Despite record-high stock market indexes and record-low unemployment, there are several indicators that the economy is starting to slow and that a recession, while not necessarily imminent, is on the horizon. Already, we’ve seen the ISM US Manufacturing purchasing manager’s index drop to a 10 year low of 47.8% in September and overall four months in a row of contraction.
It’s these conflicting signals – 127 consecutive months of overall economic growth and now four consecutive months of contraction in the manufacturing industry – that have many companies wary of new expenses and eager to capture savings wherever they can. Making the situation all the more complicated are unprecedented factors like the September/October GM/UAW strike that impacted companies throughout the automotive supply chain, and ongoing trade actions having an impact across different industries.
To address these challenges, many companies are calling for belt-tightening and implementation of initiatives that identify and capture savings in operations. That’s where lean technology can be an immensely valuable resource, directly addressing waste and inefficiency without extensive timelines for implementation.
Why Technology is a Challenge
Historically, technology is a better long term investment than the short-term. Consider the average time it takes to implement an ERP system – anywhere from 10-18 months of planning and implementation, not to mention the training that follows. That kind of long-term investment might impact operational efficiency in a few years, but it doesn’t help right now when cracks start to show in the economy.
Fortunately, now is an exciting time in manufacturing. We’re seeing a surge of new ideas built on lean principles that can be implemented quickly and with minimal cost and immediate ROI. These industry 4.0 initiatives can be layered over time to realize immediate savings that help fund future investments, and for those companies savvy enough to invest early, it represents a huge competitive edge.
As examples, Andonix has worked with several organizations to help realize immediate savings including Kiekert, which saw a 3% improvement to operational efficiency in parts of its Mexico Plant, FCA which was able to realize an immediate ROI of 7-9x by eliminating paper checklists and implementing real-time data collection, and Fortech, which saved $30,000 almost immediately by improving traceability in its shipping documentation.
Process Improvements from Lean 4.0 Technologies
The opportunity for cost-savings is substantial in several areas, especially with incremental investments of these lean technologies. For example:
- Savings in Training Time – Training is a significant expense for organizations of all sizes. Labor inefficiency can range from $3,966 to $8,479 over a single training period, and cost the company upwards of $50,000 for every single worker. Combined with high turnover rates, it can be a multi-million dollar expense. Digital technology enables faster onboarding, digital work instructions for more streamlined on-the-floor training, and standardization of instructions.
- Savings in Digitization – Paper is a massive source of waste. It has a direct impact on the substantial cost of quality for US businesses (billions every year) and can impact both safety and overall productivity on the floor. Downtime alone is a $6.3 billion annual cost to US manufacturers.
- Data Analysis – The combination of paper and the lack of a centralized system means many companies fail to evaluate and leverage their data to make smarter decisions. With lean 4.0 tools built on industry 4.0, companies are able to implement faster, smarter analysis to improve PDCA cycles, leverage Kaizen to improve the work environment, automat rotation, and attendance prediction, and perform rapid, more accurate Root cause analysis.
Choosing the Right Tools to Improve Operations
Andonix has worked with several companies that have already realized significant, immediate gains from the implementation of lean, industry 4.0 enabled tools, including:
- Digital Work Instructions – These offer benefits across key functional areas like quality and processes, training, human resources, and safety. Specific use cases are plentiful, including digital visual aids to ensure consistent Standard Work, e-learning tools to expedite onboarding, and amplification of existing processes like 5’s audits.
- Digital Checklists – These help empower the implementation of smarter Lean operations for KAIZEN, GEMBA and more. Specific use cases include layered and processed audits (LPA), digital GEMBA walks, surveys to evaluate the work environment, and safety audits done from a single digital device.
- Digital Andon Cord – A digital andon cord is designed to keep workers connected across all functional and physical areas of your organization, breaking down communications silos and improving performance. This creates a more democratic, bottom-up approach that ensures faster responses to major issues and the ability to leverage the knowledge of your front line workers.
Learn more about how Andonix Smart Work Station is designed to directly address the common areas of inefficiency in front line operations, providing an immediate opportunity for significant ROI. Use our savings calculator to determine if your company can benefit from these tools, or download our guide to capture savings fast with the right lean technology here.