The Situation
Specialty Chemicals Company* had undergone numerous ownership changes—a factor that contributed to company instability. The fallout was extensive: declining productivity and financial performance, especially at its major production plant, a large cash flow generator. Because the plant fed products to its other facilities, its reduced productivity impacted the entire manufacturing network.
Owners hadn't viewed manufacturing as strategically critical, so the basics for operational excellence weren't in place. The company had under-invested in maintaining and improving its key plant. Equipment was underutilized because of disrepair; dirt, leaks and spills were routine; it lacked key performance indicators (KPIs) as well as a continuous improvement program such as Lean Six Sigma. The shop floor itself hindered optimization, with a poor layout and inefficient workflow processes. To rapidly turn around operations, the company needed a roadmap to eliminate waste, achieve sustained cost savings and improve on-time deliveries for more satisfied customers
Our Approach
Bain collaborated with the CEO on a comprehensive diagnostic to address the two biggest challenges: improved performance and increased capacity at its major plant and transforming the plant into a best-in-class model for all other facilities. The nuts-and-bolts-oriented diagnostic focused on improving five work streams that generate profits from the shop floor:
- Overall Equipment Effectiveness (OEE): Evaluated equipments' yield, quality and speed.
- Lean Six Sigma methodology: Identified ways to optimize storage, ensure clean and reliable machinery and standardize processes.
- Key performance indicators: Revealed lack of KPIs and need to tie them to corporate productivity metrics.
- Inventory reduction: Uncovered the source and cost of overstocking.
- Customer service: Linked unstable production to lack of on-time deliveries.
Our Recommendations
After uncovering the root causes of waste, declining productivity and customer service, we recommended a series of initiatives to quickly transform the plant's operations.
- Launch over 20 "no cost" OEE initiatives to improve plant capacity followed by "pay-as-you-go" efforts; reduce plant conversion costs
- Adopt Lean Six Sigma—principally 5S (sort, store, shine, standard, sustain) methodologies--to remove clutter, optimize the plant floor layout; restore facilities to "like new" condition; implement standardized processes and institutionalize them for sustained continuous improvement
- Establish KPIs and post them so that they're visible to employees
- Reduce inventory and implement a process to sustain lower levels
- Improve customer satisfaction by stabilizing production to ensure on-time deliveries
The Results
With Bain's performance roadmap,Specialty Chemicals Company quickly restored profitability at its largest production plant. The results include:
- Saving millions in production run rates;
- Reducing non-material manufacturing costs by 10%;
- Doubling Overall Equipment Effectiveness and plant capacity—without additional capital;
- Streamlining operations and increasing production reliability with a plant-wide Lean Six Sigma program—and embedding those new Lean Six Sigma capabilities in the organization for continued improvement;
- Launching KPIs and posting them throughout the plant;
- Reducing inventory by over 25%;
- Reaching best-in-class customer service levels by improving on-time deliveries by over 10%.
By deploying this repeatable model, Specialty Chemicals Company plans to achieve additional cost savings and improvements at all its plants.
* We take our clients' confidentiality seriously. While we've changed their names, the results are real.
