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Manufacturers face unrelenting pressure to reduce costs while maintaining high quality. Many strive to achieve these goals by implementing lean manufacturing principles that aim to eliminate defects and waste within operational processes to produce greater value with less work. Yet, while manufacturers have streamlined most production and inventory processes through automation, opportunities still exist to improve workforce productivity by enhancing labor utilization, performance and quality.
Improving Workforce ProductivityHeadquartered in Costa Mesa, Calif., Ceradyne is a 42-year-old fully integrated developer and manufacturer of advanced technical ceramic products and components for the defense, industrial, automotive, nuclear, electronic and medical markets. With a dozen locations in North America, Ceradyne achieved sales of $680 million in 2008.
Ceradyne uses Kronos software to take advantage of accurate real-time data on actual workforce activities and decision-support capabilities to support lean manufacturing. Kronos' capabilities provide real-time shop-floor visibility of work in progress (WIP), machines and labor. This information is used to increase labor utilization, performance and quality.
By providing real-time visibility into the shop floor, Kronos helps Ceradyne maintain high productivity in the face of shifting lead times and uneven demand for products. Production supervisors have a current view of all activities during production, which allows them to focus on the largest issues while knowing where WIP is at any point in time. The company designed a system of bar-coded task designations that feeds production activity information into Kronos. Ceradyne management can view the status of a worker and what they are working on, along with performance metrics, at any time and in any one of their plants.
Not only does management use Kronos to keep track of exactly what workers are doing at all times, they can redeploy labor resources on the fly, synching up the right resource with the most pressing need to maximize workforce utilization. For example, Ceradyne's real-time "Who is here" report tells operations which employees are working on the premises and what skills they possess at all times. If a particular work order is falling behind, the supervisor can now quickly move an operator from another department in order to increase capacity.
Previously, operations would have had to manually go through employee records to try to find someone who could fill the position or go to an agency and hire a temporary worker. Now floor supervisors can quickly identify potential replacements within the organization to fill the gap. By using employees who are already on the payroll, they eliminate the need for additional paperwork for labor allocations and adjustments. The system also automatically tracks all required labor transactions, significantly reducing costs.
By tracking labor, WIP, machine utilization and production results, Ceradyne is able to identify waste and improve operations. Traditionally handled as distinct disciplines, the combined view of reconciled labor and machine utilization enables shop floor managers to identify and resolve bottlenecks in real time, resulting in higher levels of productivity.
With better, real-time labor information, managers have made better decisions, improving labor utilization between 5-10%. As Jerry Pellizzon, chief financial officer for Ceradyne, explains, "We utilize Kronos to improve the efficiency on a real-time basis for managing our production groups in many different locations. The key result is that we continue to experience improvement in productivity and the reduction of our costs."
Extend the Value of ERP InvestmentsCeradyne has integrated Kronos with SAP, its core ERP system. SAP sends production schedule information to Kronos, which in turn reconciles labor against individual activities within a work order, resulting in 100% reconciliation of production to payroll hours. As a result, Ceradyne now has accurate labor costing for its products.
In addition, rather than having to wait from two days to one week to enter labor data into its business system, data is now available in real time because the data integration processes are automated. This provides a significant time savings for operations and accounting.
"SAP is good at managing materials, but Kronos is expert at managing people and can provide accountability regarding where every labor dollar is spent," says Mark Nguyen, information technology project manager for Ceradyne. "With Kronos, we don't experience delays with tracking and recording labor data, which leads to better decision making for HR and senior management. Kronos' new resource tracking capability will further improve throughput, labor cost performance and on-time delivery."
Going PaperlessAnother area of concern for Ceradyne was its paper-based reporting system. The slow speed of entering and accessing reports made it difficult to deploy its workforce in the most productive way possible since delays in information availability meant managers could easily be unaware if an operation was falling behind.
Previously, employees manually filled out daily labor cards at the end of their shifts. Not only did employees not appreciate having to fill out numerous paper forms, many errors were made when forms were re-entered into multiple business systems. The data was also difficult to compare since operations management wasn't receiving timely access to standardized reports, such as work order status, which impacted productivity. With Kronos, front-line workers can quickly enter information, and managers have real-time access to the information they need-including work orders.
Because employees must fill out less paperwork and perform less redundant work, employee morale has improved. In addition, having electronic access to reports has empowered managers and employees to review team and individual performance and has created a culture of accountability.
What's Next?In a successful lean manufacturing organization, efficiency needs to be balanced with product quality or improvements in one area will only come at the expense of the other. Ceradyne plans to implement new Kronos Overall Labor Effectiveness (OLE) capabilities that will help it better achieve this balance. The OLE capability clarifies the impact of direct and indirect labor on workforce productivity so companies can trim costs and recognize opportunities to increase overall productivity and profitability.
OLE gives manufacturers a balanced key performance indicator (KPI) that breaks down workforce efficiency into three categories: utlization, performance and quality:
- Utilization refers to increasing the number of productive hours to worked hours.
- Performance refers to the actual production rate compared to the expected production rate.
- Quality refers to the quantity of saleable goods compared to the quantity produced.
For more information regarding workforce management, contact Kronos Inc. at 297 Billerica Rd., Chelmsford, MA 01824; call (978) 250-9800; fax (978) 367-5900; e-mail Gregg.Gordon@kronos.com; or visit www.kronos.com. Ceradyne's website is located at www.ceradyne.com.