs

• £122k – Avoid sending waste product to Landfill

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NW Dairy Company - Cost Savings Summary

Total potential savings

= £4.4m

Any cost savings increase profits at this companyAs it is a Farmers Cooperative

any increase in profitsgoes back to the Farmers

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Implementation PlanKaizen Intervention 1 - Not Right First Time

Reduce rejects, scrap, rework

Kaizen Intervention 2 - Setup Reduction

Reduce Downtime

Kaizen Intervention 3 - 5S in the workplaceTarget the ingredient weighing area.

Kaizen Intervention 4 - Process Measurement and Data Capture Need to improve data capture as this is fundamental to any Leanimplementation.

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Outputs

2010Opportunities Identified £21,000,000(Cost Savings Signed Off £ 5,320,000Additional Business Won £ 4,000,000Total of 202 Jobs Saved)

2011Opportunities Identified £ 14,000,000

TOTAL £35,000,000

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Benefits of Lean

More productive labour utilisationReduced Manufacturing Costs (lower unit cost)

Lower stock levels / reduced working capitalOptimised space utilisation

Fewer defects, less scrap & reworkImproved Quality RFT

Reduced changeover timesShorter cycle times

Improved machine utilisationIncreased Facility Capacity.

UK Supply Chain Associates Ltd

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Benefits of Lean

Improved delivery performance at lower costIncreased customer satisfaction (QCD)

Improved data collectionMore accurate data collectedIncreased Management Controls

Empowered & more flexible work forcePride in the work place

UK Supply Chain Associates Ltd

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Thank you for your time

I will now take your

questions