Pricing your Products to be Profitable Friday 11th March 2016

Workplace Organisation

Numbers game On the following sheet are the numbers between 1 and 99, can you tell me which ones are missing?

Numbers game If I told you that there are two missing numbers and they are between 1 and 49 – removing all the unnecessary numbers above 50 might make things easier.

Numbers game If I now told you that there was some order to the numbers on the sheet – would you then be able to tell me which numbers are missing?

Numbers game Arranging the numbers in order makes things very clear

Information People and process Material A business typically has three flows which deliver a product or service to a customer Information Customer requests for goods and services Supplier Business Customer Step 1 Step 2 Step 3 Step 4 People and process Raw materials, Installation Equipment, etc. Material

5 Business Principles Specify Value - What does the customer want/need ? Perfection - Pursue zero waste and CI Identify Value Streams - Sequence of processes from raw material to final product Pull - Make only what the customer wants Make Value Flow - Avoid batch and queue

Value & Waste WASTE VALUE Only an activity that physically changes the shape or character of a product and/or that the customer is prepared to pay for can add VALUE Therefore Any activity that does not change the product or that the customer will not pay for is WASTE

Value and Waste Waste Value Non-Value Adding Activities 5% 95% Waiting & Delays Movement Excess Production Set-Ups Breakdowns Searching & Storing Scrap & Rework 95% Value What the Customer is prepared to pay for 5%

The 7 Wastes (+1) : Overproduction Waiting & Delays Inventory Movement (stocks + work-in-progress) Movement of People Talent Inappropriate Processing (procedures & paperwork) Transport of Materials Defects & Rework

Overproduction Root Causes Too much – more than is needed long set ups batch sizes design of process & layout using up material Too early – earlier than is needed lack of machine capacity subcontracted operations long in-process delays and leadtimes Building more than the customer wants? (just in case) How many shortages were created? Where is the addition stock/parts stored? How much did this cost?

Waiting & Delays Root Causes How often does it occur? Why does it happen? How much does it cost? Waiting For: Paperwork Instruction Supervision Products Machines No material scrap breakdown poor schedule poor purchasing procedures poor supplier lack of preparation or instructions materials stored incorrectly / missing No machine set-ups large batch no tool, jig, fixture, gauge No man skill shortage absenteeism watching another machine

Inventory (stock + work-in-progress) Root Causes Unbalanced Material Flow synchronisation between stages level quantities in and between stages Cushion Storage breakdowns rejects poor suppliers or buying Safety Storage increase feeling of security Lot Delays transfer batches greater than one layout How much does this cost? Why does it happen? How much space is taken up by stock?

Transport of Materials Movement of People How much excess movement do you do each day? How long does this take & what’s the cost? What else could you have done with the time? Root Causes Layout Workplace Organisation Functional Organisation Work-in-progress and/or stock levels Transport of Materials How many times are materials handled? What do racks do to the process? How much time is spent handling materials?

Inappropriate Processing (procedures & paperwork) Root Causes Wrong tool, jig or machine specification Poor procedures or process Lack of operator skill or knowledge Roughing cuts due to oversized material Deburring due to poor tool maintenance or product design Could things be done more simply? Buy expensive machines and what can happen? What happens to set-up times on big machines? Are operating procedures, testing procedures and paperwork fit for purpose?

Defects & Rework Root Causes Wrong tool, jig or machine specification Poor procedures or process Lack of quality prevention and inspection Lack of operator skill or knowledge How much does a defect cost? How much does rework cost? Can you add value twice? What do defects do to production?

Talent What extra skills do people have? How could these be used? What will be the benefit?