20% direct labor reduction for processing facility

Client Overview

The client was a processing facility in a heavily regulated industry. The facility included several independent processing areas, none of which were loaded to full capacity. The result was poor operating margins.

In addition, the client was in the midst of implementing a heavily modified, high-end MRP package to satisfy industry specific regulatory requirements. The implementation was several years behind schedule and millions of dollars over budget. The new MRP package was required to accommodate new manufacturing process that the old MRP package could not handle. The client had determined that the new MRP was corrupting data that had to be tracked to conform to their site operating license.

Our Involvement

We were brought in to improve profitability; however it soon became clear that the most pressing issue was resolving the data corruption concern. The software development team was swamped with support requests and with meeting development milestones to which they had previously committed. We held an all hands meeting in which we resolved that data integrity was the highest order of priority. We isolated the development team and short interval managed them through a data integrity validation. We determined the root cause of the data corruption, developed a program to repair the corrupted data and piloted the repair program on a test database. We shut down operations and ran the retrofit program, a 72 hour processing task.

To improve profitability we developed a block-scheduling program. We cross trained their operators and began running different processing areas sequentially rather than concurrently. Additionally we restructured the client’s organization to improve information flow and reduce process decision backlog.

The Result

In addition to bringing the MRP implementation back on track, we provided the client with a different approach to running their business. This, coupled with the improved information flow and organizational restructuring, allowed a 20% reduction in labor (direct, indirect and overhead).

20% inventory reduction for automotive parts manufacturer

Client Overview

The client was a high volume aftermarket automotive part manufacturer. Inventory turns were on the order of four and they stocked approximately 80,000 SKU’s, 75% as finished goods. They had a high incidence of inventory obsolescence. The client MRP tool was a legacy system from the late 1980’s.

Our Involvement

The parent company had mandated that they reduce inventory by 20%. The client had no metrics for buyers or planners. Our first objective was visibility. We developed a tool that interfaced with their mainframe to track inventory dollars by planner and by buyer. Reports were auto generated weekly. We performed an ABC inventory analysis and auto updated 80,000 parts with order/build rules. We conducted training to educate the buyers and planners.

The Result

In addition to providing the client with management tools, our updated MRP rules resulted in the required inventory reduction as well as a dramatic reduction in part obsolescence.

Operational analysis revises sales forecast by 20%

Client Overview

The client had been a low volume, high tech manufacturing division of a large corporation. They were in the process of evolving into a higher volume manufacturing facility. The parent corporation was selling this division to divest non-core businesses. The client was in the process of replacing an unstable, homegrown MRP with a very sophisticated ERP. Existing reporting was rudimentary with limited visibility into operations.

Our Involvement

We were brought in to conduct an operational evaluation of the company for a prospective buyer. We identified several key development issues, all of which were determined to be of reasonable risk. In an effort to evaluate their sales forecast we developed a database tool to analyze an available production report derived from their existing MRP system. By comparing the MRP production schedule with the client’s sales forecast, we determined that the planned manufacturing output fell significantly short of forecast sales. Long component lead times made it impossible to achieve their sales forecast schedule.

The Result

The client adjusted their forecast to match the production output our analysis predicted. The prospective buyer was able to reduce their offer by 20% to reflect the resulting reduction in forecasted revenue and EBITDA.

3x reduction of work in process for marine manufacturer

Client Overview

The client was a low volume producer of high value consumer products. Cycle time was on the order of four weeks per unit. They had very poor inventory control and suffered from part shortages, excess inventory and high scrap rates. Despite the long manufacturing cycle time, all material was procured for the start of each unit.

Our Involvement

We were brought in to help improve profitability. We implemented an inventory control system with discrete locations for inventory. We reduced the kit size from 1 week of work to 1 day of work. We developed a software program to track work orders and kitting requirements. We established task specific standards and developed an automated schedule. We implemented controls for issue of additional material and for root cause analysis of scrap.

The Result

In addition to providing the client with visibility of their inventory, we provided them with tools for activity based planning. We reduced the amount of WIP by a factor of three and dramatically reduced both the scrap rate as well as the incidence of part shortages.

50% scrap reduction for automotive parts manufacturer

Client Overview

The client was a high volume producer of automotive parts. Their existing facility could not keep up with scheduled delivery requirements. Scrap was extremely high and machine utilization was poor. Historically, the client responded to increasing demand by expanding production capacity through the acquisition of additional, high cost, automated production lines.

Our Involvement

We brought in a team to perform a detailed analysis of the operating process at the new facility. The client had a cumbersome process for tracking failures and no tools to track productivity. We developed and implemented a comprehensive failure analysis and productivity-tracking package. This tool allowed us to implement productivity metrics in addition to improving the failure analysis capability.

We determined that the major problem in productivity was poor machine utilization due to excessive automation down-time (>60%). This led to poor labor utilization and in turn poor productivity.

We identified and brought in a manufacturing expert to resolve key persistent process issues. We identified the root cause of their highest failure modes and developed and implemented manufacturing solutions.

We developed a labor management strategy to take advantage of improving machine availability while minimizing the loss of labor productivity.

The Result

In addition to reducing labor by 20%, we reduced scrap costs by over 50%. Furthermore, we provided management with tools to assess future process improvement initiatives.

30% reduction in overhead for government contractor

Client Overview

The client was a high tech, low volume manufacturer in a heavily regulated industry. Most of their contracts were government related and they had large R&D and engineering requirements. The client had recently been acquired by an LBO fund. The former parent company had provided key IT services including procurement and financial. Inventory was tracked using a home grown system that did not cross-check with procurement. Program forecasting and completion tracking was handled by an obsolete software package running on non-Y2K compliant IT system. Overhead rates were double best in class. Program management was client specific with dedicated design and engineering teams. The result was broad duplication of effort and proliferation of part numbers.

Our Involvement

We became involved as soon as the client was acquired. We helped the client select a low-end financial package and integrated it with a low-end MRP package. Our approach was to implement the MRP without any software modification while transferring a sense of ownership to the key process leaders in each functional area. We set up and managed a team of key people to pilot the software. The team’s objective was to plan a job, write PO’s, receive material, and issue material to job work orders. We brought job planning and purchasing on line in 2 months with an additional month to integrate inventory.

Concurrently, we developed a simple software tool to let them track program completion and forecast. We migrated all the data from the non-Y2K hardware into this new tool, implemented it, and trained their people to use it. We set up a team of engineers and designers to develop a standard parts list and to identify common components.

The Result

Having provided the client with the tools required to streamline their business, we were able to achieve a 30% reduction in overhead rates. This resulted in increased proposal competitiveness and increased sales. The company was sold by the LBO fund 14 months after it was acquired for a 145% ROI.

Business Software Implementation

Selection and implementation of business software is a challenge many of our clients face. We use a “Real World Business Needs “approach to rapidly assess software suitability. During implementation, we use client teams to quickly configure the software for actual business needs. The advantage of the client teams is that ownership is transferred into the organization while the product is being tested and configured. In addition to implementation management, we also develop test scripts that allow rapid testing of service packs and software upgrades.

The Selection Process

Assume that all Business Software packages can perform normal business functions. For example, if you are looking at manufacturing software (ERP/MRP), assume that it can place PO’s, issue work orders, prepare kit lists, etc. What is important is to make sure that the package you select can meet your specific needs.

Create an “Unusual Requirements list.” This is the list of requirements that you perceive as being specific to your industry. Evaluate this list. Many companies impose requirements on themselves that are more rigorous than they need. This is a good opportunity to streamline existing processes. Bear in mind that there may be a couple of requirements that are truly necessary but come up extremely infrequently. These may be able to be handled outside of the system.

Ask vendors to demonstrate their systems relative to your unusual requirements list. The Business Software provider can put the system through its paces in terms of demonstrating normal functionality, but this will not address your specific needs. The key is making sure that the system can accommodate your Unusual Requirements.

Request to be referred to a reference company with similar business requirements who has implemented the software. Meet with them and find out what specific issues they ran into during the implementation process. There is no substitute for talking to someone who is actually using the product.

Software Customization

Software providers are more than happy to customize their software during the implementation process. This should be avoided at all costs. Maintaining a customized software package is terribly expensive to an organization. Consider the following:

  • Business Software packages are generally designed around best practices.
  • It is easier to change people practices than software.
  • A modified Business Software cannot be upgraded to newer versions without re-customizing the software.
  • A modified Business Software requires a dedicated, specialized support group.
  • Many clients choose to upgrade to a more robust system as their business grows or changes. If a system has been customized, it is difficult to move data to the new product.

Implementation Tips

The key to a successful Business Software implementation is allowing the client to take ownership of the software package without allowing them to try to force existing systems into the software.

To achieve these goals:

  • Create a client team
  • Establish a steering committee
  • Establish a pilot room

Create a client team. The client team must have representatives from each of the key operational areas. These client team members will become the go-to people when the software is implemented, so they should be respected people within their departments.

Establish a steering committee. This should include peripheral areas, like maintenance, that may be effected by the implementation, but will not be primary operational users of the package.

Establish a pilot room. Time must be dedicated to testing the software. Because many tasks have cross functional impact, it is important that that the team work together. Establish time for the team to work. Mornings work best. 2 hours a day will usually be sufficient. Allowing people to pilot the software at their desks is not very effective.

Allow the client team to put the software through its paces. Establish broad objectives, like placing a PO, receiving the material, returning some to the vendor, and then transferring the information to finance. Empower the team to challenge current practices. If their current process includes a step that is not easily accommodated by the software, challenge the step. Allow the team to develop better processes.

Communicate the recommended process changes to the Steering Committee for approval and implementation.

Invited to speak at Kronons Works

We have managed process improvement projects in industries ranging from nuclear waste volume reduction to boat building. Our projects have resulted in millions of dollars of sustainable benefits. Rather than focusing on one functional area, we provide integrated solutions that permanently resolve issues while improving organizational flexibility.

KronosWorks Lecture

Read our Case Studies


We have managed process improvement projects in industries ranging from nuclear waste volume reduction to boat building. Our projects have resulted in millions of dollars of sustainable benefits. Rather than focusing on one functional area, we provide integrated solutions that permanently resolve issues while improving organizational flexibility.