making a major purchase - tappi revenue = increase gross profit operation audit pre-audit...
TRANSCRIPT
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Making a Major Purchase?
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Major Purchase Definition
Define a Major Purchase$ Dollar Amount
$1,000-$1,000,000 Plus
Life of the Asset1 Year-15 Years Plus
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Reasons for the Purchase!Production
Reduce CostsLabor Cost/UnitWasteEnergy
Capacity/ProductivityReduce Lead TimeOne Pass versus TwoIncrease Throughput
Technology/CapabilityCustomer or Market Demand
Other?
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The Value of Waste!Plant produces 50,000/MMSF per monthAverage cost of board is $42.85/MSFReduce 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 = $257,100Each percentage point = $257,100/yearEach percentage point = $21,425/monthEach percentage point = $1,071/day
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Hypothetical Case New FlexoCurrent Machine
3 shifts, 5 days per week10 orders (set-ups) per shiftAverage set-up 20 minutesAverage machine speed 3000 pieces per/hr total time. Average blank size 8 Sq. ft.Average order size 2,400Loaded labor cost per hour $60 (crew of 3)
New Machine3 shifts, 5 days per week15 orders (set-ups) per shiftAverage set-up 5 minutesAverage machine speed 4500 pieces per/hr total time. Average blank size 8 Sq. ft.Average order size 2,400Loaded labor cost per hour $60 (crew of 3)
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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/day15 set ups X 5 Minutes = 75 min/shift/day125 min. X $60/hr = $125/day or $31,250/yr
Potential through-put gainsNew Machine 4500 X 8/hrs = 36,000 pcs/day/shift Old Machine 3000 X 8 hrs = 24,000 pcs/day/shift12,000 X 8 sq. ft. = 96 MSF/day/shift96 MSF X $10 margin = $960/day/shift $960 X 250/working days/year = $240,000/yr/shift
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Hypothetical Case New Flexo
Goal is to reduce set-up costsSet-up savings
$31,250/ yrIncrease through-put
One shift potential $240,000/ yrTwo shift potential $480,000/yrThree shifts potential $720,000/yr
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Reasons for the Purchase
Sales StrategyIncrease Revenues
Gross Profit
Existing Customer RequirementsNew Customer OpportunitiesNew Market OpportunitiesCombat a Competitive ThreatOther?
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Hypothetical Case Sales StrategyExisting Customer Requirements
New ItemUsage 50,000 week8 sq. ft.$10.00/MSF margin
New Customer Opportunities
Existing ItemUsage 5,000 week8 sq. ft.$10.00/MSF margin
Change OverUsage 7,500 week8 sq. ft.$10.00/MSF margin
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Hypothetical Case Sales StrategyExisting Customer Requirements
50,000 pcs/wk X 50 weeks = 2,500,000/yr2,500,000 pcs X 8 MSF = 20,000MSF/yr20,000MSF X $10.00/MSF = $200,000/yr
New Customer Opportunities12,500 pcs/wk X 50 weeks = 625,000/yr625,000 pcs X 8 MSF = 5,000MSF/yr5,000MSF X $10.00/MSF = $50,000/yr
TOTAL $250,000/yr
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Reasons for the Purchase
Projects without Financial Pay-OffEnvironmental EPAGovernment RegulationOSHAOther?
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Reasons for the Purchase
EgoLatest TechnologyImageOther?
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Who Determines the NeedSurvey
Small Companies 20-99 EmployeesPresident, Owner, General Manager 91.4%Production or Sales Management 8.6%
Medium Sized Companies 100-499 EmployeesManufacturing Management 81.8%Sales Management 18.2%
Large Companies 500 or More EmployeesManufacturing Engineering/Management 91.4%
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Determining the Need/ReasonThe Final Approval
President or OwnerGetting the Project Approved & Having it be Successful
Pre-PlanningAnalyze the ProjectDevelop the Project DetailsGetting Input from the Organization
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Analyze the Purchase
SWOT AnalysisStrengths (Internal)Weaknesses (Internal)Opportunities (External)Threats (External)
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SWOT Analysis
Strengths (Internal) Core Competencies
Market ExpertiseProduct StrengthSkill SetsImageOther?
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SWOT Analysis
Weaknesses (Internal)Liabilities
FinancingCash FlowSkill SetsAdditional SupportOther?
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SWOT Analysis
Opportunities (External)Identify Customer NeedsIdentify Market NeedsNew Customers New TechnologyCost/Unit LessIncrease Gross ProfitsImprove ProductivityOther?
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SWOT Analysis
Threats (External)Matching Machine CapabilityNew TechnologyCompetitionLimited MarketLimited CustomerCost/Unit LessDo NothingOther?
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SWOT Analysis Example New Flexo
Strengths (Internal)Experience (4) 2-color Flexos12 experienced crewsTrained crews & supervisorsWritten & proven processesWaste in-controlThrough-put highLarge customer baseReliability Reputation
Weakness (Internal)Flexos 35-40 years oldMaintenance cost highLabor cost/unit highNot a technological leaderCrews not technology competentImpact on cash flowImage brown box
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SWOT Analysis Example New Flexo
OpportunitiesIncrease market shareOpen new marketsLarge end-user marketNew technology Improve profitsTake advantage of customer demand largest customer
ThreatsCompetitor expertiseNewer technologySupports only one customerDo nothing what happensCash flow
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Financial Analysis
Financial AnalysisNet Present ValueInternal Rate of ReturnPayback Period AnalysisAccounting Rate of ReturnDepreciationCash Flow Statement
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Financial AnalysisNet Present Value
Allows you to consider the time value of money
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Financial AnalysisInternal Rate of Return
Allows you to find the interest rate that is equivalent to the dollar returns from the project
Cost of the Project= % Return
Average Annual Cash Flow
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Financial AnalysisPayback Period Analysis
It tells how long it will take to earn back the money you will spend on the project
Cost of the Project= Payback Period
Annual Cash Flow
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Financial AnalysisAccounting Rate of Return
Gives a quick estimate of the project’s net profits
Annual Cash Flows - DepreciationAccounting Rate of Return =
Initial Investment
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Financial AnalysisDepreciation
A non-cash expense that reduces the value of an asset as a result of wear and tear, age or obsolescence
Cost – Salvage ValueDepreciation =
Useful Life
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Financial AnalysisCash Flow Statement
Shows the effect of the project on your revenuesCompares the costs and financial benefits of the project over a period of timePoints out if the project is unfeasible or partially feasibleProves you can make the loan payments
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Financial AnalysisCash Flow Statement
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The Major ProjectDetermine the Need/Reason
Reduce Costs/Increase ProfitsIncrease Revenues/Profits
Analyze the ProjectSWOTFinancial
Make the DecisionTeam Effort
Plan the DetailsTeam Effort
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Project DetailsThe Decision is MadeNow the Real Work BeginsREASON Increase Profits
Reduce Costs = Increase Gross ProfitsIncrease Revenue = Increase Gross Profit
Operation AuditPre-Audit QuestionnaireReview of QuestionnairesOn-Site InterviewsRecommendationsDevelop Plan to ImproveEstablish Goals $$Implementation
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Operation Audit
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Project DetailsSpecifics
SizeTypeCapacityCapabilityNewUsedVendor Support
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Project DetailsCost Analysis
New versus UsedTCO Total Cost of OwnershipHidden Costs
InstallationTrainingMaintenance & RepairUtilities/EnergySuppliesTaxesPayroll & Benefits New Employees
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Project DetailsOther Considerations
FacilityPlant LayoutProduct Flow
Lean Manufacturing
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Over-productionInventory TransportationWaitingMotionOver-processingCorrectionNot utilizing the talent and knowledge of human resources
Lean Manufacturing 8 Types of WasteLean Manufacturing 8 Types of Waste
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Project DetailsProduction
ProcessesMethodsProceduresGoals Measurement
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5S The Visual FactoryVisual 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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Project DetailsStaffing
Skill SetsRecruitmentTNA Training Needs Analysis
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Project DetailsSupport
PersonnelTechnologyEquipmentProcesses
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Project DetailsInventory
Process & ProceduresSpare PartsRaw MaterialsWIPFinished Goods
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Project DetailsQuality
Processes & ProceduresISOCustomer Requirements
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Project DetailsRaw Materials
Key SuppliersAvailabilityCostsQuality StandardDeliveryTechnical Support
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Project DetailsEnvironmental Issues
OSHAHazmatEPAStateCountyCity
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Project DetailsTraining
CrewsSupervisorsSupport PersonnelVendorsCustomer ServiceSalesCustomer
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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
• 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.
4.0 Process
• 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
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Project DetailsMaintenance
TrainingProgramMachine Vendor Support
ManualsWeb BasedUSA BasedCommunication
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Project DetailSales
Plan not an IdeaCommunicate Value to CustomerShowtime
“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
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Measure Your ProjectEstablish Quantifiable Goals
Financial20% ROI
ProductionReduced Cost/Unit
SalesNew Business on Machine Contribution Dollars $
Measure Performance to the GoalsPost the ResultsDiscuss the ResultsContinuous Improvement
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Ultimately
People Make the DifferenceInnovative ProductsQuality ProductDelivered On-TimeJust In-TimeAttaining the Project Goals
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Question or Comments?Thank You for Your Attention!