ISE Magazine Volume : 50 Number: 4
By Raj Sanne
Mergers and acquisitions often have ISEs figuring out the best way to make the same thing in a different place
Organizations that grow through mergers and acquisitions try to consolidate operations in order to effectively utilize assets and invested capital while optimizing profits. The consolidation can be through plant closures and moving products to existing facilities in different locations, reducing operations to match demand, shutting down plants or moving to regions that are lower in cost.
The product in question
The following is a case study of a plant shutdown and the consequent relocation of products to another facility within the corporation.
The organization is a division of a large group involved in making various products in the energy optimization sector. The division makes products that are used in household, industry and other sectors, and the division has a number of plants at different locations. The products that the division makes are used for decorative illumination in houses and offices, both outside and inside. We will examine the logistics that were adapted to move operations from the plant that closed and how the division was able to integrate with existing operations in a different location.
The product in question was a small lot, high variety one with more than 1,500 different types of features and options that were offered to customers. The decorative products are made in various shapes – for example, some are round and some are triangles. Based on their preferences, customers can add options that include battery backups and sensors.
The decorative illumination products were assembled manually and tested on assembly lines before being shipped to the customer. The production lines were worktables that were equipped with air tools and test equipment. The components consisted of purchased and fabricated items. Some of the components were proprietary in nature.
Strategy for relocation
A manager from engineering in the plant the product was being relocated to was appointed to lead a cross-functional team to implement the process. This team included representatives from engineering, sheet metal, paint, supply chain and quality, as it is always important to ensure broad participation to cover all areas for a smooth transition to operations in a new location.
This team discussed logistics for moving operations from the current location to the new plant. In order to move all equipment, materials, tooling, documentation and other connected items, team members decided to make a list and develop ownership for implementing the project.
Focus of team members
The various team members focused on different aspects of the plan.
For example, the team member who represented operations focused on process-related items like layout, production flow, run rates, standard work, material flow into and out of the work cells and other aspects that affected production. This is essential so the new plant can quickly train operators and get production up and running with the least amount of downtime.
The quality team member concentrated on definitions covering components and product quality requirements, tolerances, finish, reliability, test procedures, documentation, gap analysis and safety – all things that are geared to meet customer requirements.
The team member from sheet metal fabrication was involved in looking at parts that could be made in-house with existing facilities. That team member also helped develop processes to meet targeted production. Factors taken into account included process capabilities, the need for any new equipment and quality requirements, including tolerances and scrap rates. Another long-term goal was to bring in components supplied by vendors wherever possible to ensure stable supplies and minimize outsourcing. This also helped in better utilization of shop capacity.
The engineering representative was involved in engineering drawings, the structure of the bills of materials and integration into existing SAP plant routings, specifications and tolerances. The engineering team member also actively pursued opportunities for cost reduction through design, value engineering and other improvements.
The supply chain team member was involved in collecting information covering materials and components used in making products, sources of supply, lead-times, costs and other factors. This member also was involved in adopting a long-term strategy to ensure a stable supply for production requirements.
Setting up the new line
Once all the associated equipment was received, a location and sketch of the proposed layout was done.
The floor at the new site was marked before laying out the equipment for two assembly lines. In coordination with maintenance, the line was laid out covering worktables, air and power for lines, air tools, test equipment and packaging stations. Space was earmarked for incoming materials, which included kits that came to the work cell from the warehouse, along with space to keep finished products in line.
In order to man the lines, operators were selected in advance and given hands-on training in assembling these fixtures. Management wanted employees at the new production line to get a feel for the work involved in assembling these products. So they came up with a pilot batch of 10 sample fixtures of 15 identified types to broadly cover the whole spectrum of products that were moving from the soon-to-be-shutdown plant.
Training was also given in some special processes to ensure that the finished goods met the demanding customer expectations. The team conducted a gap analysis and then adopted measures to close those gaps. This covered production methods, workmanship, engineering, in-house and vendor-supplied parts.
Whenever a manufacturer starts a new production line or plant, there will be issues affecting production. Problems can include parts shortages, errors in the bills of material, quality issues, engineering issues (fit, form and function), material availability, on-time delivery from vendors, in-process handling that damages parts or issues with parts that have been manufactured in-house.
In order to ensure that such issues are resolved and that long-term flow is smoothed out, the cross-functional team developed a tracker, or a spreadsheet that captured information that could help decision-makers resolve the issue. The details that were gathered included shop router number, part number, issue, responsible owner, corrective action, status (resolved or not resolved) and date it was resolved.
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