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Atizapan Mexico Plant Operations Review

Atizapan Mexico Plant Operations Review. Atizapan, Mexico Nov 11, 2008. Agenda. Plant Profile Financials Bridge Financial Review To Expected FY 09 Bridge FY 07 to FY 08 to FY 09 FY09 CIP’s Comparison vs Plan Inventory Variances Overtime FY 09 Capital Expenditure Summary Key Metrics

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Atizapan Mexico Plant Operations Review

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  1. Atizapan Mexico PlantOperations Review Atizapan, Mexico Nov 11, 2008

  2. Agenda • Plant Profile • Financials • Bridge Financial Review To Expected FY 09 • Bridge FY 07 to FY 08 to FY 09 • FY09 CIP’s Comparison vs Plan • Inventory Variances Overtime • FY 09 Capital Expenditure Summary • Key Metrics • Orders & Sales • Fill Rate • Inventory & Turns • Backlog • Powertite – Causes, Action Plan & Update

  3. Plant Profile

  4. Key Strengths: • Low cost • Flexibility • Capacity Atizapan Plant • Total Sq Ft: 149 k • Bldg 1: 61 K • Bldg 2: 63 K • Bldg 2.5: 25 K • Total Hdct: 681 • Hourly: 603 • Salaried: 78 • Hourly Full Burden Avg. : $2.73 per hour • Avg. Wage: $1.89 per hour • Avg. Fringes: $0.84 per hour

  5. Plant Profile • FY08 Sales Value: ECM $135M + HCS $26M = Total $161M usd • FY08 Cost of Sales: ECM $56M (41%) + HCS $12M (46%) = Total $68M usd • FY09 Sales Value: ECM $138M + HCS $26M = Total $164M usd • FY09 Cost of Sales: ECM $57M (41%), + HCS $12M (46%) = Total $69M usd • Total plant population : HCS hourly hdct ranges from a low of 60 to a high of 263 making our total plant hourly hdct from 418 to 621, depending on the season. • Plant operates 24 / 5, + 2 shifts on Saturdays. • 1st Shift – 8 hours/day, 6 days/week (323 hourly headcount) 54% • 2nd Shift – 7.5 hours/day, 6 days/week (211 hourly headcount) 35% • 3rd Shift – 8.5 hours/day, 5 days/week (69 hourly headcount)11%

  6. Atizapan, Mexico Team Joe Corrigan VP Operations Mike Kramer Director Of Operations Armando Enrile Plant Manager (4 Y) Armando Enrile Carlos Aranda Materials Manager (Acting) Finance Manager (0,11 Y) Carlos Martinez Gustavo Cerezo Projects & Transfers Mgr Quality Manager (Acting) (4 Y) Gustavo Cerezo Alberto Sanchez Machining Manager Engineering Manager (1 Y) (4 Y) Jorge Nieto Rodolfo Vázquez Human Resources Mgr Assembly Manager (10 Y) (2 Y)

  7. Plant Reloc. 61k Sq Ft 245 H. Hdct Plant Start Up 20k Sq Ft 7 H. Hdct. Plant Growth 124k Sq Ft 440 H. Hdct. Plant Growth 149k Sq Ft 560 H. Hdct. Assembly Only Machining & Assembly Product Line Growth Cable Extrusion Product Line Transfers 1999 2009 1997 2001 2003 2005 2007 CTL STATION, P&R AND MOTOR STARTER Over 7500 FG SKU’s

  8. Financials

  9. Bridge Financial Review to Actual FY08

  10. Bridge FY 07 To FY 08

  11. Bridge FY 08 To Expected FY 09

  12. Controls on Expenses General Process to control expenses: Expenses are divided in two types: Expenses within Requisition System “SOC” and Expenses out of “SOC”. Procedure to control Expenses • Based on POR, Finance issue a monthly MRO budget by department at the beginning of the year. This is revised and adjusted by Management every month. • Finance input the revised budget in “SOC”. - SOC “ doesn’t allow to exceed the budget assigned by Accounting for each department. • Area Managers approves every P.O.s issued in SOC, below USD 1,000. Every P.O. over 1,000 usd must be approved by Plant Controller • If a Manager requires an increase of expenses budget , have to make a requisition to Plant Controller or Plant Manager. If approved the requisition of incremental expenses can be posted in SOC.

  13. Controls on Expenses 1. Freight cost savings – On June the company Started to work with new carriers for intra-México shipments (Trans - mex and Emerson transportation) Benefits: Reduction in costs and around 2 days in Transit Times. 2. Reduction of transportation cost as a result of double stacking pallets on the northbound trailers beginning the first week in July 2008. - Past method of shipping: Trailers were sent with 30 pallets (28-30,000 lbs.) - Current method of shipping: Trailers are loaded with 40 pallets (38-42,000 lbs.) • Reduce air freights CIP saved 119 K USD • Savings of 93 K USD in custom taxes for non NAFTA materials using goverment programs such as 8th Rule • Speed out Inventory reconciliations reducing the amounts of penalties and surcharges. • MTD POR is reviewed every week by managers based on a weekly report

  14. Improvement Programs

  15. CIP´s FY09 EX 120

  16. CIP´s FY08 EX 120 A

  17. MAKE VS BUY EX 118

  18. 2007 – 2012 Cost Reduction Projects

  19. CAPITAL EXPENDITURE

  20. CAPITAL EXPENDITURE

  21. DIE CAST MOLD • Status Phase I Phase II

  22. Productivity Profitability % productivity = Std hrs earned/total payroll hrs

  23. Actions to Improve Productivity • Around 20 machining operators have been trained also as set up man; we have reduced 5 set up men and we will keeping with this training. • Several nests of transfer machining are in upgrade program/plan in order to earn more std hours per person. • CNC electronic boards upgrade will increase the out put per person, probably allowing to reduce 1 shift. • Tool crib people will operate machines as needed, earning std hours, we are not getting today. • During low volume machining schedule months, people of the 3rd shift is replacing assembly operators. • We will fill direct people lunch breaks by using indirect people; this will earn std. hours we are not getting today.

  24. Salaried headcount control Hiring is freeze It can do only with the authorization of MK / JC / DY It have to fill the “EGS Staffing Requisition” format with memo of justification and organizational chart. Those paper must send to Rosemont for approval. Salary Control We get a Salary Plan authorized Any difference must be previous authorized by EM/ MK / JC / DY

  25. Key Metrics

  26. Orders & Sales

  27. Orders & Sales FY08

  28. Orders & Sales FY09

  29. Delivery: Backlog & Fill Rate

  30. Backlog Analysis $ 3,535 $ 1,630 $ 1,360 Total Backlog as of Oct 30/08 $2,990 K • Foundry Backlog has Increased 107% • Non Foundry has decreased 32% • Total Backlog has decreased 3%

  31. Backlog Reduction Plan • Focus on Top 60 items, this represents $1,164K or 39% of our non allocated Backlog • Focus on the Fill Rate recovery Plan in order to decrease backlog and fill RDC. MTS Backlog represent 80% of total BL ( $ 2.3m) • Review backlog status with planners three times a week. • Increase safety stock on Foundry MTS related Items to 25 DOS • Maintain 35DOS on A2 Power Tite items

  32. MTO Backlog(as October 30, 2008) Total MTO non allocated BL including futures: $592K $132K $102 K of Lighting BL is allocated

  33. Power Tite Backlog Reduction Plan Initiated in May 08 • Double the Powertite safety stock in the planning process (done) • Focus on the $1,7M in Powertite following the developed Powertite recovery plan (done) • Reduce the Powertite BL, by the end of each month, as follows:

  34. ALPE (Al. Hard Cast Housing) – Jan 08 200 amp housing was changed from sand cast to die cast, we encountered quality issues with threads. DCMEX (Al. Die Cast Parts) – Dec 07 Obsolete PC Board that took 8 weeks to recover Sandblast machine down for two weeks Second 400 Ton. Molding machine was down the fourth week of March due to sealing issue Shortage in operators during February COMMERCIAL PLASTICS (Plastic Terminal Blocks) - Feb 08 Quality issues due to mold wear Lack of follow up and expediting from our planner Orders 7% above Plan in Q2, 14% above in Jan. and 12% in March ALPE (Al. Hard Cast Housing) Mold has been fixed DCMEX (Al. Die Cast Parts) DCMEX is currently using 4 machines to produce Powertite parts Developed a Detailed Recovery Plan Daily production meetings with DCMEX DCMEX has hired 12 new operators Will move two molds to new vendor Plan to transfer out 50% of DC Mex jobs COMMERCIAL PLASTICS (Plastic Terminal Blocks) Repair mold New Planner has been assigned the Powertite Line Training of another planner for back up Finished Good production lot size increased to 20 DOS Issues that have Impacted Powertite Performance Major Issues Actions Taken Solved by • Mid April • End of May • End of April • End of April • Beginning of May DONE DONE DONE DONE DONE

  35. Power Tite Fill Rate & Backlog Powertite BL is now in the lowest level in the last two years

  36. Fill Rate Performance

  37. AT Fill Rate Major Impact Families

  38. Fill Rate by Product Line

  39. EXPECTED Fill Rate by Product Line

  40. Conduit Fittings Sealtite & Conduit Bodies Hazardous Fittings Late deliveries Outsourced Castwell heat treating casting castings CNC Machines Overloaded Outsource components Planner's low performance and lack Restructuring planning Area of follow up Analyze Top Items every day SOLIPLAS low quality & late Quoted 3 new suppliers deliveries Late deliveries SM Castings Prioritizing A items with SM Increase SS to 25 DOS Weekly expedite list Critical machines overloaded Running Over time, prioritizing A items in machining Late deliveries F & J Moved 20% of CO castings out Late deliveries SM Castings Prioritizing A items with SM Increase SS to 25 DOS Planner's low performance and lack Restructuring planning Area of follow up Analyze Top Items every Huge demand Fill Rate Recovery Plan by Item Class ISSUE ACTION

  41. Major Vendor Issues

  42. Inventory

  43. Inventory & Turns

  44. Actions to Reduce Inventory STANDARD PROCESSES WE HAVE IN PLACE • We have an annual Inventory Plan ; this plan is monthly reviewed , in accordance with SOP and POR figures and includes the issue of Ex. 245. • We have daily control of all our open P.O.s and we are comparing them against the approved purchases coming from the above mentioned Inventory Plan, and inform this to planners, twice per week, in order to take the proper actions. • We are also keeping daily control of the rest of the variables affecting Inventory, including: • Receipts from Sister plants Receipts from Outside Services • Absorption Scrap • Shipments to Sisters Variances • COGS • We have 531 part numbers already in kanban with both domestic and import vendors • We are working, along with Procurement in order to convert around 200 main part numbers into kanban pull systems, including bar stock.

  45. ON GOING AND FUTURE SIMULTANEOUS PROJECTS • NASCO IMPLEMENTATION • KANBAN ULTRIVA • HCS RM PLANING CONSOLIDATION IN AT • NIPPLE CONSOLIDATION • COORDINATE MOVE OF DIES OUT OF DC MEX • HCS FLOOR OPERATIONS IMPROVEMENT • TESTING 1215L BARS INSTEAD OF USING 12L14 STEEL BARS • REPLACING SOLID ALUMINUM BARS WITH ALUMINUM TUBINGS • MOVE DIES FROM ALLOY TO PACE • ESTABLISH ORACLE FINANCE MODULE • ESTABLISH ORACLE MANUFACTURING MODULE • CHANGE HCS F.G. PLANNING TO AT • SISTEMA TRESS IMPLEMENTATION (MEXICO PAYROLL SYSTEM) • FLEXIBILITY IN TRANSFER MACHINING • COLUMBUS CONTROL STATIONS PLUGS AND RECEPTACLES TRANSFER • CLUB 7% • SUBSTITUTE OLD ASM WITH HIGH SPEED CNC • BRING EXTERNAL MACHINING OPERATIONS IN HOUSE

  46. ¿ ? S a f e t y 17 incidents in 4’047,254 hrs worked (FY06 to FY08). 1 accident each 238,074 hrs EGS Electrical Group OSHA Recordables EGS Electrical Group OSHA Lost Time Safety Performance FY05 to FY08

  47. Safety Savings FY06 to FY08

  48. Safety Plan FY08 to FY11 • Three minutes rule • 5 S’s • Lock out/Tag out program • MASH Mail box • Safety training to Line Leaders • Recognition of achievements • Safety campaign with children • Arc Flash guidelines • Ergonomics analysis Actions

  49. COO Safety Award • Status of our first participation in this famous award: • We received the Inspection Committee on September 8th & 9th, 2008. • They found 99 points resolved of 99 requested (100%) • According with the Committee, we are in the top 4 • The final decision was held in the last week of October. • We are deeply committed with safety as employees and it is reflected in the culture of the Plant

  50. Thank You

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