Automation by GGpb0Gx

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									                        Automation and Productivity

Overview
Automation is the replacement of manual labor with machines. Automation is a sensitive
subject in many manufacturing environments because it involves the nature and, in some
cases, the very existence of jobs. We recommend that the assessment team determine in
advance its own approach to automation. Some teams may decide not to pursue this area
at all. Other teams may decide to make automation recommendations only in cases
where workers can be reassigned within the company. Other teams may conclude that
automation is a natural and welcome part of economic evolution, and that jobs eliminated
by automation are replaced by better, more challenging jobs.

Whatever the feelings of the assessment team members, they should seek to determine
whether the client is amiable to suggestions about automation and, if so, how to proceed.
We generally ask whether the company could sell more products if it could produce
more, and whether the company is experiencing a shortage of skilled labor. If either
answer is yes, then it is highly probable that productivity improvements through "labor
savings" will not result in the elimination of jobs.

Approach
To identify opportunities for automation, in-depth assessments frequently break down the
production process into steps and assign measures of productivity to each step.
Unfortunately, we have not found the time to do this in a one-day comprehensive
assessment. Thus, we generally ask a few pointed questions and spend as much time
observing the production process as possible. When discussing the production process
we ask: where are the bottlenecks in the production process, and what steps involve the
most labor? When observing processes, we look for groups of people doing repetitive
tasks, then talk directly to the operators and management about ideas for speeding this
process. Sometimes, manual labor is the best way to get a job done. In these cases we
pay attention to ergonomics to make sure that workers are in the most productive and
safest positions.

Productivity
Often, a change in procedure can increase the process throughput, resulting in increased
output of finished products. Some recommendations accomplish this without
automation; we have grouped these under the general title “Productivity”.

In addition to changes in procedures, the quality of the work environment can have a
pronounced effect on human productivity. Worker attitude, rates of absenteeism, ability
to see the work properly, and general health all affect production rates and output.

Recent studies have quantified human productivity gains exceeding 20% in buildings
using natural daylight. See our section on lighting for information and sources.
Additionally, several national groups are investigating productivity gains from building
comfort levels such as temperature, humidity and indoor air quality. Productivity gains
are expected to be in the range of 2 to 20%. Groups involved include BOMA (Building
Owners and Managers Association) and NEMI (National Energy Management Institute).



Example Recommendations




                                         1
AR 4354: Operator Training on the Folding Machine
                                       Annual Savings                  Project      Simple
                          Resource       CO2 (lb)        Dollars        Cost       Payback
Productivity            11,149 hours                    $195,104       $6,720      1 month

Analysis
Currently, the folding machine runs three shifts per day in order to meet production
requirements. However, the productivity levels vary considerably from shift to shift.
According to management, the first shift produces about 28,000 pieces per shift. Second
and third shifts produce about 6,000 pieces each.

Recommendation
We recommend that the company adopt a thorough on the job training (OJT) program in
conjunction with an effective employee involvement program. To ensure the program’s
success, production management must commit the proper resources and support. To
begin, production management and the best performing operator (in this case it would be
the operator on the first shift), need to construct a manual of operation that would be used
as a reference for the all shifts. The manual would include proper start up and shut down
procedures as well as set points and other special characteristics. The operator on first
shift would be the OJT. trainer and would be responsible for the training and continual
maintenance of the manual. The operators on the alternative shifts would then train with
the operator on first shift. This would increase the consistency of the operation and
should result in higher productivity and less waste.

The OJT program alone will not optimize the productivity of the folding machine. In
order to take full advantage of the productivity capabilities of the machine, a strong team
must be built across all three shifts. One way to accomplish this would be to develop a
Process Improvement Group (PIG). The process improvement group would be made up
of the crew leaders from all three shifts and a facilitator. Other members could be added
from appropriate support organizations (maintenance, accounting, development etc.). The
facilitator is typically a member of management. It is important that the facilitator
understand that his/her role is to keep the team focused and on track, not to act as the
manager. First, the group should set a productivity goal. Next, the group lists items that
help or deter the group from achieving the goal. Using this list, priorities are set and
action plans developed. Someone should be assigned to make sure each action item is
carried out Each action item should include an estimated date of completion and be
assigned to a someone responsible for carrying it out. The group continues to meet until
every item on the list is addressed or dismissed. This process provides the operators with
an avenue to gain support needed for increasing productivity and reducing waste.

Developing OJT and PIG programs should result in increased productivity, product
quality and an overall reduction in product cost.

Estimated Savings
Management reports that first shift produces about 28,000 pieces. Second and third shifts
produce about 6,000 pieces. Thus, daily production is about:


                                             2
28,000 + 6,000 + 6,000 = 40,000 pieces /day

Management states that the wage package for each operator is $17.50 per hour and three
operators work on the folding machine each shift. The current cost of operating the
folding machine is about:

3 shifts /day x 3 oper /shift x 8 hrs/oper x $17.50 /hr x 6 days/wk x 52 wks/yr = $393,120
/yr

If each shift produced 28,000 pcs/shift, then the time to produce the daily requirement
would be about:

40,000 pieces/day / 28,000 pieces/shift = 1.4 shifts/day

And the labor cost of operating the folding machine would be about:

1.4 shifts/day x 3 oper /shift x 8 hrs /oper x $17.50 /hr x 6 days /wk x 52 wks/yr =
$183,456 /yr

Therefore the labor cost savings would be about:

$393,120 /year - $189,456 /year = $209,664 /year

The PIG program would also require some time. If the six operators and two
management facilitators each spent two hours per week in PIG activities, the labor cost
would be about:

8 operators x 2 hr / operator-wk x $17.50 /hr x 52 wks/yr = $14,560 /yr

The net savings would be about:

$209,664 /yr - $14,560 /yr = $195,104 /yr

Estimated Implementation Cost
Management estimates that the time to train an operator is approximately one month.
Since only 1.4 shifts/day would be needed to meet production levels, only one additional
operator would have to be trained. However, for backup purposes, we recommend
training two operators. Therefore, the one time implementation cost would be about:

2 operators x $17.50 /hour x 8 hours /day x 6 days /week x 4 weeks = $6,720

Estimated Simple Payback
$6,720 / $195,104 /yr x 12 months/yr = 1 month




                                             3
AR 4354: Replace The Old Die Cutter With A Blanker Machine
                                     Annual Savings                    Project      Simple
                          Resource     CO2 (lb)          Dollars        Cost       Payback
Increased Output                                        $321,750
Labor                     4,160 hr                       $41,600
Maintenance                                               $2,000
Net                                                     $365,350    $1,000,000 33 months

Analysis & Recommendation
The Bobst die-cutting machine does not completely separate the printed product from the
carrier sheet. Final separation of the patterns from the sheets is done manually.
Management reports that the best throughput achieved with this machine is about 3,000
sheets per hour, while the printers can produce at a rate of over 7,000 sheets per hour.
Thus, the die-cutting machine is a bottleneck in the process.

New blanker machines have an output of about output of 9,000 sheets per hour and
completely cut the product from the carrier sheet. Thus, a new blanker machine would
eliminate the need for manual separation and alleviate the production bottleneck. The
patterns would be automatically separated from each other and stacked on a skid, ready to
be finished. We recommend purchasing a new blanker. This would alleviate the die-
cutting bottleneck and reduce labor costs.

Estimated Savings
The production manager believes that, taking setup time into consideration, a blanker
machine could cut and separate paper at a rate of about 9,000 sheets per hour. The
existing machine’s throughput is about 3,000 sheets per hour. This means that the
blanker machine would be about 3 times as fast as the old machine. However, this rate
would exceed the capability of the printers. By removing the die-cutter bottleneck,
throughput would be limited by the printers, to about 7,000 sheets per hour. Thus, the
throughput of the process would increase from 3,000 sheets per hour to 7,000, boosting
production by about 2.3 times.

Management reports that present annual sales are about $7,500,000 and that about one-
third of current production passes through the die cutter. Management believes that
sufficient work is available so that additional product could be sold, and the profit margin
would be about 10%. If so, the additional profit from increased sales obtained by
replacing the old die cutting machine with a blanker machine would be about:

($7,500,000 x 33%) x 130% (increased production) x 10%(profit) = $321,750 /year

In addition, the use of a blanker would eliminate the need for manually stripping the
patterns. Management conservatively estimates that, on average, two temporary laborers
work 8 hours per shift, one shift per day at a cost of $10 per hour to do the final
separation of patterns. The labor cost for stripping is currently about:




                                             4
              8 hours 1 shifts 260 days       $10
2 workers                                           $41,600 /year
               shift    day      year     labor - hour

Management estimates that, because of the age of the existing blanker, maintenance costs
have averaged about $3,000 per year, and that annual maintenance costs on a new
machine would be less than $1,000. Thus, maintenance savings would be about:

$3,000 /yr – $1,000 /yr = $2,000 /yr
The total savings based on these assumptions would be about:

$321,750 /yr + $41,600 /yr + $2,000 /yr = $365,350 /yr

Estimated Implementation Cost
Production management has looked into this idea, and estimates the cost of a new Bobst
SP102-CERII blanker machine to be about $1,000,000.

Estimated Simple Payback
The simple payback would be about:

$1,000,000 / $365,350 /yr x 12 mo/yr = 33 months




                                            5
AR 3954: Automate "Solu-pak" Packaging Process
                               Annual Savings                     Project        Simple
                      Resource      CO2 (lb)        Dollars        Cost         Payback
Labor               10,000 hours                   $250,000      $325,000      16 months

Analysis
Some pigment blends are packaged for sale in a soluble wrapping. Because the wrapping
dissolves, the entire package can be added to a product, thereby eliminating measuring
and handling. Unfortunately, the Solupak packaging process is very labor intensive.
Because of this, the product is not very profitable. However management is proud of the
innovative technique and continues with the product to maintain good customer relations.
Management believes that the Solupak will be a good seller in the future and asked us to
look into automating the process to reduce labor costs and increase production.

Recommendation
We recommend automating the Solupak packaging process. The main components would
be an automatic filling machine, a boxing machine, and a packing machine.

Estimated Savings
Three operators per shift package Solupaks. The first is a set-up person who opens
boxes, applies labels and keeps the other stations supplied. The second operator places
the Solupak sheet in the filling fixture and manually fills each bucket. The third operator
places the buckets in boxes and puts the boxes on a pallet. According to management,
operators make about $25 per hour including benefits. At two shifts per day the labor
cost for this process is about:

              2 shifts 8 hours 250 days       $25
3 persons                                            $300,000 /year
                day     shift    year     person - hour

Automatic filling machines can be designed to fill multiple containers at once and are
much faster than manual filling. We contacted an automated machine manufacturer who
believes that the packaging rate could easily be doubled with an automated machine, even
given the unique constraints of the Solupak process. The automatic filling machine
would be followed by an automatic boxing and pick-and-place machines for loading
pallets. These machines are common in the packaging industry and are not overly
expensive. The manufacturer estimates that the entire packaging process could now be
run in one shift by a single operator. If so, the labor cost would be about:

             1 shift 8 hours 250 days       $25
1 person                                           $50,000 /year
              day     shift    year     person - hour

The labor savings would be about:

$300,000 /year - $50,000 /year = $250,000 /year



                                             6
Estimated Implementation Cost
According to an automated packaging manufacturer, a custom boxing and packing
machine with an automatic flow weight control would cost about $275,000 and the
installation cost would be another $50,000. If so, the net implementation cost would be
about:

$275,000 + $50,000 = $325,000

Estimated Simple Payback

                 1      12 months
$325,000 x            x            16 months
             $250,000      year

Automation Contact:
     Bob Brill
     Selectronics, Robotics & Automation
     190 Prescott Avenue
     Elmira Heights, NY 14845
     (607) 733-9164
     (607) 733-9206
     http://www.selectronicsinc.com




                                            7
        AR 3354: Use Staggered Die Layout for Nine-Inch Plate Lines
                                    Annual Savings              Project    Simple
                           Resource      CO2 (lb)    Dollars     Cost     Payback
EPS Foam Savings          5,702 rolls              $1,154,672 $1,100,000 11 months

 Analysis
 According to management, scrap from 9-inch plates accounts for about half of all scrap.
 Management is looking for ways to reduce this web scrap.

 Recommendation
 We recommend using staggered dies for both the forming and punching operations to
 reduce webbing scrap. The current dies are about 40.3 inches long and punch four rows
 of plates with each stamp. Staggered dies would punch four overlapping rows of plates
 in about 32 inches, and would not punch a cut at the beginning and end of the dies. Thus
 about 8 inches of styrofoam per punch would be saved. If staggered dies work for the 9-
 inch plates, they may also be feasible for the other lines.

 Estimated Savings
 Nine-inch plates are punched from rolls of styrofoam in the pattern shown below
 (Figure2.1). In addition to punching the plates, the die also punches a cut along the top
 and bottom of the die every 40.3 inches. The styrofoam between the plates is called
 webbing. Webbing scrap and is reground, melted and recycled into the extruders.
 However, this scrap is not free. If the amount of webbing scrap could be reduced, then
 the imbedded manufacturing costs in the scrap styrofoam would be eliminated.

                                      Feeding direction




            Guide holes
                                       52 inches
                                                                            1.06
                                                                           inches


                                                                           8.75 in dia
                                                                             plates


            x=40.3                                                       1.06
            inches                                                      inches




                                                                              1.06
                                                                             inches


                     2 inches          1.06                  2 inches
                                      inches




                                                8
Figure 2.1 Present 9-inch die configuration

The length of styrofoam for every 20 plates (Figure 2.1) is about:

x = 8.75 inches x 4 rows + (~1.06 inches x 5 rows) ~ 40.3 inches

We suggest using a staggered pattern in the die to reduce webbing scrap (Figure 2.2).
According to management, the thermoforming and punching operations require a
minimum distance of about 0.5 inches between the plates. If so, the distance z would be:

8.75 inches + 0.5 inches = 9.25 inches

The distance y would be:

9.25 inches x Sin (60) = 8.01 inches.




                                              w




                                                               z


                           y
                                                           w




Figure 2.2 Exploded view of adjacent plates


The length of styrofoam for every 4 rows of plates would be about:

4 x 8.01 inches ~ 32 inches.

A diagram of the staggered die is shown in Figure 2.3. At 32 cycles per minute, the
length of styrofoam saved would be about:

(40.3 - 32) inches 32 cycles 60 minutes
                                       15,936 inches /hour
      cycle         minute      hour



                                              9
Although the plate lines try to run continuously, we conservatively assume that a 9-inch
line operates about 18 hours a day including roll changeovers and miscellaneous
downtime. If so, the length of styrofoam saved from a single line would be about:

15,936 inches 18 hours 7days 50 weeks 0.0833 feet
                                               8, 363 ,063 feet /year
     hour       day     week   year      1 inch

According to management about three 9-inch plate lines are operational during off-peak
and about five lines during peak seasons. Conservatively assuming that three lines are
always running, the total length of styrofoam saved would be about:

(8,363,063 feet/year) /line x 3 lines = 25,089,159 feet /year

                                   Feeding direction




                                     52 inches




                                                                     8.75 in
                                                                     plates
  32 inches

                                                                        Distance between
                                                                        plates along rows
                                                                        and columns to be
                                                                          about 0.5 inch

Figure 2.3 Proposed staggered layout with minimal webbing between rows and columns.

According to management a roll of extruded styrofoam weighs about 450 pounds and
measures about 4,400 feet long. Management estimates that the production cost of
extruded styrofoam on rolls is about $0.45 per pound. Thus, the styofoam cost savings
would be about:

25,089,159 feet      1 roll    450 lb $0.45
                                          $1,154,672 /year
      year        4,400 feet    roll    lb

Estimated Implementation Cost
According to management, a new punching die would cost about $100,000. We estimate
that a forming die would cost about $120,000. If so, the net implementation cost for all
five plate lines would be about:



                                             10
($100,000 + $120,000) /line x 5 lines = $1,100,000

Estimated Simple Payback
                1 year    12 months
$1,100,000                         11 months
             $1,154,672      year




                                          11
 AR 3854: Purchase Automated Tipper for Unloading Pipe
                                 Annual Savings                  Project        Simple
                    Resource         CO2 (lb)      Dollars        Cost         Payback
Labor              2,040 hours                     $30,600
Maintenance                                         $5,000
Net                                                $35,600      $57,000       20 months

 Analysis
 Management states that the current method for unloading cured pipe from the 48” hydro
 tile line floor conveyor is time consuming and costly. During second shift, a forklift
 operator unloads the cured pipe from the conveyor, turns the pipe 90 degrees and lays it
 on its side. Then another operator picks up the pipe and transfers it to the outside
 holding lot. According to management, the forklift that the operator uses to unload and
 turn the pipe from the conveyor has been a constant maintenance headache.

 Recommendations
 The alternative pipe production line uses an automatic tipper for unloading and tipping
 the pipe from the conveyor. We recommend purchasing and installing similar equipment
 to unload and tip the pipe from the 48” hydro tile line. This would enable management to
 reduce labor by one unit on second shift and also reduce maintenance costs.

 Estimated Savings
 Management estimates that the tipping machine would eliminate the need for one
 operator working 1 shift per day, 5 days per week. Management reports that wages and
 benefits for the forklift operator are about $15 per hour. The annual labor savings would
 be about:

 $15 /hour x 8 hours/day x 5 days/week x 51 weeks/year = $30,600 /year

 Management estimates that the annual maintenance cost (parts and labor) for the current
 forklift are about $5,000 per year.

 The total savings would be about:

 $30,600 /year + $5,000 /year = $35,600 /year

 Estimated Implementation Cost
 Management estimates that a new tipper would cost about $57,000 including installation.

 Estimated Simple Payback
 $57,900 / $35,600/yr x 12 months/yr = 20 months




                                            12
AR 3854: Automate Standard Product Lines in Plant 1
                              Annual Savings                        Project       Simple
                     Resource     CO2 (lb)    Dollars                Cost        Payback
Labor              21,420 hours              $321,300
Increased Revenue 12,750 products            $318,750
Net                                          $640,050             $1,000,000 19 months

Analysis
According to management, the major problem faced in both plants is frequent labor
absenteeism and labor security. Last year alone the company hired more than 150 new
employees. This led to company losses of about $300,000 in labor overtime and also
resulted in production losses. Automation is difficult since most of products produced in
Plant 1 are custom ordered. However we identified two lines in Plant 1 that produce
standard products. According to management about eleven persons are stationed on these
lines.

Recommendation
We recommend automating the two standard product lines in Plant 1. This would require
integrating a pick-and-place the robot into the existing process.

Estimated Savings
According to management, eleven operators working for one long shift of about twelve
hours per day, are currently needed on the two lines. Management agreed that if the lines
were automated, two operators per line would be sufficient. This would free seven
workers for other jobs in the plant and reduce the staffing requirments. According to
management, the average wage including benefits is about $15 per hour. If so, the annual
labor savings from automating the lines would be about:

              12 hours 255 days
7 persons x           x          21,420 labor hours /year
                day      year

21,420 labor hours      $15
                   x             $321,300 /year
       year          labor hour

According to management, automating these processes would increase their current
output from 100 to 150 units per day and the profit is about $25 per product. If so, the
increased revenue would be about:

50 products 255 days     $25
           x         x          $318,750 /year
    day       year     product

If so, the total savings and additional profit from automating these lines would be about:

$321,300 /year + $318,750 /year = $640,050 /year


                                            13
Estimated Implementation Cost
Management has received a quote for an appropriate robot with controls for about
$275,000 including installation. Based on price estimates from similar robotic projects
and on management's estimates, we estimate automating and integrating the concrete
filler with the robot would cost another $225,000. If so, the total implementation cost for
the two lines would be about:

2 lines x ($275,000 + $225,000) /line = $1,000,000

Estimated Simple Payback

                  1      12 months
1,000,000 x            x            19 months
              $640,050      year




                                            14
AR 4104: Automate Aerial Tower Assembly Operation
                               Annual Savings                      Project        Simple
                     Resource       CO2 (lb)          Dollars       Cost         Payback
Labor Savings       2,056 hours                       $96,632     $200,000      25 months

Analysis
A primary concern for management is to reduce overall labor hours. The majority of the
operations in the facility are "job-shop" type operations in which no two are alike.
However, we identified one operation, building the aerial towers, which is done
repeatedly. According to management, it takes two people about 235 hours to construct a
tower.

Recommendation
We recommend automating the marking, drilling and taping operations by feeding the
tower corner angles into a CNC machine. We contacted a manufacturer that designs and
builds special machines for manufacturing. According to the manufacturer, the CNC
machine would be designed to move on a track along the length of the stationary tower.
There would also be a fixture to mount the four corner angles. The CNC machine would
be programmed to perform the operations on two corner angles simultaneously and
automatically indexing on the other two angles. However, it is still necessary to have the
operators follow behind the CNC machine to assemble the tower. We estimate that this
would dramatically reduce the time for these operations and reduce the overall process
time.

Estimated Savings
According to management, it takes about 235 hours to construct a tower. The marking,
drilling and tapping operations take at least about 70% of the time, while the remaining
30% is spent assembling the towers. With an output of 25 towers per year, the time spent
to mark, drill and tap the towers is about:

 235 hours 25 towers
                     70 %  4,112 hours /year
   tower      year

According to a custom machine manufacturer, the drilling and tapping operations could
be completed in about 40 hours per tower. If so, the new drilling hours and total labor
reduction would be about:

40 hours 25 towers
                   1,000 hours /year
 tower      year

(4,112 hr/yr - 1,000 hr/yr) / 4,112 hr/yr = 76% reduction in labor hours.

To be conservative, we estimate that you could reduce the overall time by about 50%. If
so, total hours saved would be about:



                                            15
4,112 hours /year x 50% = 2,056 hours /year

According to management the cost of labor including benefits is about $47 per hour. If
so, the labor cost savings would be about:

2,056 hours $47
                  $96,632 /year
    year     hour

Estimated Implementation Cost
According to the manufacturer, the cost to design, install and purchase a CNC machine
and the fixture set up to perform the tower processes would cost about $200,000.

Estimated Simple Payback

                1      12 months
$200,000 x           x            25 months
             $96,632      year




                                           16
 AR 3854: Purchase Robot for 48”Hydro Tile Line
                                 Annual Savings                   Project        Simple
                    Resource        CO2 (lb)       Dollars         Cost         Payback
Labor              2,040 hours                     $30,600
Sales Profit      39,882 pipes                    $290,142
Total                                             $320,742       $525,000      20 months

 Analysis
 The small pipe production line utilizes a robot to load pipes onto the floor conveyor. On
 the 48-inch line, a manually-controlled crane loads the pipe. The slow cycle time of this
 operation reduces the productivity of the line. Management estimates the productivity of
 the line would increase from 23 to 33 parts per hour through utilization of a robot.

 Recommendations
 We recommend purchasing and installing a robot similar to the one on the small-pipe line
 to load pipe from the 48” hydro tile line. Management requested that we calculate the
 cost savings using two methods: first by considering only labor savings at current
 production levels, and second by including increased revenue from producing and selling
 more pipe. The second alternative is clearly more cost effective.

 Estimated Savings
 Currently two operators are needed for one shift per day on the line. The robot would
 immediately eliminate one labor unit. The labor savings would be about:

 $15 /hour x 8 hours/day x 5 days/week x 51 weeks/year = $30,600 /year

 In addition, the robot enable the production of the same amount of pipe in less time.
 Thus, even the remaining robot operator could work less. If productivity increased from
 23 to 33 parts per hour, the time savings would be about:

    1 hr       1 hr
           
  23 parts 33 parts
                     30 %
          1 hr
        23 parts

 Thus, the additional labor savings would be about:

 $30,600 /year x 30% = $9,180 /year

 Management estimates the peak productivity of the line is currently about 23 parts per
 hour and the line runs for one shift per day. If so, the number of pipes produced is about:

 23 pipes/yr x 8 hours/day x 5 days/week x 51 weeks/yr = 46,920 pipes/yr




                                             17
We estimate that downtime and pipe damage reduces this number by about 15%. Thus,
the number of usable pipes actually produced is about:

46,920 pipes/yr x 85% = 39,882 pipes/year

According to the company price sheet, the average sales price for pipes from the 48-inch
line is about $97 per pipe. Management estimates that the average selling price margin is
about 25%. Thus, the additional profit from increased production would be about:

(39,882 pipes/year x 30%) x ($97 /pipe x 25%) = $290,142 /year

Thus, the total savings considering labor only would be about:

$30,600 /year + $9,180 /year = $39,780 /year

The total savings including profit if more pipe could be sold would be about:

$30,600 /year + $290,142 /year = $320,742 /year

Estimated Implementation Cost
Management estimates that a new robot would cost about $275,000 including parts and
installation. Management also estimates that preparing additional storage space for
increased production would cost about $250,000. Total implementation cost for
increased production scenario would be about $525,000.

Estimated Simple Payback
The simple payback from labor savings only would be about:

$275,000 / $39,780 /year x 12 months/year = 83 months

The simple payback if more pipe could be sold would be about:

$525,000 / $320,742 /year x 12 months/year = 20 months

Increasing production and sales would clearly be more cost effective than simply
reducing labor costs.




                                            18
AR 3804: Automate Final Inspection Process
                                    Annual Savings                               Project            Simple
                          Resource      CO2 (lb)                 Dollars          Cost             Payback
Labor                   18,000 hours                            $270,000        $150,000           7 months

Analysis
All 650,000 automobile batteries manufactured each year move through a single final
inspection line after they are charged in the forming room. This final inspection line has
numerous stages including topping off the sulfuric acid, inserting danger caps and labels,
rinsing and placing handles on the battery. The finished batteries are then manually
stacked on pallets and taken by forklift to the warehouse. The workers on this line were
scrambling to keep up with production.

Recommendation
We recommend several modifications to this line that would reduce manual handling of
the batteries and speed production without exhausting the workers. First we recommend
converting the present straight line into a U-shaped cell. This would allow products to be
loaded and unloaded from the same area, and reduce the distance between operations on
the line. Next, we recommend installing a robotic arm near the opening of the U to load
and unload batteries from pallets. This would reduce the heavy lifting required in these
operations and speed production. Next, we recommend replacing the current roller
conveyor with a motor-driven belt conveyor. This would reduce worker fatigue.
Management agreed that these modifications would help reduce labor and speed
production. The proposed system is shown in Figure 1.1

                         Rejected
                         batteries           High voltage          Rinse
                                            discharge tester       wash           Sulfuric acid
                                                                                     top up


                                                                                          Automatic
                                                                                          controls

           Finished
           batteries


                                                                                        Conveyor
                                                                                          belts



                                                                                    Rotating
          Robotic arm                                                                pallet




                              Finished batteries               Batteries from forming

Figure1.1 Proposed layout for final inspection process



                                                   19
Estimated Savings
According to management, five persons per shift are currently needed to load batteries on
pallets and operate the final inspection line. If the recommended changes were
implemented, both management and the robotic arm manufacturer estimate that two
persons could run the line. According to management, the average wage including
benefits is about $15 per hour. If so, the annual labor savings would be about:

                    8 hours 3 shifts 5 days 50 weeks
(5 - 2) persons x          x        x      x          18,000 person - hours /year
                     shift   day      week    year

18,000 person - hours       $15
                      x                $270,000 /yr
        year            person - hour

There would also be additional benefits for increasing the rate of production, especially if
the inspection line is a bottleneck. However, at this stage, it is not possible to quantify
these benefits.

Estimated Implementation Cost and Simple Payback
The manufacturer estimates that a robotic "pick and place" arm would cost about
$50,000. Adding the controls, fixtures and conveyoy belts would cost an additional
$50,000, and final process intergration and site erection would cost another $50,000. If
so, the total implementation cost would be about:

$50,000 + $50,000 + $50,000 = $150,000

Estimated Simple Payback
               1      12 months
$150,000 x          x            7 months
           $270,000      year




                                            20
 AR 3754: Install A Programmable Robotic Arm between Paint-Lines
                                    Annual Savings                  Project      Simple
                       Resource         CO2 (lb)         Dollars     Cost       Payback
Labor                 4,000 hours                       $144,000   $150,000    13 months

 Analysis
 The two paint lines are situated side by side (Figure 2.1). The paint-line operators
 currently load rotors onto the line, place rotor-cap masks on the rotors and have to
 scramble to stack the painted rotors on pallets as they come off the line. According to the
 operators, this tires them and slows the capacity of the paint lines. We investigated ways
 to reduce operator labor and increase the rate of production through the paint lines.

                                Paint line 1                              Paint line 2




                                                                                         Direction of
                                               Rotor cap                                 product flow
   Direction of                                 fixture
   product flow




                                                Paint
          Pallet for loading                   booths                          Pallet for loading
           and unloading                                                        and unloading

 Figure 2.1 Schematic of present paint lines layout

 Recommendation
 To reduce operator labor and increase the rate of production, we recommend the
 following modifications to the painting operation. First, we recommend rotating paint
 line 2 towards paint line 1 so the loading and unloading operations for the two lines are
 adjacent to each other. Next, we recommend installing a programmable robot swivel arm
 that could service both lines (Figure 2.2). This arm would be capable of moving about an
 axis so that it could alternatively load rotors onto the lines, place the rotor cap masks on
 the rotors, and unload the two lines. Finally we recommend purchasing rotating pallet
 tables linked with the speed of rotation of the arm. These recommendations would
 eliminate one operator per shift and increase the output of the two paint lines.




                                                21
                                                        Paint line 1
                                                                            Product after painting



                    Paint line 1-                                                          Direction
                     as present                                                             of flow

     Robotic pick
     and place arm

 Unloading from
 a rotating table                                                                            Repalletizing
      pallet                                                               Paint             after painting
                                                                          booths




                                                                   Oven
  Direction                                                                         Paint line 2 -with
   of flow                                                                         orientation changed

              Caps' fixture

                                    Paint line 2


Figure 2.2 Proposed layout of paint lines with robotic arm

Estimated Savings
According to product summary sheets, Line 4 produces about 18,000 rotors per week.
These are the only rotors painted on the paint lines. Thus, each line paints about 9,000
rotors per week. Each paint lines run 2 shifts per day, five days per week. Thus, the
current rate of production on each line is about:

9,000 rotors 1 week 900 rotors
                       
   week       10 shifts   shift

900 rotors 1 shift 1 hour 1.88 rotors
                         
  shift     8 hours 60 min   min

The average time to produce each rotor is about:

  1 min      60 sec 32 seconds
                  
1.88 rotors 1 min      rotor

We timed the rate of rotors moving on the paint line to be about 8 seconds per rotor. This
implies that manual loading and unloading results in losses of about:




                                                   22
32 seconds 8 seconds 24 seconds
                   
   rotor      rotor     rotor

We estimate that a robotic arm could cut this loss by two thirds to about 8 seconds per
rotor. If so, rotors could be produced at the rate of about:

8 secondsproduction time 8 secondsloss 16 seconds
                                     
         rotor                rotor       rotor

  1 rotor    3,600 seconds 8 hours 1,800 rotors
                                 
16 seconds      1 hour      1shift    shift

This is exactly twice the previous production rate of 900 rotors per shift. Thus, the
second shift could be eliminated. One operator per line per shift currently operates each
paint line and the average wage including benefits is about $24 per hour. The second shift
receives overtime wages of 1.5 times the regular wage. Thus, labor savings from
eliminating the second shift would be about:

            1 operator 8 hours 1 shift 5 days 50 weeks      $24  1.5
2 lines                                                             $144,000 /year
               line     shift   day     week    year     operator  hour

Estimated Implementation Cost
According to a robotic arm manufacturer, the recommended arm would cost about
$50,000 plus about $25,000 to design and program. We estimate that moving the paint
lines and installing rotating pallet tables would double the cost. If so, the net
implementation cost would be about:

2 x ($50,000 + $25,000) = $150,000

Estimated Simple Payback

                    1          12 months
$150,000                                13 months
              $144,000 /year      year




                                            23
 AR 3754: Purchase Automatic Boxing Machine for Line 13 Products
                                 Annual Savings                   Project        Simple
                       Resource     CO2 (lb)     Dollars           Cost         Payback
Labor Savings        20,000 hours               $480,000         $175,000       4 months

 Analysis
 Brake rotors for a specific vehicle were recalled due to a design flaw. The company
 received an order to manufacture newly-designed brake rotors. The order is projected to
 last one year and is being filled on Line 13. Because the rotors are being sent to dealers
 across the country, individual rotors are wrapped, boxed and labeled. This packaging
 operation is currently done by six people working two shifts per day. We investigated
 ways to automate this process and save money.

 Recommendation
 We located a manufacturer that builds custom automatic-boxing machines. The machine
 proposed for your process would have the following characteristics:

    Easily programmable for different product runs.
    Capable of forming boxes.
    Capable of packing, stapling and labeling in high volume.
    Capable of stacking finished products on skids.
    Could be integrated with any production line.

 The current location of the packing process requires that rotors be transported from the
 end of Line 13 across the plant to the packing station. Inspection of the plant layout
 indicates vacant areas along Line 13. We recommend integrating the automatic-boxing
 machine in Line 13. This would eliminate the need for transporting products across the
 plant. Finally, we recommend purchasing an ergonomic, spring-loaded pallet table for
 stacking finished products.

                          Directly from                              Ergonomic spring-
                             line 13                                 loaded pallet table

        Finished
       rotors from                        Automatic
         line 13                          boxing and
                                           packing
                          Existing line    machine
                          13 operator


 Figure 1.1. Proposed location of an automatic boxing and packing machine

 Based on the analysis that follows, we believe that an automated boxing machine would
 pay back in less than one year. We recommend that you investigate purchasing such a
 machine. The machine is flexible enough that it could be used for future contracts.



                                             24
Estimated Savings
At full production, management plans to have one person loading products onto a
conveyor belt, two persons making boxes, two persons boxing and adding labels and one
person unloading the products (Figure 1.2). This project will run for two shifts per day.




     Product
       from                Loading   Box making       Labeling    Unloading
      line13




Figure 1.2. Management's proposed packing operation.

According to management, the average wage including benefits is about $24 per hour.
The cost of labor for this packing operation is about:

              8 hours 2 shifts 5 days 50 weeks      $24
6 persons                                               $576,000 /year
               shift    day     week    year     labor hour

With the automatic-boxing machine integrated in Line 13, we estimate that only one
person would be needed to unload product (Figure 1.2). If so, the labor cost would be
about:

             8 hours 2 shifts 5 days 50 weeks      $24
1 person                                               $96,000 /year
              shift    day     week    year     labor hour

The annual labor savings from automating the boxing process would be about:

$576,000 /year - $96,000 /year = $480,000 /year

Estimated Implementation Cost
According to a vendor, an automatic-boxing machine would cost about $150,000
including installation. In addition, we estimate that it would cost about $25,000 to
integrate the machine into Line 13. The total implementation cost would be about:

$150,000 + $25,000 = $175,000




                                            25
Estimated Simple Payback

              1 year    12 months
$175,000                         4 months
             $480,000      year




                                          26
 AR 3354: Automate Sorting and Packing
                                    Annual Savings              Project      Simple
                           Resource      CO2 (lb)    Dollars     Cost       Payback
Labor                    84,000 hours              $1,260,000
Additional Profit      48,384,000 plates            $241,920
Net                                                $1,501,920 $1,075,000    9 months

 Analysis
 Each of the twelve production lines includes a thermal-forming machine followed by a
 punching machine. Three persons at the end of each line sort, count and pack the
 styrofoam food container products. Automating the sorting, counting and packing
 operations could reduce labor, speed up the process and reduce scrap. With
 management's encouragement, we investigated automated packing machines for the 9-
 inch plate lines which account for more than 50% of the company's business.

 Recommendation
 We located a manufacturer that builds custom packing machines. A machine suitable for
 your process would have the following characteristics:
  Easily programmable.
  Capable of sorting mixed runs.
  Capable of detecting debris as small as human hair
  Counts and packs at same rate (or faster) than products are produced
  Capable of bagging.

 Based on the following analysis, we believe that an automated sorting and packing
 machine would be cost effective. Thus we recommend that you investigate purchasing
 automated sorting and packing machines for the 9-inch plate lines.

 Estimated Savings
 According to management, three workers per line are needed to sort, count and bag the 9-
 inch plates. Both management and manufacturer agreed that only one operator would be
 required to run an automating packing machine. Each line runs three eight-hour shifts
 per day, seven days a week. Management reports that the average wage including
 benefits is about $15 per hour. The labor saving from automating the five 9-inch plate
 lines would be about:

              2 workers 8 hours 3 shifts 7days 50 weeks      $15
  5 lines                                                        $1,260,000 /year
                 line    shift    day     week   year     worker  hr

 Management estimates that about 4% of the plates are thrown away between roll changes.
 Management believes that this scrap could be reduced to about 1% by automating the
 sorting operation. According to management each line produces about 32 cycles per
 minute at 20 plates per cycle and each 9-inch plate is sold for about $0.01. Assuming




                                             27
that the profit from selling plates that are currently scrapped is 50% of the sales revenue,
the additional profit would be about:
           20 plates 32 cycles 60 min 24 hours 350 days 
          
           cycle  minute  hour  day  year  $0.01          
5 lines                                                                            $241,920
                                                                           3%  50% 
                                    line                            plate                year

Total annual savings from automation would be about:

$1,260,000 + $241,920 = $1,501,920 /year

Estimated Implementation Cost
The manufacturer estimated that a customized packing machine would cost about
$180,000 plus about $50,000 for the engineering design. In addition, we estimate that
there would be an additional $25,000 per machine in installation and startup costs. If so,
the total implementation cost would be about:

$50,000+ [5 machines x ($180,000 /machine + $25,000 /machine)] = $1,075,000

Estimated Simple Payback

                  1 year    12 months
$1,075,000                           9 months
               $1,501,920      year




                                            28
AR 4: Install a Quick-Opening Overhead Door

                             Present             Recommended          Annual Savings
Productivity                583 hr/yr               58 hr/yr         525 hr/yr; $7,875
Heating                  1,059 MBtu/yr            265 MBtu/yr      794 MBtu/yr; $4,597
Net                                                                      $12,472
Implementation Cost                                                      $24,000
Simple Payback                                                          23 months

Analysis
The overhead door is usually kept shut during winter to help keep the work area warm.
To enter or exit through the door, lift truck drivers must dismount from the lift truck,
open the door, get back on to the truck, drive through the door, dismount to close the
door, then remount the lift truck and proceed. This procedure must be repeated on the
return trip.

Recommendation
We recommend installing a quick-opening door to reduce the time spent opening and
closing the door. In addition, if the door were equipped with an optical sensor the
frequency of accidents around the door may be reduced.

Estimated Savings
Productivity:
Workers and management estimate that the lift trucks make about 25 round trips per day
through the door, and that it takes about 2 minutes to open and shut the door during each
trip. The time spent opening and closing the door is about:

25 trips/day x 350 days/yr x 4 min/round trip / 60 min/hr = 583 hrs/yr

We estimate that a remote-controlled, quick-opening door would reduce this time by
90%. With a quick-opening door, the time spent opening and closing the door would be
about:

583 hrs/yr x 0.10 = 58 hrs/yr

Using management’s estimate of $15 per hour for wages and benefits, the labor savings
would be about:

(583 hrs/yr –58 hrs/yr) x $15 /hr = $7,875 /yr

Heating:
In addition to labor, a large amount of heat is lost through the open door during winter.
The heat loss can be calculated as the product of the velocity of the air through the door,
the area of the door opening, the air density, the air specific heat, and the average
temperature difference between the inside and outside of the building. The average
velocity of air through the door is about 413 ft/min. The area of the door opening is


                                             29
about 168 ft2. The average outdoor temperature during the November to March heating
season in Cincinnati is about 34.3 F. According to management, the indoor air
temperature during the heating season is about 78 F. Thus, the heat loss is about:

413 ft/min x 168 ft2 x 0.018 Btu/ft3F x (78 F - 34.3 F) x 60 min/hr = 3.27 MBtu/hr

Assuming the natural gas furnace is about 75% efficient, the amount of gas heat lost
through the open door during the 5 winter months is about:

583 hrs/yr x 5/12 x 3.27 MBtu/hr / .75 = 1,059 MBtu/yr

If a quick-opening door could reduce the time that the doors are open by 75%, then the
gas usage would be about:

1,059 MBtu/yr x 0.25 = 265 MBtu/yr

The savings would be about:

(1,059 MBtu/yr – 265 MBtu/yr) x $5.79 /MBtu = $4,597 /yr

Net productivity and heating savings would be about:

$7,875 /yr + $4,597 /yr = $12,472 /yr

Estimated Implementation Cost
Prices of quick-opening doors range from $17,000 to $30,000.

Simple Payback
Assuming the door costs $24,000, the simple payback would be about:

$24,000 / $12,472 /yr x 12 months/yr = 23 months




                                           30
AR 12: Purchase Folding Machine to Reduce Labor Costs

                                    Present        Recommended         Annual Savings
Labor                              $279,000          $174,375            $104,625
Implementation Cost:                                                     $250,000
Simple Payback:                                                          28 months


Analysis and Recommendation
To facilitate welding two steel sheets together into a plane surface, a strip of each sheet is
bent 90 degrees (Figure 1.1). Currently, this is done on a press break by inserting the
strip into the press break then lifting the entire sheet until a 90 degree angle is formed.
When the pieces are large (up to 8 feet by 4 feet), a crane is required to lift the sheet and
the process takes about 2 man-hours per piece of steel. Management is considering
purchasing a folding machine to speed this process. Management estimates that the
process could be done on a folding machine in about 1.25 man-hours per piece. Together
we investigated the cost effectiveness of this process. Based on this analysis, we
recommend that you purchase a folding machine because of the large potential labor cost
savings and the reasonable payback.



Figure 1.1 90 degree bends in steel pieces to facilitate welding.

Estimated Savings
Management estimates that they sell about 20 small washers per year and between 4 and
8 large can-washers per year. Each small washer requires about 150 "bent" pieces of
steel and each large machine requires about 250 "bent" pieces. Thus the number of
pieces bent each year is about:

(20 washers/yr x 150 pieces/washer) + (6 washers/yr x 250 pieces/washer) = 4,500 pieces/yr

Management estimates that the folding machine would save about 0.75 man-hours per
piece, and that the average cost of labor including benefits is about $31 per hour. The
labor cost savings from purchasing a folding machine would be about:

4,500 pieces/yr x 0.75 man-hours/piece x $31 /man-hour = $104,625 /yr

Estimated Implementation Cost
According to management, the installed cost of a folding machine would be about
$250,000.

Estimated Simple Payback
SP = $250,000 / $104,625 /yr x 12 mo/yr = 28 months (2.4 years)




                                              31
AR 13: Semi-Automation of the Gasket Gluing Procedures

                                 Present           Recommended           Annual Labor Savings
       Full-Time Wages           $25,480              $10,920                  $14,560
      Temporary Wages            $57,600               $0.00                   $57,600
              Net                                                              $72,160
     Implementation Cost:                                                      $21,000
       Simple Payback:                                                       3.5 months

Analysis
        Following a suggestion by management, the gasket area offered several
possibilities for improvements. The current process for inserting and attaching gaskets in
the connectors has three primary procedures: transportation of the connections, the
inserting/gluing of the gasket, and line support. First, fittings are transported from the
production line to the gasket area. Operators then must carry a set of connections from
skids to their workstation. Gaskets are inserted and a manually triggered glue gun will
adhere the gasket to the connection. Health issues, including tendinitus and back
problems, have arisen from the layout of the workstations, the glue guns, and the
repetitive tasks. As discussed with management, specialized fixtures and gluing
dispersion would correct the health issues.
        The inefficiency of the process originates in the irregular product flow and
random arrangement of the gluing stations. Steady product flow to operators, automated
gluing stations, and an organized finished-goods removal system would reduce the
handling required of the operators. Rather than each operator transporting components
and finished goods to separate areas, a single individual would be responsible for
transportation and product flow. By organizing the gluing operation into distinct stations,
the current 7.5 minutes per part could be decreased to approximately 2.5 minutes per part.
        Portable gluing stations would also increase productivity. Locating the gasket
stations between the blow mold machines, as depicted on the layout on the following
page, would eliminate much of the excess transportation. Skidded connections would exit
the production area as finished products. Removing excess transportation and handling
required to move the fittings to the gasket stations would greatly increase procedure
efficiency.     Collectively, the automation and product flow streamlining would
approximately increase the productivity more than 50%.

Recommendation
        Including capacity for the new 300HP machine, we recommend installing 3
specialized fixtures that would automatically rotate and apply glue to connections. With
the proper layout, the operator would only be required to load the connection, insert the
gasket, and unload. Task simplification would eliminate much of the previous handling of
individual pieces.
        Three operators would be required for the new stations, while the fourth
individual would be responsible for maintaining the product flow in and out of each
station. It is estimated that the 4 full-time employees would be able to meet product
demands by the elimination of health related down time and the productivity increase.


                                            32
The temporary workers would no longer be needed if product demands were met. The
commitment by support personnel will also reduce in simplifying the operation and
product flow. The cost of implementation is estimated at approximately $21,000, with a
$72,160 saving. The simple payback will be 3.5 months.
                             Products From
                            Molding Machines




                     Automated Gasket
                    Insertion and Gluing
                           Station


                                                Finished
                                                Product
                                               Packaging


Estimated Savings
      Present
      Line Support: 7 hrs/day x 5 days/wk x $14.00/hr x 52 wks/yr = $25,480/yr
      Temps:       3 temps x 40 hrs/wk x $9.60/hr x 50 wks/yr = $57,600 /yr

       Recommended
       Line Support: 3 hrs/day x 5 days/wk x $14.00/hr x 52 wks/yr = $10,920/yr
       Temporary: $0.00 /yr

       Savings (Present - Recommended)
       Line Support: $25,480/yr - $10,920/yr = $14,560 /yr
       Temporaries: $57,600/yr - $0.00 /yr = $57,600/yr
       Net:          $72,160 /yr

Implementation Cost
      3 stations x ($4,500/ fixture + $2,500/electric glue dispenser) = $21,000

Simple Payback
      $21,000 implementation cost / $72,160 /yr savings x 12 mo/yr = 3.5 months




                                           33
AR 7: Buy New Mixer to Eliminate Super Sacking Operation
                           Present         Recommended              Annual Savings
Labor                   2,800 hours/yr          0                 2,800 hr/yr; $35,000
Materials                   $2,000              0                        $2,000
Net                                                                     $37,000
Implementation Cost                                                     $36,000
Simple Payback                                                         12 months

Analysis and Recommendation
About one tanker per week arrives at the plant from Texas to deliver calcium. Each
tanker brings about 50,000 pounds of calcium and can stay only about 3 days before it
must return to Texas for another load. The current 500-pound mixer cannot process the
entire delivered load in three days, thus, as an intermediate step, the calcium is unloaded
from the tanker and placed into large super sacks before being mixed.

A larger mixer that could be fed a continuous stream of calcium would eliminate the need
for the intermediate sacking step. Calcium could be directly unloaded from the tanker
and fed into the mixer during the three-day layover of the tanker. We recommend
purchasing a 1,500-pound mixer with continuous feed capability to streamline this
process and reduce labor and material costs.

Estimated Savings
According to management, it takes about 16 person-hours per week to load the calcium
into super sacks. In addition, the current setup requires a full-time mixer working about 8
hours per day to prepare the mix for shipment. The 1,500-pound mixer would eliminate
these tasks. Management estimates that the average cost of labor, including wages and
benefits, is about $12.50 per hour. Based on these numbers, labor cost savings from task
elimination would be about:

[(16 hr/wk x 50 wk/yr) + (8 hr/dy x 5 dy/wk x 50 wk/yr)] x $12.50 /hr = $35,000 /yr

The cost of super sacks is about $2,000 per year. The total savings would be about:

$35,000 /yr + $2,000 /yr = $37,000 /yr

Estimated Implementation Cost
Management estimates that a 1,500-pound mixer with continuous feed capability would
cost about $35,000 plus $1,000 for installation.

Estimated Simple Payback
SP = $36,000 / $37,000 /yr x 12 months/yr = 12 months




                                             34
  AR 3004: Trade the 142 Die Cutter for a Blanker Machine
                                 Present             Recommended              Annual Savings
Profit                                                                          $600,000
Labor                                                                           $280,000
Net                                                                             $880,000
Implementation Cost:                                                           $2,100,000
Simple Payback:                                                                29 months

  Analysis & Recommendation
  The 142 Bobst die-cutting machine does not completely separate the container pattern
  from the blank sheet. Final separation of the patterns from the sheets is done manually
  by strippers with air chisels.

  A blanker die-cutting machine completes the cutting operation in one step. Thus, the
  patterns are automatically separated from each other and stacked on a skid, ready to be
  either folded or glued. All this is done faster than the present 142 machine. Thus, a
  blanker machine could increase production, reduce scrap, reduce air compressor energy
  use and free labor for other critical jobs.

  Two of these issues, increased production and better use of labor seem to be critical for
  the company. Management believes that sales could be increased if additional labor
  could be found to increase production. Management also believes that the die-cutting
  operation is a production bottleneck. Thus, we attempted to quantify the savings and
  payback of trading in the 142 machine for a blanker machine. Based on our limited
  understanding of the issues involved, this appears to be an attractive option.

  Estimated Savings
  Management reports that present annual sales are about $8,000,000 and that about one-
  half of current production passes through the 142 die cutter. A machine operator
  estimates that a blanker machine could cut and separate paper twice as fast as the 142 die
  cutter. If so, the sales generated by the blanker machine could be roughly twice what the
  142 machine can generate. For our calculations we assume that the blanker machine
  is1.5 times faster than the 142 machine. Management estimated that the profit margin on
  an incremental increase in sales is about 30%. If so, the additional profit from increased
  sales from replacing the 142 machine with a blanker machine would be about:

  $4,000,000 x 50% (increased production) x 30%(profit) = $600,000 /year

  In addition, the use of blanker would eliminate the need for manually stripping the
  patterns. A machine operator estimated that six strippers working 8 hours per shift, two
  shifts a day, at $14 per hour to do the final separation of patterns. If so, the labor cost for
  stripping is about:

            8 hours 2 shifts 250 days      $14
  6 men                                         $336,000 /year
             shift    day      year     man - hour


                                                35
The operator believes that with a blanker machine, only one stripper per shift would be
needed to move the patterns to the appropriate spots. If so, the annual labor cost would
be about:

          8 hours 2 shifts 250 days      $14
1 man                                         $56,000 /year
           shift    day      year     man - hour

The annual savings from reducing stripper labor would be about:

$336,000 - $56,000 = $280,000 /year

Hence, the total savings based on this case would be about:

$600,000 /year +$280,000 year = $880,000 /year

This would free labor for other critical jobs involved with the increased production. In
addition, air compressor electricity use would be decreased. This decrease may be
enough to offset the increased electricity consumption of the new blanker and machinery.
Thus, it seems reasonable that this option would remove the labor constraint on increased
production and make it possible to maintain the 30% profit margin on increased sales.

Estimated Implementation Cost
Management estimated the cost of a new blanker machine to be about $2,500,000.
Management estimates that the present 142 die cutter machine is worth about $400,000 if
traded in on a new Bobst blanker machine. Hence the implementation cost would be
about:

$2,500,000 - $400,000 = $2,100,000.

Estimated Simple Payback
Based on the annual savings we estimate a simple payback to be in about:

$2,100,000 / $880,000 /year = 29 months

Alternative Strategy
An alternative strategy would be to keep the 142 machine and add a blanker machine. In
many ways this may be even more cost effective, since production through the cutters
could be increased by 150% for only $400,000 more investment. However, we did not
attempt to quantify the cost effectiveness of this option since the benefits depend heavily
on factors for which we do not have enough information to make estimates for. These
factors include whether other areas of production process could be scaled up to match the
increased die-cutting capacity, whether additional labor could be found, and how much
profit could be expected from the increased sales.



                                            36
AR 3054: Purchase a CNC Machine to Reduce Machining Cost
                                Present           Recommended          Annual Savings
Machining Cost                 $420,000            $320,000 /yr          $100,000
Implementation Cost:                                                     $200,000
Simple Payback:                                                          24 months

Analysis and Recommendation
The company's production is divided into two product lines, one for building and
repairing lathes and the other for producing repair parts. Many parts require various types
of machining on lathes, cutting machines, grinders, etc. According to operators, some of
these parts could be made much faster by a CNC machine. Recently, a CNC machine
devoted to producing repair parts was sold. All repair parts are now manually machined.

We reinvestigated the idea of using a CNC machine to reduce production costs of repair
parts. If the number of parts that could be made faster with a CNC machine is small, then
the initial investment in a CNC machine would never pay off. However, if the number of
parts that could be made faster with a CNC machine is large, then the decreased
production costs would justify the purchase of a CNC machine. In the following
analysis, we estimate what fraction of the repair parts would have to be machined by a
CNC machine in order to make the purchase of the CNC machine pay back in two years
or less. We note that this would allow some of the operators who are currently making
repair parts to move to the lathe building operation and increase this area of your
business.

Estimated Savings
According to an operator, the repair service department has 10 people. An operator
estimated that it takes about 2 hours to produce each part. If so the annual number of
parts machined by the repair department is about:

                      1 part      8 hr 250 days
10 operators                                  10,000 parts/yr
                 2 hr - operator day      yr

Management estimated the average cost of labor is about $21 per hour. The present labor
cost for the repair department is about:

10,000 parts 2 hours $21
                          $420,000 /yr
     yr        part   hour

If so, the labor cost per part is about:

$420,000       1 yr
                        $42 /part
   yr      10,000 parts




                                             37
Estimated Cost and Simple Payback
 To make a $200,000 CNC machine payback in two years, the annual required labor
savings would have to be about:

$200,000 / 2 yrs = $100,000 /yr

Thus, the cost of labor would have to be reduced to about:

$420,000 /yr - $100,000 /yr = $320,000 /yr

An operator estimated that the previous CNC machine could produce parts four times as
fast as they were produced by hand, including programming time. However, it is not
practical to produce all the repair parts with a CNC machine. For a CNC machine to
payback in two years, the fraction of parts produced by the CNC machine (FracCNC)
would be determined by the following equation.

10,000 parts/yr x [FracCNC x $42 /part x 25% + (1-FracCNC) x $42 /part] = $320,000 /yr

Thus, if you could produce FracCNC = 32% or more of the repair parts on a CNC
machine, it would payback in about 2 years and save about $100,000 per year in labor
costs. According to management, more lathes could be sold if more could be produced.
Thus, purchasing a CNC machine would allow some of the operators who are currently
making repair parts to move the lathe building operation and increase this area of your
business.




                                             38
 AR 3204: Buy an Automated Inspection Machine to Reduce Labor and
 Inventory
                                Annual Savings                   Project      Simple
                      Resource      CO2 (lb)        Dollars       Cost       Payback
Labor Cost          17,136 hours                   $205,632
WIP Cost                                            $15,000
                                                   $220,632    $300,000     16 months

 Analysis
 The major steps in the production process are shown in the process flow diagram. The
 main operations are aluminum melting, die casting, trimming, deburring, inspection and
 packing. During our tour we noticed a significant quantity of work-in-progress inventory
 (WIP) between operations. Carrying this excess inventory is expensive since the money
 tied up in WIP could be invested more productively. In addition, WIP takes up valuable
 floor space, requires bookkeeping, etc. It appears that the inspection and packing
 operations are bottlenecks due to the amount of WIP in front of them. With help from
 management we investigated ways for alleviating these bottlenecks and subsequently
 reducing WIP and labor costs.

 Recommendation
 We located a manufacturer that builds custom surface inspection machines. A machine
 suitable for your process would require the following characteristics:
  Be easily programmed for different product runs
  Inspect all six surfaces of a casting
  Perform high-volume surface inspection of at least 1,500 castings per hour
  Integrated with automated packing machines

 Management agreed that a machine that could perform the above tasks might be
 appropriate for your process. Based on the rough analysis that follows, we believe that
 an automated inspection and packing machine would be highly cost effective. We
 recommend that you investigate purchasing such a machine.

 Estimated Savings
 Management estimated that about three persons per shift are involved in inspection and
 packing. The cost of labor is about $12 per hour. Thus, the annual cost of labor for
 inspection and packing is about:

              8 hours 6 days 51 weeks        $12
 9 people                                          $264,384 /year
                day    week    year     person  hour

 The manufacturer reported that a visual inspection machine with a robotic arm for
 automated packing could be operated by one person. Based on management's estimated
 production of 21,000 parts per day, this would require two shifts. If so, the new annual
 cost of labor for inspection and packing would be about:



                                            39
             8 hours 6 days 51 weeks        $12
2 people                                          $58,752 /year
               day    week    year     person  hour

Net annual labor savings would be about:

$264,384 /year - $58,752 /year = $205,632 /year

We estimate that this machine could also reduce the WIP in front of the inspection and
packing processes by at least 50%. If the value of this WIP is $200,000 and the company
can make a 15% return on investment, then the annual revenue from reducing WIP would
be about:

$200,000 x 50% x 15% /year = $15,000 /year

Total savings would be about:

$205,632 /year + $15,000 /year = $220,632 /year

In addition, reducing WIP would also reduce product lead time. This may improve
customer service, attract potential new customers, reduce defective as well as obsolete
parts, and result in other cost savings.

Estimated Implementation Cost
The manufacturer estimated that a customized machine would cost about $250,000, plus
about $50,000 for the engineering design. The net cost would be about $300,000.

Estimated Simple Payback

              1 year    12 months
$300,000                         16 months
             $220,632      year




                                            40
 AR 3704: Purchase Automated Wrapping System
                               Annual Savings                     Project       Simple
                     Resource      CO2 (lb)          Dollars       Cost        Payback
Revenue            21,600 blocks                     $43,200
Labor                125 hours                        $1,750
Pallets                                              $44,950     $110,000     29 months

 Analysis
 Retaining wall blocks are wrapped in plastic before shipping. The plastic wrap machine
 is about 60 feet away from the splitting machine. The pallets of stacked blocks are
 conveyed for that distance, then placed on a rotating table by a forklift. The pallets are
 then wrapped in plastic and covered with a plastic company logo.

 Transporting blocks down the conveyor and manual wrapping them slows overall
 production. The plant manager suggested that an automatic wrapping machine could
 increase production if it were installed near the splitting machine. We investigated the
 cost-effectiveness of this idea.

 Recommendation
 Based on the following analysis, the idea appears to be cost effective, especially since the
 plant manager believes that the retaining wall business will increase. Thus, we
 recommend that you purchase an automated wrapping system and install it near the
 splitting machine. This may involve moving some of the current equipment to make
 room for the wrapping machine.

 Estimated Savings
 The plant manager estimates that the automatic plastic wrap machine would increase
 production of retaining wall blocks by 4 racks of 216 blocks per day. Retaining wall
 blocks are made during about 10% of the 250 work days per year. The plant manager
 also estimated each block generates a $2 profit. If so, the increased profit from an
 automatic wrapper would be about:

  4 racks 216 blocks  250 days  $2
  day  rack    year  10%  block  $43,200 /year
                               

 When producing retaining wall blocks, one operator is required to wrap and transport the
 blocks. We estimate that an automatic wrapping machine would reduce the operator time
 required to wrap and transport blocks by about 50%. The operator currently works about
 10 hours per day at about $14 per hour. The labor savings would be about:

 10 hours 250 days         $14
                   10%        50%  $1,750 /year
    day     year           hour

 The total savings would be about:


                                             41
$43,200 /year + $1,750 /year = $44,950 /year

Estimated Implementation Cost
According to the plant manager the automatic plastic wrap machine costs about
$100,000. In addition, we estimate that installation would cost another $10,000. This
should also cover the cost of moving current equipment if necessary.

Estimated Simple Payback
$110,000 / $44,950 /yr x 12 mo/yr = 29 months




                                           42
AR 4004: Dip Two Coils Instead of One to Reduce Labor Costs
                               Annual Savings                     Project         Simple
                   Resource       CO2 (lb)         Dollars         Cost          Payback
Labor              2 workers                      $134,400       $400,000       36 months

Analysis
Currently, one coil of rod is sequentially dipped in 11 tanks for descaling. The dipping
operation currently requires 2 workers per shift for 2 shifts per day. We observed that the
tanks are large enough to allow dipping 2 coils at one time. Management agrees that this
would be possible; however, management believes that this would require modifying the
present equipment to support the weight of 2 coils.

Recommendation
We recommend dipping two coils in the pickling line operation instead of one to reduce
labor costs. This would require modifying the crane, cables and coil-carrying rod.

Estimated Savings
Management agrees that dipping two rods instead of one could eliminate 1 shift per day.
According to management, the average cost of labor, including benefits, is about $24 per
hour. If so, the total annual labor savings would be about:

$24 /hr x 2 workers x 8 hrs/day x 7 days/wk x 50 wk/yr = $134,400 /yr

Estimated Implementation Cost
According to management modification of the present equipment for supporting
additional load would cost about $400,000.

Estimated Simple Payback
The estimated simple payback would be about:

SP = $400,000 / $134,400 /yr x 12 moths/yr = 36 months




                                            43
AR 3904: Install A Vertical Loader For Horseradish Washing
                                 Annual Savings                   Project      Simple
                        Resource     CO2 (lb)          Dollars     Cost       Payback
Labor                  1,300 hours                     $19,500    $8,600      5 months

Analysis
During our visit we witnessed an operator manually loading horseradishes into a front-
loaded washing machine. According to the operator, the loading process is strenuous and
takes about 45 minutes.

Recommendation
To reduce loading time, we recommend purchasing an elevated hopper with a sliding
door and conveyor to feed horseradishes into the washer (Figure 3.1). In addition, the
existing loader would have to be modified with an additional top-loading door.
Horseradishes could be dumped into the hopper by a lift truck. These changes would
reduce loading time and operator fatigue. The existing loading door would still be used
for unloading.



 Hopper with a
  sliding door




                                                 Conveyor belt



                                                                                 Top loader




                                    Present
                                 loading door



Figure 3.1 Recommended type of loading

Estimated Savings
According to the operator, about 5 loads of horseradishes are washed every day. The time
spent loading the two washers is about:




                                            44
            5 loads 45 min 260 days 1 hour       1,950 hours
            day  load  year  60 min  washer 
2 washers                                 
                                                    year

According to management, the cost of labor is about $15 per hour. We estimate that
loading the washers from the hopper would reduce this time by two-thirds. If so, the
labor savings would be about:

1,950 hours/year x 2 / 3 = 1,300 hours/year
1,300 hours/year x $15 /hour = $19,500 /year

Estimated Implementation Cost and Simple Payback
According to the grainger a hopper with a sliding door would cost about $300 capable of
handling about 2 tons. A manufacturer estimated a conveyor would cost less than about
$1,000. We estimate that cutting the existing loader at the top and welding a second
door to cost under $3,000 including labor. If so, the total implementation cost for the two
loaders would be about:

($300 + $1,000 + $3,000) /line x 2 lines = $8,600

Estimated Simple Payback

              1      12 months
$8,600 x           x            5 months
           $19,500      year




                                            45
AR 3854: Reduce Robot Delay Time in Plant 2
                                    Annual Savings                   Project       Simple
                          Resource      CO2 (lb)    Dollars           Cost        Payback
Increased Revenue        4,753 pipes               $118,825          $15,000      2 months

Analysis
Plant 2 has two lines that produce reinforced concrete pipes. According to the plant
supervisor, the robot used to move compressed twelve-inch pipes to the kiln table has a
delay between pipe pours. According to the plant supervisor, this slows the capacity of
the line. During our visit we measured the time taken between different stages of the pick
and place operation to be about:

1.   12 seconds to lift the filled mould.
2.   8 seconds to travel to programmed position.
3.   15 seconds to lower and shake product off the mould.
4.   18 seconds to release the product and move vertically upwards.
5.   8 seconds to travel back to re-bar position.
6.   12 seconds to load re-bar into the empty mould.
7.   18 seconds to position the mould back into the slot on the rotating table.

The total time between pours was about 90 seconds.

Recommendation
Based on our observations, we believe that the times for the first stages of the operation
cannot be significantly decreased. However, the final stages could easily be sped up. We
recommend installing guiding devices to help the operator to load the re-bar into the
robot. We also recommend installing simple mistake-proofing devices, called a "Poke
Yoke", on the rotating table to guide the mould into the slot to reduce the cycle time.

Estimated Savings
According to the plant supervisor the current speed of the twelve-inch line is about 280
pipes per eight-hour shift. If so, the time taken to pick and place a pipe is about:

 8 hours 60 minutes 60 seconds 103 seconds
                            
280 pipes   hour     minuite       pipe

This is in rough agreement with the 90 seconds we observed for the pick and place
operation. We timed the average delay due to the robot to be about 12 seconds. If so, the
time lost in an hour is about:

12 seconds 40 pipes 480 seconds
                  
  1 pipe     hour      hour




                                              46
We estimate that stages 6 & 7 could easily be reduced from 30 seconds to about 24
seconds. This results in a gain of about six seconds which would reduce the delay time of
twelve seconds by half. If so, the extra pipes that would be produced annually would be
about:

480 seconds          8 hours      1 pipe     255 days
             50 %                                  4,753 pipes /yr
   hour                day     103 seconds     year

According to the plant supervisor, additional twelve-inch pipes could be sold if produced.
According to company price sheets, the average profit per pipe is about $25. If so, the
additional annual revenue from twelve-inch pipes would be about:

4,753 pipes $25
                  $118,825 /yr
    year     pipe

Estimated Implementation Cost
We estimate that it would cost about $15,000 to install the guides on both areas.

Estimated Simple Payback

  $15,000      12 months
             x            2 months
$118,825 /yr      year




                                            47
AR 4054: S-84 Canister Work Cell Modification
                              Annual Savings                                  Project    Simple
                     Resource       CO2 (lb)                     Dollars       Cost     Payback
Increased Output 185,294 canisters                              $370,588      $40,000   2 months

Analysis
The S-84 canister assembly lines are the largest producers in the plant, as measured by
quantity of output. Currently, 16 people work on three main lines and an accessory line.
Each main line has four operations and the accessory line has one. According to
management, the biggest production problem is retaining good employees. Thus,
reducing labor requirements would alleviate this problem. In addition, management
would like to reduce the space required by the assembly processes and use it for storage
and lift truck access. Management also believes that if more canisters could be produced,
they could be sold.

Recommendation
We recommend combining the current four lines into a single line supplied by a conveyor
(Figure 1.1). This would ensure that all production is at the same rate, rather than the
current situation in which the rate of production varies between lines. Combining the
lines would also free more room for raw materials and lift truck access. Next, we
recommend balancing the assembly operations to increase the productivity of the process.
Finally, we recommend cross-training workers for all operations along the line, and
rotating them between operations to reduce fatigue and boredom.




      Stage 1                     Stage 2        Stage 3   Product flow    Stage 4          Stage 5   palletize




                              conveyor           Work bench
Figure 1.1. Recommended layout for S-84 canister line before line balancing

Estimated Savings
Combining Assembly Lines
According to management, about 1,800 canisters are produced per day. The production
time per canister is currently about:

1,800 cannisters
                 / 3 lines  600 cannisters /line /day
      day




                                                   48
8 hours         1day            3,600 sec
                                         48 seconds / cannister /line
  day     600 canisters /line      hour

We timed different operations in the S-84 process. The times are shown in Figure 1.2.
The last operation, cannister testing, is the slowest and takes about 25 seconds. If you
could streamline the process so that you eliminated time lost due to material handling, the
production time would be about 25 seconds per cannister per line, rather than the current
average of 48 seconds. To reduce material handling time loss, we suggest you combine
the accessory line with the main lines, and improve material flow between operations.
We believe that a single conveyor-fed line would help accomplish this and significantly
reduce the production time.

Balancing the Operations
We observed that both Stage 2 and Stage 5 have three workers even though Stage 2 takes
the shortest time and Stage 5 takes the longest time. We recommend removing a person
from the fastest operation (Stage 2) and adding that person to the slowest operation
(Stage 5) as shown in Figure 1.3. We estimate that this would reduce the time required
for Stage 5 from 25 to 20 seconds. Thus, the time required to complete each operation
would more closely match the others (they would be better "balanced"), and the
minimum cannister production time would be reduced from 25 to 20 seconds per
cannister per line.

  Before line balancing. Cycle time = 25 seconds

       Stage 1              Stage 2              Stage 3        Stage 4         Stage 5
     Accessory              Bracket             Canister       Checking         Testing
     14 seconds           10 seconds           20 seconds     18 seconds      25 seconds
      3 persons            3 persons            3 persons      3 persons       3 persons

    After line balancing. Cycle time = 20 seconds

       Stage 1              Stage 2              Stage 3        Stage 4         Stage 5
     Accessory             Bracket              Canister       Checking         Testing
     14 seconds           15 seconds           20 seconds     18 seconds      20 seconds
      3 persons           2 persons             3 persons      3 persons      4 persons


Figure 1.2. Roughly estimated stage times for the S-84 line




                                                    49
     Stage 1                      Stage 2       Stage 3   Product flow      Stage 4     Stage 5   palletize




                             conveyor            Work bench
Figure 1.3 Recommended layout for S-84 canister line after line balancing

We estimate that the proposed changes would eliminate half of the time currently lost in
material handling. If so, the new cycle time would be about:

20 seconds/cannister/line + [50% x (48-20) seconds/canister/line] = 34 seconds/cannister/line

and the number of cannisters produced per year would be about:

1 cannister /line             8 hours 250 days 3,600 seconds 635,294 cannisters
                   3 lines                              
   34 seconds                   day     year       1 hour           year

The current number of cannisters produced per year is about:

1,800 cannisters/day x 250 days/year = 450,000 cannisters/year

We estimate that each cannister is sold for a profit of about $2. If so, the increased profit
would be about:

(635,294 - 450,000) cannisters/year x $2 /cannister = $370,588 /year

Estimated Implementation Cost
According to a manufacturer, a conveyor system with the automatic speed control would
cost under $20,000. We estimate a total of about $20,000 to reorganize the entire
process. If so, the implementation cost would be about:

$20,000 + $20,000 = $40,000

Estimated Simple Payback

                   1      12 months
$40,000 x               x            2 months
               $370,588      year




                                                  50
 AR 3454: Increase Productivity of Washing Operation
                             Annual Savings                     Project         Simple
                     Resource       CO2 (lb)      Dollars        Cost          Payback
Labor               1,200 hours                   $8,400        $2,500         3 months

 Analysis
 Management estimates that the parts washer processes 400 –500 metal parts per hour.
 The washer operation requires a four-person crew. The first operator loads parts onto a
 belt that feeds the washer. Currently, the operator loads four pieces of 3.5-inch pad-metal
 across the 60-inch width of the belt. A second operator unloads and inspects the parts
 from the washer and places them in stacks on a second conveyor belt. From here, the
 parts are conveyed approximately 25 feet and packed into portable containers by the third
 and fourth operator.

 According to management, only four parts per row are loaded because the drying air
 knocks the products off the belt. Management agreed that redirecting the drying air
 would enable more parts to be run. In today’s competitive environment, it is necessary to
 continually improve productivity. One method for increasing productivity is to maximize
 equipment output.

 Recommendations
 According to management, a simple modification of the air drying system would enable
 the washer to run at increased capacity. We recommend deflecting the drying air so it
 does not knock products off the belt. This would enable the operator to load up to 16
 metal parts across the width of the belt.

 Estimated Savings
 Management reports that the washer washes pad metals for about 8 hours per week. The
 current output of the washer is 450 units per hour. The weekly output is about:

 450 parts/hour x 8 hours/week = 3,600 parts/week

 If 16 parts per row were loaded, the washer could produce about:

 (16 parts per row / 4 parts per row) x 450 parts/hour = 1,800 parts/hour

 Thus, production time could be reduced to about.

 3,600 parts/week / 1,800 parts/hour = 2 hours/week

 Management estimates that wages and benefits are about $7 per hour. Management also
 believes that the other four workers on the line could also process 1,800 parts/hour.
 Thus, the labor savings would be about:

 (8 hours/week - 2 hours/week) x 4 persons x $7 /hour-person x 50 weeks/year = $8,400 /yr



                                             51
Estimated Implementation Cost
We estimate that ductwork modifications would cost no more than $2,500.

Estimated Simple Payback
$2,500 / $8,400 /yr x 12 mo/yr = 3 months




                                            52
AR 11: Improve Productivity of Core Knockout Process
                             Present             Recommended         Annual Savings
Labor Cost                   $40,000                $12,000             $28,000
Implementation Cost:                                                    $12,000
Simple Payback:                                                        5 months

Analysis
         The knockout procedure consists of three tasks: knockout, during which the sand
is hammered loose from the casting; collection, during which sand is swept toward a
focal point and lifted into a tub; and transfer, when the tub is carried to a dump truck
located approximately 50 yards away. An estimated 72 cubic feet of sand is removed
each day. Management asked us to explore ways to improve the productivity of this
process.
         One option we considered to improve productivity was to install a conveyor
system between the knockout room and dump truck. However, we did not think that this
method would be cost effective primarily because of the high first costs, limited
flexibility for future changes, and the small amount of sand (only 4-5 tubs moved per
shift ) being transferred.

Recommendation
        Our first recommendation for improving the process is to build and install a steel
table with a mesh surface. The casting would sit on top of the table and sand would fall
directly into a tub below the table during knockout, eliminating the collection and
deposition tasks. When designing the table, care should be given to the following:

         1. It should be big enough to work with tow motors and bins.
         2. It should minimize spillage in order to minimize cleanup time.
         3. It should be stable and flexible enough to support the knockout machines.

        A secondary recommendation would be to move the knockout room to an area
currently used for storage of outgoing castings. This would improve the flow of used
sand from the die room, into the bake-out oven, to the knockout room, and finally to the
dump truck. The new location places the knockout room significantly closer to the exit
and reduces transport time and tow motor traffic. The current knockout room would then
become available for flash removal tools or could possibly be modified for storage.

Estimated Cost Savings
Present
Management estimates that about 40% of the total knockout effort is dedicated to the
collection and transfer of sand after it has been broken loose from a casting. An average
of 20 people hours per day are dedicated to this activity. Assuming wages and benefits of
$20 per hour and a 5 days per work, 50 weeks per year work schedule, the costs of labor
associated with the knockout process is about:

Total labor cost = (20 hr/dy)($20/hr)(5 dy/wk)(50 wk/yr) = $100,000 /year


                                            53
Labor cost of moving sand = $100,000 /year x 40% = $40,000 /year

Recommended
Assuming that the steel table and room relocation would reduce handling by 70%, the
labor cost of moving sand would be about:

40,000 /year x (100% -70%) = $12,000 /year

Savings (Present - Recommended)
Savings = $40,000 /year - $12,000 /year = $28,000 /year

Estimated Cost of Implementation
Steel table with grate and collection bin assembly: $2,000
Room relocation: $10,000
Total: $12,000

Simple Payback
SP = $12,000 / $28,000 /yr x 12 months/yr = 5 months




                                           54
 AR 4104: Reduce Repair and Rework
                              Annual Savings                      Project      Simple
                     Resource    CO2 (lb)     Dollars              Cost       Payback
Labor               1,200 hours              $56,400
Material                                     $24,000
Process Engineer                             -$41,600
Net                                          $38,800               none      immediate

 Analysis
 Currently, little time is spent on tracking and resolving repair and rework problems. One
 method for increasing productivity is to focus on reducing non-value-added operations
 such as repair and rework. These operations increase production costs by adding
 unnecessary tasks, which increase labor hours per production unit. In your case, these
 costs are significant; according to management, employees spend about 200 hours per
 month and $4,000 in material for repair and rework operations.

 Recommendation
 To reduce the amount of time operators spend on unnecessary repair and rework
 operations, we recommend hiring a full-time process engineer. This engineer's sole
 responsibility would be to track hours associated with repair and rework, and coordinate
 solutions.

 Estimated Savings
 Management reports that wages and benefits for salaried personnel cost about $47 per
 hour, and that rework and repair operations total approximately 200 hours per month.
 Thus, annual labor cost for rework and repair is currently about:

 $47/ hour x 200 hours/month x 12 months/year = $112,800 /year

 Management estimates that the monthly material cost for repair and rework is about
 $4,000. The annual material cost is about:

 $4,000/month x 12 months/year = $48,000 /year

 Therefore, total cost of repair and rework is currently about:

 $112,800 + $48,000 = $160,800 /year

 Management estimates that the repair and rework could be reduced by 50 to 80% through
 the efforts of a process engineer. Using 50%, the annual savings would be about:

 50% x $160,800 /year = $80,400 /yr

 With a salaried employee’s wages and benefits cost of $20 per hour, the cost of adding a
 full-time process engineer to your staff would be about:


                                              55
$20 /hr x 40 hr/wk x 52 wk/yr = $41,600 /yr

Therefore, the total cost savings achieved by implementing a new repair and rework
intervention program would be about:

$80,400 /yr - 41,600 /yr = 38,800 /yr

Estimated Implementation Cost and Simple Payback
We estimate that the cost of reducing repair and rework would be negligible. Thus, this
measure would pay back immediately.




                                           56
 AR 3254: Minimize Washer Downtime by Pre-washing Parts
                                   Annual Savings                          Project      Simple
                       Resource        CO2 (lb)          Dollars            Cost       Payback
Operator Cost          96 hours                           $2,880
Chemicals Cost                                           $27,000
Solvent Cost          25 gallons                         -$2,000
Net                                                      $27,880           $7,000      3 months


 Analysis
 Every machined part is washed and dried in a parts washer to remove the grease, oil and
 fine particles before it is shipped or plated. Grease and fine particles get deposited on
 filters in the parts cleaner. Due to this heavy deposit of impurities, the parts washer often
 malfunctions causing significant downtime. Management acknowledged that this is a
 significant bottleneck. We worked together to develop this solution.

 Recommendation
 We recommend installing a single-dip pre-cleaner with biodegradable solvent before the
 actual parts cleaner (Figure 3.1). This could reduce labor, chemical costs and work-in-
 progress (WIP).




               Baskets with material
                                                                  Ready for Plating
               Coated with oil & files                                                      Parts cleaner




                                                                                      Semi cleaned
                                                                                        baskets
                               Enzyme
                               microbes

                                              Parts Pre cleaner
 Figure 3.1. Single-dip pre-cleaner with biodegradeable solvent installed before parts washer.

 Estimated Savings
 According to management the parts cleaner was shut down due to malfunctions about
 eight times last year. Management estimates that it takes 2 people, earning about $30 per
 hour, about eight hours to fix the cleaner each time it malfunctions. If so, the annual labor
 cost spent on malfunctions is about:



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            8 repairs 8 hours       $30
2 persons                                 $3,840 /year
               year      repair labor hr
According to management each malfunction required flushing out and adding new
cleaning chemicals. Management estimates that each addition of new chemicals costs at
least $4,500. If so, the cost of additional chemicals is about:

8 repairs $4,500
                  $36,000 /year
   year    repair

There is also a cost for disposing the chemicals. In addition, machine downtime also
creates a bottleneck and increases WIP. Although we are not able to estimate these costs,
they may be greater than the labor and chemical purchase costs described above. The net
labor and chemical purchase costs due to the parts cleaner downtime are about:

$3,840 /year + $36,000 /year = $39,840 /year

We estimate that installing a pre-cleaner would reduce the frequency of parts cleaner
downtime from eight to two times per year. If so, the net labor and chemical purchase
costs due to the parts cleaner downtime would be about:

$39,840   2 cleanouts
                      $9,960 /year
  year    8 cleanouts

As described in AR #5, some additional solvent may be needed each year, especially
because of carryout from the pre-cleaning tank. We estimate that this would not cost
more than $2,000 per year. The net savings would be about:

$39,840 /year - 9,960 /year - $2,000 /year = $27,880 /year


Estimated Implementation Cost
Management estimated that a 4 x 4-foot tank would suffice to dip at least two baskets of
parts simultaneously before the actual wash. Based on AR #5 we estimate that a tank
with the necessary solvent equipment would cost about $7,000.

Estimated Simple Payback

            1 year 12 months
$7,000                      3 months
           $27,880    year




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