Meeting the Cost Reduction Challenge in 2008

by Mike Gibson, Managing Director, Manufacturing Market, Standard Register

As fiscal year 2008 gets underway, manufacturers across the United States and beyond are faced with a major issue—how can we reduce costs this year while still remaining competitive in the global marketplace? One viable and imperative option is to drive cost reductions throughout their supply chains, placing a firm focus on production costs and materials.

Through the years, a tremendous amount of focus and effort has been placed on the highest spend commodities, such as metals, plastics, fasteners and others. Typically, results have been mixed due to the external market factors that control the cost of these commodities. This leaves the manufacturers searching for the next generation of cost reduction and, thus, looking deeper into the bill of materials for additional “low hanging fruit” for cost reductions.

There is an excellent opportunity for double-digit cost reductions in the area of printed production parts, depending on total spending. This often overlooked commodity consists of manufacturing labels, decals, technical literature and marketing collateral. The reasons for this commodity being overlooked are numerous but typically point toward the vast numbers of parts involved and their position as class B or C spend items. The effort required to gather, analyze and implement changes to these manufacturing parts has often outweighed the realized savings.

Historically, there has been no organized method to undertake all of the complexities involved in organizing the engineering drawings, if they exist, and gathering all of the specifications into a common analysis tool. Most previous efforts have focused on reducing the piece price of items instead of focusing on total cost of ownership. The most common method for focusing on piece price reduction is the online auction tool. Many companies have attempted to treat this family of parts as a commodity item and utilize the online auction method only to realize that, due to the custom nature of the products and the multitude of materials and various production methods involved, they do not totally realize the desired savings.

In order to fully realize the savings potential, manufacturers need a new approach to driving reductions in their printed production parts. Standard Register has developed an in-depth analysis program known as Manufacturing Assessment for Printed Production Parts, or MAP3. This program consists of a well-organized and documented approach toward analyzing the fit, form and function of all printed production parts and driving cost reductions via a number of process improvements.

The key to fully realizing cost reductions lies in the ability to organize all of the various specifications involved. Standard Register has developed an exceptional online data repository that captures all of the key specifications, production methods and performance requirements for the thousands of printed production parts in existence in the typical manufacturing organization. This system is the integral part of the MAP3 program, and once all of the data is organized, our Label Management Inventory System™ (LMIS) has analysis functionality that can identify potential areas for significant cost reduction.

In addition to the technology portion of the MAP3 program, Standard Register has a highly-trained staff of technical consultants that are tasked with analyzing all the data gathered in the assessment process and comparing this data to the client’s published performance requirements. This team of individuals looks for opportunities for material consolidation, re-engineering and substitution, as well as die size reductions and migration to technology solutions. Due to the fact that printed production parts have been virtually ignored for years, this process identifies a multitude of process improvement opportunities. These opportunities are typically ranked by the cost impact they will yield along with a performance ROI analysis.

The MAP3 process consists of a select few, clearly-defined stages:

• Pre-assessment data gathering
• Plant-level assessment
• Data entry/specification organization, including samples, engineering prints and performance requirements
• Cost reduction project identification
• Formalized cost savings report
• Implementation

Pre-Assessment Data Gathering
An experienced team of professionals conducts a client interview consisting of in-depth discussion surrounding the customer’s printed parts environment. In this interview, particular emphasis is placed on the client’s performance requirements, agency compliance requirements and supply chain challenges. During this portion of the process, the Standard Register team and client decide together if they should move forward based on the findings of this high-level meeting.

Plant-Level Assessment
Standard Register conducts an on-site assessment of the client’s facility utilizing a team of highly trained product engineers. This team of technical engineers meets with key customer contacts, such as representatives from engineering and production. They perform an in-depth analysis of the customer’s performance requirements, as well as extensive analysis of the various label materials that the client is using. Finally, the team conducts an on-site production floor analysis utilizing their Lean/Six Sigma methodology. This team is focused on uncovering opportunities for cost reduction via:

1. Material functional replacement
2. Material and die size reductions
3. Production part elimination and SKU reduction
4. Utilization of technology to further reduce spend

Data Entry/Specification Organization
The technical team analyzes the customer’s environment by loading much of the collected data into analysis tools and performing a more detailed assessment. This phase confirms the original opportunities for cost reduction that were uncovered in the first two phases of the process. By more closely analyzing a cross-section of the production part spend and comparing samples to engineering drawings and performance requirements, the technical team begins to validate and quantify the actual potential for savings.

Cost Reduction Project ID and Formalized Cost Savings Report
The outcome of the in-depth analysis is typically a detailed listing of potential cost reduction opportunities. These opportunities are organized into a formal report that details the current situation, the potential issue or opportunity, the suggested method to achieve the savings and the projected hard-dollar impact, if implemented. This report is given to the client as part of a formal presentation.

The MAP3 assessment process has a strong record of success in reducing total cost of ownership for many manufacturing organizations. This well-documented process is typically implemented with very limited customer manpower requirements. The Standard Register team has refined the process to ensure there is very little interruption to the customer and that the process requires less than a full day on site. As stated by a lead engineer with a global industrial automation power provider, “We chose Standard Register because they have the people, processes and technology to truly drive cost savings and change the way we do business.”

If you would like more information on how your manufacturing business can benefit from a MAP3 or to schedule an assessment of your facility, contact Standard Register today.