I recently did an operational audit for a distributor that also provided value added assembly services. This is a common service, found in many distribution centers. It could be kitting of components, making shrink-wrap packages, or pre-labeling for retail. Usually set-up in a separate area in the DC, these services can be money makers for those operations that charge (either internal or external customers) for “adding value” to the inventory. However, because they often considered as outside of the main stream of business, these operations have to be managed well to maximize the related profits (or minimize the related costs).
I am going to share some of the main thoughts that came out of the audit I did for my client. Hopefully, if you are involved in a similar operation, you might find a nugget or two as well.
Labor Savings Opportunities
As mentioned, valued added assembly is very labor intensive. Operations need to be streamlined and run very lean if they are going to be effective. Here are some ideas to consider to reduce the cost of value added assembly labor:
Design, teach, and use good work flow.
Because the items being handled are always changing in a value added assembly area, it is imperative that the work orders are set-up so that the workers can be productive. If you have a flexible assembly area, using nothing more than table space, the work orders should set-up to replenish from one side and assemble from the other side. The layout would look something like this:
Although this should be intuitive, it is also important that the components be set-up so that the assembly flows from one end of the assembly table to the other. Believe it or not, I have seen this not be the case. Component product should also be placed in good relation to the assembly workers, to minimize their movements. They shouldn’t have to walk around each other, reach across each other, etc. The set-up must also be thought out so that the number of “touches” is minimized. This requires some planning and experience.
Bucket Brigade Assembly.
A concept that has taken hold in recent years is “bucket brigade” assembly. This is a concept that was first developed at Georgia Tech
with the goal of producing a self-leveling assembly line. It is widely used today. If you have ever been to a Subway restaurant
, it is the way that they assemble your sandwich (see www2.isye.gatech.edu/~jjb/bucket-brigades/case-studies/subway.html
). Although it is low-tech, it promotes the flow of the assembly build process. More information can be found at: www.bucketbrigades.com
Install group leaders with accountability for production.
These people should be empowered to lead a small group that is fairly autonomous, that works together as a team, and that is accountable for their production. The group leader should be a “working lead” that sets-up the work flow for the assembly orders that they are assigned. They should set-up their team to maximize the productivity of each work order. However, to get the most out of this, the group leader must be given some training on how to do this.
Install a time keeping & labor tracking system.
Every employee and group should be measured against a goal time (and rate) for each work order done in the assembly area. The time each person spends on each WO should be tracked. As computerized time tracking system can be used to do this. A simple one that works well for this type of environment is Time Clock Plus (www.timeclockplus.com
Consider paying a piece rate incentive.
With the tracking of piece rates by employee (or group), a piece rate incentive program can link the company’s goals (reducing the cost per unit) with the employees’ goals (ability to maximize their paycheck). Based on the number of component pieces completed by the employee (or the employee’s group) and the number of hours logged by the employee for the week, the employee could earn incentive pay as part of their compensation. This should be designed not to increase the nominal wage of the mediocre employees, but rather provide a bonus to the exceptional performers (or teams).
Make early decision on non-productive workers.
In most operations that have a regular valued added assembly area, the work force is mainly temporaries. If it is determined that a temporary worker is not going to meet the productivity requirements of the operation, get them out of there early! In most cases, a supervisor or group leader can tell if someone is going to be productive enough to keep within one hour - certainly by the first break. Agreements with temporary agencies often have a one hour, no questions asked guarantee for this reason (if yours doesn’t, talk to your temp agency about getting this added). An early decision on these people not only reduces the cost per unit, it also makes everyone else aware that low productivity is not tolerated.
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