Lean Management & SOFP Process Company Profile

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1 Lean Management & SOFP Process Lean Accounting Summit Company Profile Vertically Integrated 1,500 Employees 300 Contract Growers $300 Million Annual Sales Retail Deli Food Service Privately Owned GNP Company Case Study September 15,

2 Our Locations Cold Spring St. Cloud Sauk Rapids Arcadia Independenc e Luverne GNP Company Case Study September 15, Agenda Continuous Improvement Timeline Planning for a Successful Pilot Start the Ball Rolling Lean Management Converting Traditional Budgeting to SOFP Keys to Success GNP Company Case Study September 15,

3 GNP Company Continuous Improvement Timeline GNP Company Continuous Improvement Timeline Six Sigma Lean Tools Lean Accounting Pilot Lean Accounting Implementation Lean SOFP Implentation GNP Company Case Study September 15, Industry Fundamentals Supply is set 13 weeks out Supply is both pull and push We do not have demand for every part of the bird Value adding to product is key Processing is a flow system with few areas to stage product Regulatory (USDA) Limited Product Life GNP Company Case Study September 15,

4 Keys to a Successful Lean Pilot GNP Company Case Study September 15, Planning for a Successful Pilot Do your research ( ) 2010) Literature Networking (Lean Accounting Summit, etc.) Visualize Perfection Assemble a Lead team and create a high level Implementation Plan Tap into others experience (August 2010) Received Company Leadership approval of high level l plan (September 2010) Before process launch, complete training with an expanded cross functional team (February 2011) Completion date needs to be set GNP Company Case Study September 15,

5 Planning for a Successful Pilot Identify location for the Pilot Determine criteria Choose the Implementation Team Involve all areas of the business Great opportunity for increasing overall lean involvement Develop Preliminary Value Streams for Box Score deployment Envision how the new organization will look How will this impact the company Decision making Budgeting Reporting Elimination of Standards GNP Company Case Study September 15, Eectinga Executing successful Lean Pilot: Use the Tools GNP Company Case Study September 15,

6 Start the Ball Rolling Scheduling Schedule recurring Kaizen events with time between to complete assignments We used 3 day events 6 8 weeks apart This allows the team to be working together uninterrupted during the sessions Leave each event with well defined assignments GNP Company Case Study September 15, Start the Ball Rolling Measures Identify Measures Valuable Tool Linkage Chart Develop the measures that will allow the team to impact the companies strategic goals Begin with strategic goals and develop measures: Monthly/weekly Value Stream Daily Cell GNP Company Case Study September 15,

7 STRATEGIES Increase Sales & Market Share Increase Cash Flow & Reduce Debt Create Culture of Continuous Improvement Maintain Stable & Educated Workforce Most Valuable Tool Linkage Chart STRATEGIC MEASUREMENTS Sales Growth Cash from Operations Customer Satisfaction Inventory Days or Turns Sales per Employee Suggestions per Person % People Engaged in Improvement Annual Employee Survey VALUE STREAM GOALS Increase Thru-put with Same Resources Reduce Order Fulfillment Lead Time Reduce Inventory Perfect Quality Improve Productivity Collect Cash Qikl Quickly Increase CI Project Participation Provide Advancement for Employees Eliminate Accidents & Injuries GNP Company Case Study September 15, VALUE STREAM MEASUREMENTS Sales per Person On-Time Shipment Dock-to-Dock Days First Time Through Average Cost per Unit Accounts Receivable Days # People on Improvement Teams Cross Training per Person Number of Accidents & Injuries VALUE STREAM MEASUREMENTS Sales per Person CELL CRITICAL SUCCESS FACTORS Cell Measurements Eliminate Obstacles to Flow CELL GOALS Reduce Cycle Times CELL MEASUREMENTS Day by the Hour Report On-Time Shipment Dock-to-Dock Days First Time Through Average Cost per Unit Accounts Receivable Days # People on Improvement Teams Cross Training per Person Number of Accidents & Injuries Use Standardized Work Make Products on Time Effective Visual Pull Systems Quick Change Over on Machines Quality at Source Increase CI Project Involvement Increase Training & Cross Training Enhance Standard Safety Procedures Build to Schedule Small Batches Single Piece Flow Eliminate Variability Effective 5S & Visual Management Widespread Cross Training Wholly Safe Work Area GNP Company Case Study September 15, WIP to SWIP First Time Through Operational Equipment Effectiveness Track Improvement Projects 5S Audit Cross Training Chart Safety Cross 7

8 Value Stream Performance Measures Company Value Stream Plant 1 Example 1 Value Stream Goal 02-Jul Jul Jul Jul Jul Aug Aug Aug-11 Future State erformance Measures Pe Produce to Schedule 67.00% 89.00% 95.00% 83.00% 95.00% % 85.00% 75.00% 90.00% Conversion $ Cost / Prod Lb $ $ $ $ $ $ $ $ Revenue / $ Labor Hour 675 $ 690 $ 715 $ 730 $ 714 $ 692 $ 696 $ 707 $ 720 Yield % to Live 18.62% 18.44% 18.30% 18.70% 18.50% 18.65% 18.62% 18.43% 18.65% Strategic & Branded % % 62.00% 68.00% 54.00% 58.00% 73.00% 65.00% 68.00% 70.00% Prod Lbs Strategic & Branded % % 65.00% 65.00% 60.00% 52.00% 59.00% 68.00% 68.00% 70.00% Net Sales Lbs Quality Score 99.28% 99.31% 99.40% 99.33% 99.15% 99.48% 99.20% 99.50% OSHA - Days without Incident % of People in CI Projects & Training 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 40.00% Program GNP Company Case Study September 15, Value Stream Board Box Score Metrics (Yellow) Capacity (Blue) Financial (Green) Safety Quality Produce to Schedule Productivity Measure Flow Interruption WIP Rework Breakthrough Projects Value Stream Maps GNP Company Case Study September 15,

9 Value Stream P&L Total Value Value Value Value Value Value Value Value Value Monument Monument Production Stream 1 Stream 2 Stream 3 Stream 4 Stream 5 Stream 6 Stream 7 Stream 8 Stream Assign Contribution Margin $479,000 $33,000 $62,000 $371,000 $157,000 -$3,000 $42,000 $173,000 $52,000 $57,000 $0 $0 $0 Net Sales $3,117,000 $138,000 $118,000 $1,233,000 $349,000 $38,000 $97,000 $666,000 $232,000 $247,000 $0 $0 $0 Raw Material $2,138,000 $104, $56,000 $861,000 $192,000 $41,000 $56,000 $493,000 $180, $154,000 $0 $0 $0 Total Expense $903,000 $34,000 $20,000 $179,000 $39,000 $3,000 $24,000 $86,000 $33,000 $5,000 $159,000 $42,000 $13,000 Ingredients $3,000 $0 $0 $2,000 $0 $0 $0 $0 $0 $0 $0 $0 $0 Packaging $155,000 $10,000 $11,000 $51,000 $21,000 $3,000 $4,000 $31,000 $23,000 $3,000 $0 $0 $0 Labor $362,000 $7,000 $5,000 $62,000 $11,000 $0 $13,000 $30,000 $6,000 $0 $60,000 $9,000 $9,000 Fringe $136,000 $5,000 $2,000 $23,000 $4,000 $0 $4,000 $11,000 $2,000 $0 $22,000 $3,000 $4,000 Govt Services $6,000 $0 $0 $3,000 $0 $0 $1,000 $0 $0 $0 $2,000 $0 $0 Utilities $35,000 $0 $0 $0 $0 $0 $0 $0 $0 $0 $15,000 $12,000 $0 Supplies $25,000 $0 $0 $2,000 $0 $0 $1,000 $1,000 $0 $0 $5,000 $1,000 $0 Depr/Rent/Leases $70,000 $5,000 $0 $10,000 $0 $0 $0 $5,000 $0 $0 $4,000 $1,000 $0 Repair/Maint $50,000 $2,000 $0 $12,000 $1,000 $0 $1,000 $3,000 $0 $0 $18,000 $6,000 $0 Outside Services $45,000 $3,000 $1,000 $4,000 $1,000 $0 $1,000 $3,000 $1,000 $1,000 $16,000 $7,000 $0 Other $15,000 $2,000 $0 $11,000 $0 $0 $1,000 $2,000 $0 $0 $15,000 $4,000 $0 Monument Assignment $0 $10,000 $6,000 $86,000 $19,000 $4,000 $6,000 $49,000 $18,000 $15,000 -$159,000 -$42,000 -$13,000 1st Proc Monument $0 $8,000 $4,000 $64,000 $14,000 $3,000 $4,000 $37,000 $13,000 $11,000 -$159,000 $0 $0 2nd Proc Monument $0 $2,000 $1,000 $17,000 $4,000 $1,000 $1,000 $10,000 $4,000 $3,000 $0 -$42,000 $0 Other Assignables $0 $1,000 $0 $5,000 $1,000 $0 $0 $3,000 $1,000 $1,000 $0 $0 -$13,000 Other Monument Assignment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Company Expenses $5,000 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Misc $5,000 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Total Plant Expense $908,000 $44,000 $26,000 $266,000 $58,000 $7,000 $29,000 $136,000 $51,000 $21,000 $0 $0 $0 Value Stream Profit $77,000 -$11,000 $36,000 $106,000 $99,000 -$10,000 $12,000 $37,000 $1,000 $72,000 $0 $0 $0 GNP Company Case Study September 15, Start the Ball Rolling Capacity Develop Capacity Worksheets Calculate Equipment and Team member Capacity Identify potential bottlenecks Identify excess capacity Develop a future state capacity New Capital Sales, Operations & Financial Planning (SOFP) planning Focus is on Planning not Scheduling!!! GNP Company Case Study September 15,

10 Capacity Worksheet Value Stream Employee Employee Employee Machine Machine CELL DESCRIPTION People Capacity Process 1 Process 2 Process 3 Machine Capacity Machine 1 Machine 2 Employee/Machine Productive Capacity 59% 24% Employee/Machine Non-Productive Capacity 14% 5% Employee/Machine Available Capacity 27% 71% Pounds Required per Month (forecast) 605, , , , ,767 Pieces Required per Month 2,089,534 1,508, ,283 1,483, ,093 Piece Weight Cycle Time(employee or machine) Total pieces per minute NA NA Staffing NA NA Change Over Time Sec Line Hours per Day Average Batch Size Number of Change-Overs Scrap Rate (offal) 1.8% 1.8% 1.8% 0% 0% Scrap Rate Packaging 2.0% 0% 0% 2.0% 2.0% Rework Rate 2.0% 0% 0% 4.0% 4.0% Scrap/Rework Quantity 0 120,984 27,002 8,364 59,338 25,254 Downtime % 0% 0% 0% 1.7% 1.7% # of machine per cycle NA NA NA 1 1 5S & Clean Up Time Meetings & reporting per day/per person Downgrade % 21.7% 0.0% 21.7% 0% 0% Downgrade Qty 453, , User Defined Crew Size # cells Number of Employees Days per month GNP Company Case Study September 15, Value Stream Box Score Capacity Company Value Stream Plant 1 Example 1 Value Stream Goal 02-Jul Jul Jul Jul Jul Aug Aug Aug-11 Future State Capacity Employee Productive Employee Non- Productive Employee Available Capacity Machine Productive Machine Non- Productive Machine Available Capacity 72.00% 72.00% 72.00% 72.00% 72.00% 72.00% 72.00% 72.00% 72.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 18.00% 18.00% 18.00% 18.00% 18.00% 18.00% 18.00% 18.00% 18.00% 32.00% 32.00% 32.00% 32.00% 32.00% 32.00% 32.00% 32.00% 32.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 58.00% 58.00% 58.00% 58.00% 58.00% 58.00% 58.00% 58.00% 58.00% GNP Company Case Study September 15,

11 Value Stream Box Score P&L Company Value Stream Plant 1 Example 1 Value Stream Goal 02-Jul Jul Jul Jul Jul Aug Aug Aug-11 Future State P&L Net Sales $302,000 $309,000 $320,000 $327,000 $319,000 $310,000 $311,000 $316,000 $325,000 Material Costs $210,000 $190,000 $210,000 $214,000 $200,000 $190,000 $185,000 $190,000 $190,000 Conversion Costs $70,000 $50,000 $60,000 $65,000 $60,000 $72,000 $66,000 $71,000 $62,000 Value Stream Profit $22,000 $69,000 $50,000 $48,000 $59,000 $48,000 $60,000 $55,000 $73,000 Value Stream ROS 7.28% 22.33% 15.63% 14.68% 18.50% 15.48% 19.29% 17.41% 22.46% Inventory Pounds (Thousands) Strategic & Branded % of 75.00% 81.00% 84.00% 90.00% 88.00% 80.00% 79.00% 82.00% 90.00% Inventory GNP Company Case Study September 15, Using the Box Score GNP Company Case Study September 15,

12 Box Score Decision Making Process Opportunity capture 6,250 pounds of product per week that is not recovered in the current process Salesprice of the product willbe $1.00/pound The equipment necessary to capture product is already available within the company Installation costs will be less than $20,000 Labor for the new process will be $80,000 annually There is no excess labor capacity currently available Labor will be filled with overtime or additional team members The additional labor will reside in a monument not the value stream GNP Company Case Study September 15, Current vs. Future Value Stream Company Cold Spring Weekly Impact Annual Impact Value Stream Example 1 Current State Value Stream Boxscore Futrue State Boxscore Change Change Cap apacity Performance Measures s Produce to 86.17% 85.90% -0.27% 85.90% Schedule Conversion $ $ $ $ Cost / Prod Lb Revenue / $ Labor Hour 702 $ 709 $ 7 $ 709 Yield % to Live 11.44% 11.61% 11.61% 0.17% Strategic & Branded % % 42.89% -0.65% 42.89% Prod Lbs Strategic & Branded % % 43.19% -0.66% 43.19% Net Sales Lbs Quality Score 99.31% 98.30% -1.01% 98.30% OSHA - Days without Incident % of People in CI Projects & 30.00% 30.00% 30.00% 30.00% Training Program Employee 72.00% 0.00% 72.00% 0.00% Productive Employee Non % 0.00% 10.00% 0.00% Productive Employee Available 18.00% 0.00% 18.00% 0.00% Capacity Machine 32.00% 0.00% 32.00% 0.00% Productive Machine Non % 0.00% 10.00% 0.00% Productive Machine Available 58.00% 0.00% 58.00% 0.00% Capacity 0 Net Sales $314,081 $320,331 $6,250 $325,000 Material Costs $193,455 $193,455 $0 $0 Conversion $62,052 $63,591 $1,538 $80,000 Costs Value Stream $43,890 $63,286 $4,712 $245,000 Profit Value Stream 14.13% 19.76% 75.38% 75.38% ROS Inventory Pounds (Thousands) Strategic & Branded % of 82.00% 82.00% 0.00% 0.00% Inventory GNP Company Case Study September 15,

13 Future State: Using the Box Score Daily Decision Making on Product Mix Daily Customer Requests Easy to Interpret GNP Company Case Study September 15, Integrating the Box Score into the Business GNP Company Case Study September 15,

14 1.Uses in Administration Executive Box Score Continuous Improvement Box Score Director of Processing Box Score Supply Chain Box Score Accounting Box Score GNP Company Case Study September 15, Traditional Budgeting to Lean SOFP Financial Forecasting Complete Current and Future State Value Streams of Budgeting/Forecasting Process Complete Gap Analysis Determine your companies appropriate time horizon (generally months) Planning vs. Scheduling Break away from Scheduling Plan with Value Stream Capacity worksheets from the Lean Accounting process GNP Company Case Study September 15,

15 Monthly SOFP Process GNP Company Case Study September 15, SOFP Process Steps Week 1 Complete 15 month demand plan Week 2 Create supply and production plan Capacity Spreadsheet Box Score Measures Week 3 Hold balancing meeting and approve plan Week 4 Finalize Financial Statement (Value Stream Income Statement), Hold Executive Meeting and Receive Plan Approval GNP Company Case Study September 15,

16 SOFP Implementation Timeline GNP Company Case Study September 15, Our Plan Company Value Stream Income Statement completed by October 2011 Full deployment in remaining facilities by April 2012 Monthly Lean SOFP May 2012 Elimination of annual budget cycle for 2013 GNP Company Case Study September 15,

17 Keys to Success Leadership Driven Determine the value of outside expertise Track record of completing big projects on time Dedication of resources Training Learn by doing Discipline Kaizen secure resources GNP Company Case Study September 15,