A sub client has a wonderful business. It involves making good money out of supplying a HACCP regulated product to big chains.
One of the requirements is that a batch number, sell by date and best before date is printed on each bottle. Those printers don’t come cheap, so it is looked after and not pushed beyond its capacity. When I say they are not cheap, they cost more than R20,000, which is expensive when one compares to a small office printer at Macro.
So this business has a problem: it struggles to get goods delivered on time, and has been in this situation for months. Soon customers will get with the program and move elsewhere. When we looked for the bottleneck in the production line, we found a particular printer through which every single finished package has to go, before it can be sent to its market.
When we had done our calculations:
- If the printer were to break, it would take four days to get a spare part and fix the thing. There is no redundancy, because it is a very expensive machine, and really doesn’t add any value to the process. The client is trying to raise finance for a new R500,000 mixer. He needs cash on the business balance sheet to make the ratios work.
- Sometimes the printer operator goes on lunch, tea, or home. During that time unprinted product backs up further in the queue. Packers on the printed side of production then go off to make tea, have a smoke break or get on their phones; well because there is nothing else to do. They are still paid.
- If the printer were to go down, the R20,000 of the cost of an additional printer, would be lost in production in 34 minutes.
After some flip chart pictures, management agreed to put an additional operator on that bottleneck, so that each operator could take more frequent breaks, keep the darn station running, and take on two hours of overtime each day to clear the line before the start of the next day.
Within a week, there was no more queue, ever. The bottleneck had not been moved down the line either, because those packers were simply kept busy, and delivery trucks were on the road delivering instead of waiting to be loaded.
Customers are getting their orders before the end of the month, along with invoices, closely followed by statements. By next month, the cash flow will have jumped forward by a whole month. And… those tough discussions with customer buyers have been put on hold.
More complicated is that the normal month’s production was completed with a week to spare in the month. the bottleneck has been moved to the front of the whole process. “Where are the sales, fellas? You keep complaining that you struggle to sell because we deliver late.” That problem is solved. “YOU are now the problem. We need to keep our workers busy.”
Oh, and they have ordered another printer, just so that they have some redundancy for when old faithful cocks its toes, or for when the promised sales materialise. The new mixer? Finance for that will be very easy, given our soon to be improved cash reserve.
Apparently the value of the business as a whole has gone up significantly, but we’ll have a better idea of that at the end of the financial year.