COMPANY CUTS COSTS BY 20% WITH VALUE ANALYSIS
LOW VOLUME DAIRY EQUIPMENT
*Case studies have been anonymized for client confidentiality
An expert team of manufacturing consultants was brought in to improve a company’s product and packaging. “Here’s the problem.” Said the general manager of the $11 million material handling company in Minnesota, “We only make 32 units a year of a machine that stacks milk carton cases for shipment to grocery stores. Will Value Analysis work with these low volumes? Can we get 20% of the cost out of this machine?” The answer was a resounding yes.
Value Analysis Techniques are ultimately structured to identify areas of conflict in value. These conflicts often occur between the customer’s perception of what the product delivers and the company’s cost to produce the product. This conflict can arise regardless of volume. Furthermore, any time a team identifies a product, process, or procedure, and there is a cost to be collected, these costs can typically improve through utilizing the right consulting services and performing in-depth Value Analysis.
The only difference between a large company and a small business performing Value Analysis is the impact the process has on the organization. In a large firm, establishing a five-person study-team is a matter of selecting who is best qualified for the particular project, and then simply beginning the work. In a smaller business, with only 60 employees, it becomes a major decision. The right people were the key individuals in engineering, cost accounting, purchasing, operations, and marketing. The same individuals who were most needed to run the company.
To further complicate the decision, the team of consultants on the job showed the company that they needed to study “what the customer buys.” The problem was not the just the single piece of equipment, but also the milk cartons delivered in cases to the stores. Therefore, another team of five was ultimately needed to study the machine that puts the milk cartons into cases. After some deliberation, priorities shifted so the two teams of “key people” were able to perform Value Analysis on the essential equipment.
With not only product improvement, but overall business process improvement in mind, the teams explicitly received the following goal: “Don’t make the products cheaper, make the machines meet the customer’s requirements, and get a cost reduction as a by-product.”
To minimize the workforce drain on the company, the Value Analysis program transpired during the slower summer months. The two teams, therefore, stayed together for the first seven working sessions, before ultimately separating to explore individual ideas for change.
As a result, the teams reported the following outcomes two months later:
|Milk Carton Case Stacker||24%||20.2%|
|Milk Carton Caser||27%||32.7%|
*Note: Each team put forward approximately 30 cost-reducing changes and 5 product improvements. And all severe faults identified by the customers fixed accordingly.
A small company can get significant cost savings, and improve their product in the process, by following these guidelines:
Adjust the company’s priorities to allow time for the study
Establish the team based on the “right people,” not on whoever is available
Establish a numerical goal to work towards
Get the customer involved in the changes
Fix all serious faults as identified by customer
OTHER PRODUCT IMPROVEMENT PROJECTS: