MIT Sloan Lecturer Finds Cost-Saving Measures Readily Available but Rarely Used

CAMBRIDGE, Mass., March 10, 2009 — Many manufacturing companies turn to outsourcing to save labor costs, however cost-saving measures are available right on their factory floors, according to research by MIT Sloan School of Management Senior Lecturer John Carrier. Using readily available — but seldom applied effectively — methods to reduce costs would prevent the need to outsource jobs.

Carrier, who consults for manufacturers such as the companies who make parts for automakers, found that applying a methodical approach based on “Continuous Improvement” strategy can save hundreds of thousands of dollars in a few weeks.

He explained that the first step is taking workers on a collective “waste walk” where they literally walk through the facility, discussing every step in the process. “It is amazing when the team realizes that only a few percent of the processes actually add value to the product, and it is a great way to help everyone on the site to see waste,” he said.

The next step is spending time on the floor with workers to get everyone who “touches the work” involved in identifying and eliminating defects. This begins with simple tools like whiteboards so that workers can post measurements, list key action items, and leave messages for all shifts.

“The operators must be given the freedom to track their own progress and make it visible to anyone walking the floor,” he said. “And since many of them play in fantasy sports leagues, they have a very practical and useful understanding of statistics that we can tap into.”

According to Carrier, many companies spend too much time trying to work around problems rather than solve them. For example, in a current assignment with the Advanced Manufacturing Group, he found that an auto parts manufacturing process produced anywhere from 0 to 250 machined parts per hour. This wide fluctuation occurred when the team needed to shut down the machines in order to swap out a malfunctioning tool. The key was finding the root cause of the malfunction in order to prevent the team from needing to shut down the machines.

The cause turned out to be simple: When the tool arrived from the vendor, it was not always the correct size. “They hadn't been measuring the tools as they arrived because they were too busy trying to compensate for the lost productivity when they needed to shut down the machines. It was a circular loop,” said Carrier. By talking to the tool vendor, they were able to fix the measurement problem in four weeks. And by ensuring the correct tool was in place, many other secondary productivity problems were resolved, saving the company over $300,000 a year.

“That problem had occurred for close to a year and no one was dealing with it, but I've also dealt with problems that have been around for 10 years,” he said, noting that a similar approach can be used in service companies which commonly suffer from processing backlogs as work piles up on employees' desks.

“I always look for oscillations in the process performance,” he said. “As humans, we tend to look to assign blame to the workers, but invariably the true cause is a system problem as opposed to a people problem. By learning to see the entire process and all of its faults, with everyone who works in the process, we can eliminate these fluctuations resulting in a significant and immediate reduction in costs. It's much more efficient to fix the defects in our workplace rather than to ship the whole process overseas.“

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