Pet Toys Manufacturing Industry
The company has been a leader in the niche market of pet toy supplies manufacturing and distribution. They have been an established vendor to Walmart and have recently been added to their list of preferred suppliers. However, Walmart’s new reporting demands and more rigid quality standards have raised the labor, material, and administration costs. This has prompted the company to make the necessary changes in the production department to lower costs and increase efficiency. The production manager received special coaching on this matter from outside specialists who were engaged for that specific purpose.
Because the market in the products supplied by the company is not large, and the company has demonstrated an ability to come up with creative designs, Walmart decided not to seek offshore suppliers from their Asian sources. However, the prices offered by the company had to be tightened to an uncomfortable level that could not be sustained over the long term. This case study deals specifically with the production department recommendations, although many other areas of the business were also restructured.
The production manager was shown the advantages of effectively utilizing the chain of command, and not to take action that undermines the authority of others under his supervision. Sometimes just stepping back to play a purely supportive role for other managers is the right approach.
The manager is to take more initiative for productivity increases in the factory. A manufacturing quota and incentive program was seen to work well but it was rendered less tedious to apply by the introduction of a simple plug-in to the production software. This is expected to reduce the administrative cost of this program by 40%.
A format that provides issues and problems review with the foremen will be used on a daily basis and has already proven that it can significantly reduce waste and errors. By having daily reports on scheduling, people problems, production bottlenecks, and process gaps, remedial action can be taken that same day. The production manager now follows up with the foremen to review the improvements that were made – from the small to the large.
Because all activities within the company are intertwined in some way or form, a bi-weekly production committee of key employees has been set up, which includes the production manager, shipper, foremen, and operations manager. This group is empowered to generate solutions for production-related issues and problems that affect other areas of the business. They have been instructed to conduct their meetings in the spirit of creating actionable solutions, designating responsibility, and following up
The production manager and foremen will select team leaders for the separate production lines, who will be provided with a premium of 10% on top of their regular salary to take on that responsibility. This is a key move that is expected to reduce labor cost by 1.5%, which will drop right down to the bottom line.
The newly installed team leaders have become valuable sounding boards for quality-related issues that are now more readily brought to the attention of the production manager and quickly resolved in most cases. Immediate improvements work themselves down the production chain and affect more improvements.
The new software was customized to compare production output to the sales forecast. It is capable of verifying that the peak time delivery requirements for Walmart and other customers are being met, and automatically adjusts the production schedules and personnel loading accordingly.
Supervisory plant tours by the production manager will contribute to more efficiency through more attentive observations and the habit of asking probing questions of specific employees. Major lapses or failures will be discussed at the committee level. Workflow gaps and bottlenecks will be spotted more regularly and lead to solutions. All of this incorporates efficient lean management methodology whose objective is to reduce waste and errors.
In order to forestall production breakdowns and stoppages, which have been a past concern for the company, a formal weekly schedule for preventive maintenance, repairs, and other mechanical work has been implemented. Procedures and standards for periodic maintenance are now an intrinsic part of quality and efficiency controls.
Performance evaluation of all the vendors will be made at least once a year. They will be evaluated by the purchasing manager and her team, using a scale of 1-10. This will produce a measurement that will include: on-time shipments, delivery lead times, price comparisons, quality consistency, % of rejects, short shipments, customer service response, credit terms and limits. Any vendor scoring less than 80% on the total allocated points will be subject to review and possible elimination from the supply chain.
An extensive exploration for ways and means of reducing material costs has been set in motion, which will compare vendor pricing from local and offshore suppliers. Placing blanket orders for high turnover items has been a proven strategy for material cost reduction. With the increased line of credit from the bank, this will be extended to other major suppliers. The objective is to gain at least a 2% reduction in material cost in the next six months.
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