As you are smiling and counting up your savings from a year of cost reduction projects, do you think “how are the cost reduction projects that were implemented last year or the year before measuring up”?
Are you still receiving the estimated savings from each project? Are you now receiving unexpected “benefits”?
Are the performance monitoring procedures still being conducted to assure that the new process implemented for the cost reduction is in compliance with requirements or were these procedures “cost reduced” out after a couple of months since the operation was going smoothly?
Were the cost reduction projects scoped out with alert criteria for potential failures in the future?
For example, a change in packaging would result in reduced costs through a weight reduction in the cans, jars, and corrugated. Do you measure the product returns from the supply chain for the next couple of years to assure reliable performance? Has there been an increase in equipment “set up” time, a decrease in line speed, increase in packaging rejections on the line, or an increase in maintenance activities?
Are you seeing an increase in “can crashes” in rotary retorts? Are you seeing more line stoppages during depalling of the glassware or breakage at the filler? Are you seeing more crushing of cases with a product during storage on pallets?
There was probably a trial conducted to assure that the new packaging would run on the production line for an hour with the packaging expert and supplier expert in attendance, a “shake, rattle, and roll” test in the laboratory, and the test packaging was sent on a road trip to a distribution center. Were process control audits conducted at the packaging supplier to assure continued packaging performance in the future? Are follow-up audits conducted to verify that the process is still in control? Do you require any process control records to be submitted for review periodically? Are warehouse audits conducted after a year to inspect the new packaging at the distribution centers? Depending upon your product turnover, you could still have product available a year after production to inspect for compliance with standard.
How do you assure long-term performance and maintain the cost saving? It is difficult for a company to admit that a mistake was made because the cost reduction savings have already been “baked” into the budget. Bonuses have been paid and perhaps even promotions have been obtained through the project. There is significant pressure on employees to achieve cost reductions in as little time as possible which make extensive trials difficult to conduct to obtain further assurance. With employees focused on the next “big” thing in cost reduction, it is difficult to find the manpower to do follow-up activities. Sometimes, one department may be responsible for the development and implementation of a cost reduction project and those employees who would be responsible for quality assurance may not be aware of the change in the process.
In some ways, Failure Effects & Mode Analysis (FEMA) is like Hazard Analysis Critical Control Point (HACCP). FEMA could be used to assist in the process, but as with HACCP, it is only as good as it was created by the user. If you are conducting a trial to alter the packaging of the food product, you should be partnering with the food safety manager for the new risk assessment of the HACCP plan.
When you switch to a new supplier of the cost reduced packaging, is their process control measures equal or better than the supplier that you worked with on the cost reduction project? Or are you going to send a specification, ask for a sample, measure it, then potentially say “OK”?
Or let’s say that you increased the time between full chemical “cleaning and sanitizing” of the production line to increase lineup time and reduce chemical costs. Then you “cost reduce” out the chemical company that helped you set up the new program for another one that has cheaper chemicals. Of course, you no longer have the free service agreement that covers the chemical and cleaning program compliance, but you may have a certificate of analysis.
What if your new packaging material had the potential to be continuously reused to provide the cost savings? Was the cleaning and sanitizing of the packaging prior to re-usage budgeted into the cost savings? There would have to be a replacement percentage budgeted against the cost savings. Were the cleaning and sanitizing process developed with brand new packaging or with the worn and slightly damaged packaging which would be much more difficult to clean and sanitize? Would a program be developed for the return, inspection, storage, cleaning, and storage of the new packaging? Would this new packaging management program be budgeted against the cost savings? What if you had new packaging that was not intended to be reused but could be reused? Cost savings at any cost can be very hard to resist.