ABCSampleProjectResults...1.IdentifyhiddenCostsofOperations-forexample:smallorderquantities,lowvolumeproducts,uniqueproducts,customerservicedemandsandconsiderableexpediting.❑Identified$800,000ofopportunitycostsinonesituationand$1.3millioninanother.Bothamountswereroughly10%oftotalfactoryfloorcosts.2.Redesignofunprofitableproductsortheprocessesusedtomakethoseproducts.❑Aproductsuppliedtoamajorautomotivecompanywasredesignedtoeliminateasignificantsub-contractedoperation.Productcostwascutinhalfandpricetocustomerwasdoubled.3.Identifythecostofcapacitytosupportschedulingandnewbusinessdecisions.❑Thecapacitycostingmodelwasusedtorunscenariosforthedeploymentofcapacitytoacceptanorderforaproductthatwouldincreasevolumesintheplantby50-100%.Targetproductioncostwere50%lowerthancurrentproductioncosts.4.Evaluatethecostofoutsourcingcertainoperationsratherthatproducingin-house.❑Identifiedthroughexternalbenchmarkingthatthecostofonesignificantspecialtyfinishoperationexceededoutsourcedcostbyafactorof“3”,resultingin$500,000ofcostreductionopportunities.5.Identifyandquantifyopportunitiesforsupport-costreduction.❑Opportunitiesforsupportcostreductionsaresignificant.Inoneplant,approximately$5millionofopportunitieswereidentified,onabout$30millionofsupportcosts.Inanother,$1.4millionwasidentifiedon$5.6millionofsupportcosts.6.Identifyandquantifymanufacturingcostsofquality.❑Costofqualitymanifestsitselfmostvisiblyinyieldloss,supplierrejects,andexpediting.Oneplantiscurrentlyaddressingits$1.8millionfailurecost,beginningwithyieldloss.Appendixii:BestPracticesinABCABCSampleProjectResults...7.Establishcosttargetsforinterplantbenchmarking(bestofbreedandclass).❑Costtargetsestablishedthrough“bestofbreed”analysisyieldsignificantopportunities.Inonefour-plantcompany,over$5.5millionofopportunitieswereidentified,approximating25%ofmanufacturingcosts.8.Identifyprocesscostsandinefficiencies❑Identifiedthattwothirdsofdirectlaborwasusedtomovematerialandsupportprocess/productchangeover.ABCjustified$600,000ofplantimprovementsthatwillpaybackinvestmentsinoneyear.9.Identifyandimprovecustomerprofitability.❑Thecompany’s2ndlargestcustomerwasgenerated$700,000inlossesforthecompany.Throughchangesinsteelsourcing,processchanges,testingchanges,andpricing,profitabilityonthis15yearoldaccountwasimprovedby$1.1million.10.SupporttheprincipalsofTQMthroughcontinuousimprovement❑Inan8plantprocessmanufacturing/distributioncompany,ABCwasimplementedimmediatelyafterafullyearreengineeringinitiative.Inthefirst2plants,improvementswereidentifiedinproductmix,capacityutilizationandpalletizingthatareexpectedtogenerate$300,000-$400,000ofannualoperatingbenefits.11.Supportproductdevelopmentandplantlayout.❑Amanufacturerofrefrigerationequipmentwasredesigningit’sproductlines.AnABCmodeloftheexistingproductswasbuilttosimulatetheachievementsof25%costimprovementsthroughdesigntocost/designformanufactureanddesignforassembly.Themodelvalidatedthesavings.Appendixii:BestPracticesinABC
