Mid-Tier Defense Contractor
This plant manufactured inter-modal shipping containers for the U.S. military. Even though it was the only remaining volume container manufacturer in the U.S. and it had a healthy backlog of orders, the plant was losing money.
The parent company mandated the plant contribute 5% of gross sales to the bottom line or it would shutter the company within four months. It then hired a new VP for the facility who quickly put a new management team in place. After 2 months, progress toward profitability was visible but it wasn’t sufficient.
The welding operation was quickly identified as the constraint in the facility. Management’s attention was refocused on the constraint and specific measurements were implemented that showed the true utilization of welding resources. Once management understood how to use the measurements, they realized that parts suppliers were having a tremendous negative impact on profitability. They also retrained all personnel on specific customer quality requirements.
Within one month of implementing the recommendations, the plant was producing at breakeven. At the end of the next month it showed a profit. In 2 more months the plant was meeting the parent company’s profit expectations. Throughput increased by nearly 30 percent within ninety days, with only a 5% increase in labor costs.
Prior to the changes, there were hundreds of off-quality finished units that required rework. Improvements in the welding department allowed the plant to free up labor from other areas of the plant. This labor was re-deployed to begin reworking the off-quality units. Within 6 months from initiation of the project, all of these units had been reworked and sold.