Productivity Framework Analysis Current and proposed PDF

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Description

Current Production Process Flow

The current Production Flow chart for SNR Joinery Works has nine key steps from Design, documentation and planning, purchase of material, supply chain logistics, measuring and cutting, sanding and framework, assembly line, furnishing, inspection and Final assembly and Installation & delivery to the desired output. Please refer to Table 1 in the Appendix for the illustration on the production process flow. After reviewing the current framework for SNR Joinery Works, our team realized that only accounting ratios is used to determine the profitability and how well the business is performing. Based on this evaluation we are recommending to include few productivity methods together with the accounting ratios to get a more comprehensive measure on the business performance.

Proposed Productivity Framework for SNR Joinery Works (PTE) Ltd SNR Joinery Works currently do not have any productivity measurement framework in place. The organization measures its output in monetary terms which is through profit. They do have all the financial requirements in place, however, when it comes to measuring the productivity for its production process, they lack critical information and data recording. This has been seen as a major drawback for the organization, however, it creates room for further improvement in terms of implementing a proper reporting and recording system. Data for each job needs to be recorded so that it is easier to measure the organizations productivity and also to determine how they are performing in each project. A formal request for information was sent to SNR Joinery Works, and based on the limited information received from them, it was noted that there was a major room for improvement within their organization in terms of a productivity measurement framework. To illustrate to SNR Joinery Works on how they can implement a simple productivity measurement framework, certain assumptions have been made. The productivity methods proposed for SNR Joinery Works are; Single Factor Productivity, Multi-factor Productivity, Overall Equipment Effectiveness, Statistical Process Control Charts, Cause and Effect Diagram and Job Sheet. Single Factor Productivity (SFP) To perform the SFP calculations, the following assumptions were applied; 

Joinery job types



Approximate duration to complete each job



Approximate cost for each job



Total number of labor and total labor hours

Based on the information available from SNR Joinery Works, certain assumptions had to be made to calculate the labor cost. SNR Joinery Works had basically provided rates ranging from $4.50 - $9.50 and their total number of employees. With this limited information available with the team, assumptions were made on the key roles within SNR Joinery Works (refer to the organization structure), particularly aligning this to the joinery industry and assigning these roles the market rates to proceed further with the labor cost calculation. An illustration on the labor cost calculation is shown in the table below.

Table 1: SNR Joinery Works Labor Cost Calculation

Labor productivity has been calculated using the following formula; Labor Productivity =

Total Production Cost $ 55,000 = =$ 12.50 per labor hour Total Labor Hours 4,400

Labor Productivity =

Total Production Cost $ 55,000 = =$ 1,100 per labor per month Total No . Labor 50

The above calculation for labor productivity is only illustrated for the month of January. The same concept has been applied to the rest of the months and this has been graphically represented below. Please refer to Table 2: SFP calculation for SNR Joinery Works in the Appendix for a more detailed calculation.

Figure 1: SFP for Cost per Labor Hour

Figure 2: SFP for Cost per Labor per Month

From the illustration above, it can be seen that the average annual productivity – cost per labor hour is $14.13 which would give an average production value of $62,172 and the average annual productivity – cost per labor per month is $1,106.67 which would give an average production value of $55,333.50. From this analysis it can be seen that an increase in production value would help improve labor productivity. In terms of the energy consumed by SNR Joinery Works during production, it is important that they understand the value of goods/product they produce per unit of electricity (per kWh) so that they can determine whether their operation is running efficiently or not. The productivity in terms of the value of goods produced per unit of electricity can be calculated as follows; Productivity=

$ 55,000 Total Value of Goods Produced = =$ 50.09 per kWh 1,098 Total Electricity units ( kWh ) for the month

Figure 3: Value of Product Produced per Unit of Electricity

From the above graph it can be noted that the average value of product produced per unit of electricity by SNR Joinery Works is $47.99. The higher the value of product produced per unit of electricity, the higher would be the productivity and the higher the productivity, the higher would be the profitability. It is very important to establish this relationship when calculating productivity so that SNR Joinery Works can head in the right direction when executing the productivity measurement framework. Therefore, SNR Joinery Works can very simply measure their productivity through this method and keep a close track of its performance on a daily, weekly, monthly and annual basis. This would help them assess how well they are doing per project and can accordingly implement controls to help improve overall productivity. A lower productivity would indicate that they are incurring higher costs with lower output. Multi-factor Productivity (MFP) To perform the MFP, the key input and output information was gathered from SNR Joinery Works, however, the information provided by them was not as the team had expected. Information provided was not very clear in some instances and this has been discussed below.

Figure 4: Input and Output Information from SNR Joinery Works

Based on the assumptions MFP has been calculated using the following formula; MFP=

Value of units produced Labor +Materials + Utilities + Logistics + Admin Supplies+ Repair ∧ Maintenance + Overhead

MFP=

$ 55,000 $ 55,000 =1.62 = $ 25,472+ $ 3,000+ $ 954 + $ 2,000+$ 300+ $ 250+ $ 2,000 $ 33,976

Please refer to Table 3: MFP for SNR Joinery Works in appendix table for a more detailed data.

Figure 5: MFP for SNR Joinery Works

Based on the information provided by SNR Joinery Works and the assumptions made, it can be seen that there are fluctuations in productivity depending on the different types of projects undertaken. Some projects consist of bigger scope while some are smaller. The illustration gives SNR Joinery Works the opportunity to review their productivity over the course of the whole year and try to reflect on the months where their productivity has been low. Once the root causes are identified and addressed, SNR Joinery Works can then set themselves a benchmark or target which they can work against in the new year. This would give them a good opportunity to continuously improve their production process and achieve higher productivity results and in turn maximizing their profits.

Overall Equipment Effectiveness Monitoring at SNR Joinery Works (PTE) Ltd Overall Equipment Effectiveness can be calculated as shown below.

OEE=Availability x Performance x Quality

OEE

Availability

Availability=

Operatin Planned Prod

Performance Actual P

Performance=

Max . Produc

Quality Total Output −

Quality=

Total Ou

Figure 6: OEE Calculation

To closely monitor the OEE (%) of the workshop machines at SNR Joinery Works, it is vital that the following parameters be accurately captured: 1. Machine downtime – SNR Joinery Works need to have a machine downtime log where they can capture key information such as the date and time the downtime has occurred, area or machine where the downtime has occurred, duration of downtime, brief description of the downtime, rectification, person responsible for rectifying the downtime, date the downtime was rectified and finally the status of the downtime whether it is still open or has been closed. 2. Machine start and stop records - SNR Joinery Works need to have a start and stop log for each machine where the machine operators can capture key information such as the date, machine name, machine start time, machine stop time, total hours machine has run and finally who has operated the machine. 3. Defects – SNR Joinery Works need to have a defects log where they can capture key information such as the date of the defect, brief description of the defect, type of defect, area where the defect has occurred, who has identified the defect, by when should the defect be rectified, who is responsible for rectification and finally the status of the defect whether it is still open or has been closed.

4. Wastages – SNR Joinery Works need to have a waste log where they can capture key information such as the date, type of waste, weight, approximate cost and area where waste has been generated. OEE Calculation For illustration purpose, the following assumptions have been made to demonstrate calculation for the month of January; Downtime = 3%, Actual production = $55,000, Planned production time = 9,600mins, Max. production capacity = $70,000, Defect rate = 5% OEE (%) is calculated as follows; Availability = Operating time / Planned production time = 9,600 - (0.03 * 9,600) / 9,600 = 0.97 Performance = Actual production / Max. production capacity = 55,000 / 70,000 = 0.786 Quality = Total output – Defects / Total output = 55,000 – (0.05 * 55,000) / 55,000 = 0.95 Therefore; OEE = Availability * Performance * Quality = 0.97 * 0.786 * 0.95 = 0.72 = 72.4% Please refer to Table 4 in the Appendix for the rest of the months OEE calculations and the assumptions Process Control Chart for Productivity and OEE

High productivity in August shows that SNR Joinery Works performed well

Low productivity in March & October

Figure 7: Process Control Chart for Productivity

SNR Joinery Works can monitor their productivity using the same concept of a Process Control Chart as illustrated above. It would give them an oversight of how well their business is performing against set benchmarks. In the above chart, it can be noted that for the months of March and October, productivity is below the lower control limit. This calls for an investigation to ascertain the cause for the decline. Probable reason for this can be an increase in input cost in the form of materials where defect rates had an impact on input cost causing a decline in productivity. Therefore, when SNR Joinery Works have proper job records in place, they can very easily refer to historical data and determine the actual causes. Once, this is determined they can then implement a standard work practice to ensure that the same instance is controlled or it does not repeat in future which would directly impact their productivity. If we look at the month of August, their productivity has been good and there are certain factors contributing towards this, with the major one being that in the month of July Government announces annual budget and in last years budget announcement, duty on raw materials was reduced. This can be seen as a major contributing factor towards the increase in demand/sales which is reflected through the increased productivity.

Figure 8: Process Control Chart for OEE (%)

SNR Joinery Works can very simply monitor their OEE (%) through the Process Control Chart as depicted above. It would give them a good sense of understanding on how their machines are operating and during which periods their OEE (%) has fallen short of their lower control limits. Looking at the illustrative Process Control Chart above, it can be noted that for the month of March and May,

OEE (%) was below the lower control limit. If there had been certain logs or register available with SNR Joinery Works where their machine related activities such as downtime, start and stop times and defects were all recorded, it would have really helped in finding the root cause for the decline in OEE (%) by simply referring to historical data. For the months of April and August, they have done exceptionally well. Therefore, the logs which our team has recommended for use by SNR Joinery Works would greatly help them in capturing all machine related activities. Please refer to the Appendix for the proposed logs for SNR Joinery Works. Cause of effect Diagram SNR has indicated that their defect rate is 5% to 7%, but does not have adequate data to monitor and minimize the defects. The cause-and-effect diagram is a very helpful tool that would enable SNR Joinery Works to identify the factors that contribute towards their product defects. There are four causes that contribute towards defects, and below is an illustration as to how SNR Joinery Works can identify and minimize the defect rate by using this as an example.

Figure 9: Illustrative diagram of cause and effect on defects

Job Sheet A job sheet is an essential document that will contain most of the information regarding a transaction or job carried out by SNR Joinery Works. This document allows the Administration Manager/ Director to collect and organize information in relation to the production of an order. It also allows the

Administration Manager at SNR joinery Works to work out the right cost incurred during a project, exact amount of materials, labor hours, and other overhead cost incurred for that production order. Please refer to the Appendix for sample of a job sheet. Conclusion – Pending from Praneel. I have written the following based on our writeup above. Please review this and add or remove if you feel it is not required. For the purpose of illustration, our team had based key assumptions and calculations of productivity on a monthly basis due to the unavailability of full information from SNR Joinery Works. However, this does not in any way mean that in future SNR Joinery Works will only be confined to the monthly monitoring frequency. From our proposed framework, SNR Joinery Works can start collecting relevant data on a regular basis as our team has proposed certain logs as discussed above which would capture key information for the business and eventually help in calculating and monitoring productivity. Once the data collection process continues as a daily practice, they can then slowly switch from monthly to weekly monitoring of productivity, and when they become really familiar with this method, they can then start monitoring productivity on a daily basis. This should be treated as a continuous improvement journey and SNR Joinery Works can build on from the learnings they come across in their journey. A very simple productivity measurement framework has been proposed for SNR Joinery Works and it is a lead way for them to start with the single factor productivity measurement at first and then slowly start adapting the multi-factor productivity measurement method followed by the other proposed methods in the framework once they start having sufficient data. This ties back to the learning curve concept where the pace of process transition is totally dependent on the rate at which employees are learning the new process or method and they clearly start depicting it through actual practice. Once improvements or progress is evident, it would indicate that SNR Joinery Works is ready to adapt the next proposed method. Since, SNR Joinery Works is a labor intense organization, it is vital that they focus on improving their labor productivity along with its machine performance, so that they can reduce and control their input cost and maximize their profit.

Appendix Table 1: Table illustration of the production process flow No:

1.

2.

Process Design,  documentation, and planning

Data Recording Design is done using AutoCAD. Resource, material & timeline planning is done based on extent of work. Job sheet not present for each specific work entailing key order related information.



Purchase order is raised & material acquisition is done. Details on material procurement per project not present. Ordered materials are transported to the site or warehouse Delivery docket is checked against PO and filed with invoice

Purchase of material Supply chain logistics



3.

4.

5.



Measuring and cutting



Material is measured and cut as per the specification of the drawings

Sanding and framework



Sanding done as per design. No machine checklists/logs present to capture key operating parameters.

Assembly Line



Assembly done as per design. No machine checklists/logs present to capture key operating parameters.

Furnishing and Painting



Furnishing is performed as per design. Job sheet not present to capture relevant furnishing details.

Inspection



Product inspection is done by Client or consultant & approval signed off for final completion

6.

7.

8.

Illustration

Final Assembly and Installation



Delivery / Service docket signed and later Invoiced for Payment

9.

Table 2: SFP calculation for SNR Joinery Works

Table 3: MFP for SNR Joinery Works

Table 4 - OEE calculations and Assumptions

Proposed logs for SNR Joinery Works Downtime Log

Machine Start and Stop Log

Defects Log

Waste Log

Sample Job Sheet...