Our client, one of the world’s leading manufacturers of tractors, enjoys a considerable presence in the export market.
Key results
4% to 45%
Increase inFirst Pass Yield
3%
Improvementin gross margin
24%
Reduction Inventory ValueThe challenge
Despite enjoying record sales from the previous year, the company was looking for opportunities for improvements. After an analysis of their manufacturing processes, we discovered that:- Over 90% of tractors built failed to pass the final production test.
- 50% of failures were a result of missing materials.
- A disproportionate level of work in progress was required.
- A high number of tractors were not needed by the dealers.
What we did
Set up the Project Team to identify hidden opportunities
Renoir consultants partnered with the client’s taskforce to focus on opportunity identification, savings assessment, and target attainment.Set up Management Action Teams (MATs) to realise these opportunities
The Management Action Teams (MATs)—comprising the company’s managers and staff—worked with the Project Team to execute processes and annualise the benefits.Linked various departments to one management control system
Instead of working in silos, the different functions came together as one to manage the entire business process. The result was better communication, commitment and collaboration.Reviewed Key Performance Indicators (KPIs)
KPIs were revised daily, weekly and monthly based on the performance reports, thus enabling the management to tweak the variances according to their goals.Improved operations
First Pass Yield (FPY) dropped to 50% per week, thus optimising the production processes and ensuring that work-in-progress (WIP) did exceed two full days’ worth of production.Resolved daily issues promptly
Routine Interval Controls (RIC) were introduced throughout the cross functions of production, quality control and warehousing. Such initiatives promptly resolved issues and enabled extensive Root Cause Analysis (RCA) to be carried on persistent problems and immediately fixed them.
Improved stock availability
Weekly updates greatly improved inventory rationalisation and stock availability. There was 95% accuracy on sales forecasts which helped in price and delivery negotiations with key suppliers.
Improved new product development
A project management system was established to make the production of new tractors more visible. This ensured that change orders were implemented, and the Bills of Material were routinely checked for accuracy. Close monitoring increased customer satisfaction and boosted sales.
Minimised “missing parts” by improving logistics and warehousing
The problem of “missing parts” delayed production and caused a drop in FPY performance. We worked with the sales department to develop a stable plan which increased the effectiveness for logistics in negotiating for better terms with suppliers of spare parts. It also improved the accuracy and value of the warehouse which resulted in a sharp reduction of “missing parts” as a cause for a reduced FPY performance in production.
Better sales
Sales improved because of frequent sales forecasts and better communication among sales, planning, logistics and regional distributors.
Improved after sales
We introduced an effective reporting system to identify the frequency and causes of customers’ complaints on tractors bought. The complaints were then handled professionally and in a timely manner. With closer liaison with production, quality and new planning development (NPD), the number of warranty claims were reduced.
Results
At the end of the transformation project, the company received exactly what they needed — visibility of hidden opportunities. The employees, too, received a benefit: knowledge transfer. They now have the know-how to drive future improvements. Here is a summary of what we helped the client achieve:- Increased First Pass Yield average from 4% to 45%.
- Increased gross margins by 3%.
- Reduced inventory value by 24%.
- Introduced company-wide management control system.
- Established NPD planning and reporting tool.
* We take client confidentiality seriously. While we have kept the brand anonymous, the results are real.
