Making a Major Purchase?

Transcription

1 Making a Major Purchase?

2 Major Purchase Definition Define a Major Purchase $ Dollar Amount $1,000-$1,000,000 Plus Life of the Asset 1 Year-15 Years Plus

3 Reasons for the Purchase! Production Reduce Costs Labor Cost/Unit Waste Energy Capacity/Productivity Reduce Lead Time One Pass versus Two Increase Throughput Technology/Capability Other? Customer or Market Demand

4 The Value of Waste! Plant produces 50,000/MMSF per month Average cost of board is $42.85/MSF Reduce waste by 1 percent 50,000 X $42.85 = $2,142,500 $2,142,500 X 12 months = $25,710,000 $25,710,000 X.01 = $257,100 Each percentage point = $257,100/year Each percentage point = $21,425/month Each percentage point = $1,071/day

5 Hypothetical Case New Flexo Current Machine New Machine 3 shifts, 5 days per week 3 shifts, 5 days per week 10 orders (set-ups) per shift 15 orders (set-ups) per shift Average set-up 20 minutes Average set-up 5 minutes Average machine speed 3000 pieces per/hr total time. Average machine speed 4500 pieces per/hr total time. Average blank size 8 Sq. ft. Average blank size 8 Sq. ft. Average order size 2,400 Average order size 2,400 Loaded labor cost per hour $60 (crew of 3) Loaded labor cost per hour $60 (crew of 3)

6 Hypothetical Case New Flexo Goal is to reduce production costs and increase through-put Set-up cost reduction 10 set-ups X 20 Minutes = 200 min/shift/day 15 set ups X 5 Minutes = 75 min/shift/day 125 min. X $60/hr = $125/day or $31,250/yr Potential through-put gains New Machine 4500 X 8/hrs = 36,000 pcs/day/shift Old Machine 3000 X 8 hrs = 24,000 pcs/day/shift 12,000 X 8 sq. ft. = 96 MSF/day/shift 96 MSF X $10 margin = $960/day/shift $960 X 250/working days/year = $240,000/yr/shift

7 Hypothetical Case New Flexo Goal is to reduce set-up costs Set-up savings $31,250/ yr Increase through-put One shift potential $240,000/ yr Two shift potential $480,000/yr Three shifts potential $720,000/yr

8 Reasons for the Purchase Sales Strategy Increase Revenues Gross Profit Existing Customer Requirements New Customer Opportunities New Market Opportunities Combat a Competitive Threat Other?

9 Hypothetical Case Sales Strategy Existing Customer Requirements New Customer Opportunities New Item Existing Item Usage 50,000 week Usage 5,000 week 8 sq. ft. 8 sq. ft. $10.00/MSF margin $10.00/MSF margin Change Over Usage 7,500 week 8 sq. ft. $10.00/MSF margin

10 Hypothetical Case Sales Strategy Existing Customer Requirements 50,000 pcs/wk X 50 weeks = 2,500,000/yr 2,500,000 pcs X 8 MSF = 20,000MSF/yr 20,000MSF X $10.00/MSF = $200,000/yr New Customer Opportunities 12,500 pcs/wk X 50 weeks = 625,000/yr 625,000 pcs X 8 MSF = 5,000MSF/yr 5,000MSF X $10.00/MSF = $50,000/yr TOTAL $250,000/yr

11 Reasons for the Purchase Projects without Financial Pay-Off Environmental EPA Government Regulation OSHA Other?

12 Reasons for the Purchase Ego Latest Technology Image Other?

13 Who Determines the Need Survey Small Companies Employees President, Owner, General Manager 91.4% Production or Sales Management 8.6% Medium Sized Companies Employees Manufacturing Management 81.8% Sales Management 18.2% Large Companies 500 or More Employees Manufacturing Engineering/Management 91.4%

14 Determining the Need/Reason The Final Approval President or Owner Getting the Project Approved & Having it be Successful Pre-Planning Analyze the Project Develop the Project Details Getting Input from the Organization

15 Analyze the Purchase SWOT Analysis Strengths (Internal) Weaknesses (Internal) Opportunities (External) Threats (External)

16 SWOT Analysis Strengths (Internal) Core Competencies Market Expertise Product Strength Skill Sets Image Other?

17 SWOT Analysis Weaknesses (Internal) Liabilities Financing Cash Flow Skill Sets Additional Support Other?

18 SWOT Analysis Opportunities (External) Identify Customer Needs Identify Market Needs New Customers New Technology Cost/Unit Less Increase Gross Profits Improve Productivity Other?

19 SWOT Analysis Threats (External) Matching Machine Capability New Technology Competition Limited Market Limited Customer Cost/Unit Less Do Nothing Other?

20 SWOT Analysis Example New Flexo Strengths (Internal) Weakness (Internal) Experience (4) 2-color Flexos Flexos years old Maintenance cost high 12 experienced crews Labor cost/unit high Trained crews & supervisors Not a technological leader Written & proven processes Waste in-control Crews not technology competent Through-put high Impact on cash flow Large customer base Image brown box Reliability Reputation

21 SWOT Analysis Example New Flexo Opportunities Threats Increase market share Competitor expertise Open new markets Newer technology Large end-user market New technology Supports only one customer Improve profits Take advantage of customer demand largest customer Do nothing what happens Cash flow

22 Financial Analysis Financial Analysis Net Present Value Internal Rate of Return Payback Period Analysis Accounting Rate of Return Depreciation Cash Flow Statement

23 Financial Analysis Net Present Value Allows you to consider the time value of money

24 Financial Analysis Internal Rate of Return Allows you to find the interest rate that is equivalent to the dollar returns from the project Cost of the Project Average Annual Cash Flow = % Return

25 Financial Analysis Payback Period Analysis It tells how long it will take to earn back the money you will spend on the project Cost of the Project Annual Cash Flow = Payback Period

26 Financial Analysis Accounting Rate of Return Gives a quick estimate of the project s net profits Accounting Rate of Return = Annual Cash Flows - Depreciation Initial Investment

27 Financial Analysis Depreciation A non-cash expense that reduces the value of an asset as a result of wear and tear, age or obsolescence Depreciation = Cost Salvage Value Useful Life

28 Financial Analysis Cash Flow Statement Shows the effect of the project on your revenues Compares the costs and financial benefits of the project over a period of time Points out if the project is unfeasible or partially feasible Proves you can make the loan payments

29 Financial Analysis Cash Flow Statement

30 The Major Project Determine the Need/Reason Reduce Costs/Increase Profits Increase Revenues/Profits Analyze the Project SWOT Financial Make the Decision Team Effort Plan the Details Team Effort

31 Project Details The Decision is Made Operation Audit Now the Real Work Begins REASON Increase Profits Pre-Audit Questionnaire Review of Questionnaires On-Site Interviews Recommendations Develop Plan to Improve Reduce Costs = Increase Gross Profits Establish Goals $$ Implementation Increase Revenue = Increase Gross Profit

32 Operation Audit

33 Project Details Specifics Size Type Capacity Capability New Used Vendor Support

34 Project Details Cost Analysis New versus Used TCO Total Cost of Ownership Hidden Costs Installation Training Maintenance & Repair Utilities/Energy Supplies Taxes Payroll & Benefits New Employees

35 Project Details Other Considerations Facility Plant Layout Product Flow Lean Manufacturing

36 Lean Manufacturing 8 Types of Waste Over-production Inventory Transportation Waiting Motion Over-processing Correction Not utilizing the talent and knowledge of human resources

37 Project Details Production Processes Methods Procedures Goals Measurement

38 5S The Visual Factory Visual Factory is the use of controls that will enable an individual to immediately recognize the standard and any deviation from it.

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40 Project Details Staffing Skill Sets Recruitment TNA Training Needs Analysis

41 Project Details Support Personnel Technology Equipment Processes

42 Project Details Inventory Process & Procedures Spare Parts Raw Materials WIP Finished Goods

43 Project Details Quality Processes & Procedures ISO Customer Requirements

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45 Project Details Raw Materials Key Suppliers Availability Costs Quality Standard Delivery Technical Support

46 Project Details Environmental Issues OSHA Hazmat EPA State County City

47 Project Details Training Crews Supervisors Support Personnel Vendors Customer Service Sales Customer

48 One Box Set Up & Set Up Training 1.0 One Box Champion Choose a one-box champion for the facility. This individual must have the working knowledge of all the converting machines and possess the authority to administer duties needed to move the project forward. This individual shall choose an assistant to train at the same level. 2.0 Team Members Start by choosing a machine to implement the one box process. Recruit a supervisor from each represented shift. Recruit the Maintenance Manager and a maintenance mechanic from each shift. Recruit all employees of the chosen machine. 3.0 Implementation 4.0 Process Assemble all team members for a kick off meeting that is led by the One Box Champion. Explain the process and benefits of one box. Benchmark set up times, run speeds, downtime by shift. Videotape a complete set of the machine from the last box out of the previous order to the first completed unit of the current order. Retain this video for future reference. Centerline, Zero and calibration of machine. Develop TIR for every roll in each section. Create a spreadsheet to capture operator and drive side measurements. Develop parallel checking for every roll in each section. Develop diameter check for every roll in every section. Develop nip setting checklist using the following criteria: Target setting of.150 on the following dials, feed roll, pulls collars, impression cylinders, slotter section. Build in crush into each section using the following: Feed roll actual nip set to.100, impression cylinder actual nip set to.427, first down pull roll

49 Project Details Maintenance Training Program Machine Vendor Support Manuals Web Based USA Based Communication

50 Project Detail Sales Plan not an Idea Communicate Value to Customer Showtime It s not enough for salespeople to communicate value, salespeople must create value in the eyes of the customer. Huthwaite There is no inherent value in our products and services. They don t become valuable until our customer recognizes a real need for them. The need evolves from the customer s genuine business issues. Huthwaite

51 Measure Your Project Establish Quantifiable Goals Financial 20% ROI Production Reduced Cost/Unit Sales New Business on Machine Contribution Dollars $ Measure Performance to the Goals Post the Results Discuss the Results Continuous Improvement

52 Ultimately People Make the Difference Innovative Products Quality Product Delivered On-Time Just In-Time Attaining the Project Goals

53 Question or Comments? Thank You for Your Attention!