OPERATIONAL EFFICIENCY BEST PRACTICES AUTOMATIONcdn.ymaws.com/.../Thursday/Operational_Efficiency_-_Bes.pdf · “ Operational Efficiency Requires a High Degree of Automation and

OPERATIONAL EFFICIENCY

BEST PRACTICES AUTOMATION

Mark Castaldi February 9th 2018

Main Areas To Be Discussed :

* Why is Op Effic & Automation Important ?* What is Op Effic & Automation ?* Best Practices to Achieve O.E. * Types of Automation* Justification

Why is Operational Efficiency and Automation Important?Current Industry Environment:

• Tightening Labor Market/Rising Wages• Competition From Non Ag Industries• Slowing Wine Sales Growth Rates• Constraints For Price Increases• Margin Compression

Why is Operational Efficiency and Automation Important?Current Industry Environment:

• Tightening Labor Market/Rising Wages• Competition From Non Ag Industries• Slowing Wine Sales Growth Rates• Constraints for Price Increases• Margin Compression

ANSWER: TO REMAIN COMPETITIVE !!

Achieving Operational Efficiency and/or Increasing Automation is a Means toEnsure a Scalable & Sustainably Profitable Business.

Regardless of Winery Size

What is Operational Efficiency ?


Definition:The ratio between an output gained from the business and an input to run a business operation. When improving operational efficiency, the output to input ratio improves.


A Slightly Better Definition:Delivering products or services in the most cost-effective manner possible while maintaining the quality and consistency of those products, and services.

What is Operational Efficiency ? Preferred Definition:Creating a Culture/Environment Which Empowers, Recognizes, and Rewards Individuals to Challenge the Status Quo and Embrace, Support, and Implement Positive Change for the Purpose of Maximizing Profitability, Ensuring Safety, and Consistency of Quality.

Two Common Myths Regarding Operational Efficiency

“ Operational Efficiency Requires a High Degree of Automation and Capital Investment ”

“ Automation Will Ensure Operational Efficiency “

EXAMPLE: Two Wineries Belonging to the Same Parent Company: One Less Than 5 Years Old and Highly Automated, and One Built in the 1940s and Relatively Non-Automated

Cellar Labor($/Gal)

Bottling($/Case)

Crush Labor($/Ton)

$0.89

$2.67$308

Automated Winery - Operating Costs

Cellar Labor($/Gal)

Bottling($/Case)

Crush Labor($/Ton)

$0.61

$1.72$236

Non Automated Winery - Operating Costs

Winery Cost Comparison

There is More to This Than Bricks & Mortar (Automation)

Creating the Right Culture is Equally as Important

How Do You Create Operational Efficiency ?

CREATE the RIGHT CULTURE


DEFINE & STREAMLINE THE PROCESS

MINIMIZE REDUNDANCIES & WASTE

LEVERAGE EXISTING RESOURCES

OPERATIONAL EFFICIENCY4 KEY COMPONENTS

CREATING THE RIGHT CULTURE

Step 1:Achieving Operational Efficiency

Creating the Right Culture Getting the Team Engaged:1) Ask the Team the Following Question:

a) What 3-5 Things Contribute to & Support Operational Excellence ?



b) Conduct a Self Audit on the Items Identified by the Team




c) Prioritize the List and Include as Part of Ongoing Performance Evaluations




c) Prioritize the List and Include as Part of Ongoing Performance Evaluations

2) Continually Seek Team Input & Re-Evaluate

Creating the Right Culture Getting the Team Engaged (Cont):3) Develop & Implement an Incentive Plan

a) Recognition b) Title/Responsibilityc) Financial Compensation

Creating the Right Culture Getting the Team Engaged (Continued):3) Develop & Implement an Incentive Plan

a) Recognition b) Title/Responsibilityc) Financial Compensation

4) Transparency & Visibility Into Financial Infoa) Budgetsb) Costs & Marginsc) Overall Profitability

Identify What Creates Operational Efficiency

DEFINING & STREAMLINING THE PROCESS


Defining & Streamlining the Process For Each Major Operational Area:1) Map Out the Process 2) Identify Potential Bottlenecks3) Determine True & Realistic Timelines4) Utilize for Ongoing Production Planning5) Identify Ways for Improvement & Streamline

Map Out & Define the Process

MINIMIZING REDUNDENCIES & WASTE


ENTER INVENTORY

CREATE WORK ORDER

LOCATE & MOVE FULL BARRELS

IDENTIFY & PREP TANKS

SET-UP PUMPS & HOSES

RINSE EMPTY BARRELS

DE-BARREL INTO TANK

FILL BARRELS FROM TANK

MOVE BBLS TO BBL ROOM

SANITIZE EMPTY TANKS

RINSE EMPTY BARRELS

DE-BARREL INTO TANK


CREATE WORK ORDER

LOCATE & MOVE FULL BBLS


CREATE WORK ORDER

LOCATE & MOVE EMPTY BBLS


GAS EMPTY BARRELS

MOVE EMPTY BBLS TO CELLAR


ENTER INVENTORY

SCENARIO 2: EMPTY & FILL SEPARATELYSCENARIO 1: EMPTY & FILL SIMULTANEOUSLY

TWO BARREL SCENARIOS

21 STEPS

11 Steps

FILL BARRELS FROM TANKS

RINSE EMPTY BARRELS


MOVE FULL BBLS TO BBL ROOM


SANITIZE PUMPS & HOSES


ENTER INVENTORY


An Example: Barrel Cellar Labor

Sheet1

Highly Automated WineryNon Automated Winery

Cellar Labor ($/Gal)$0.89Cellar Labor ($/Gal)$0.61

Bottling ($/Case)$2.67Bottling ($/Case)$1.72

Crush Labor ($/Case)$3.08Crush Labor ($/Ton)$2.36

Automated Winery - Operating Costs

Cellar Labor ($/Gal)Bottling ($/Case)Crush Labor ($/Case)0.892.673.077647058823529

Non Automated Winery - Operating Costs

Cellar Labor ($/Gal)Bottling ($/Case)Crush Labor ($/Ton)0.611.722.3576470588235292

Sheet2

TWO BARREL SCENARIOS

SCENARIO 1: EMPTY & FILL SIMULTANEOUSLYSCENARIO 2: EMPTY & FILL SEPARATELY

CREATE WORK ORDERLOCATE & MOVE FULL BARRELSIDENTIFY & PREP TANKSCREATE WORK ORDERLOCATE & MOVE FULL BBLSIDENTIFY & PREP TANKS

RINSE EMPTY BARRELSDE-BARREL INTO TANKSET-UP PUMPS & HOSESRINSE EMPTY BARRELSDE-BARREL INTO TANKSET-UP PUMPS & HOSES

FILL BARRELS FROM TANKMOVE BBLS TO BBL ROOMSANITIZE EMPTY TANKSGAS EMPTY BARRELSMOVE EMPTY BBLS TO CELLARSANITIZE EMPTY TANKS

11 StepsENTER INVENTORY SANITIZE PUMPS & HOSESENTER INVENTORY SANITIZE PUMPS & HOSES

CREATE WORK ORDERLOCATE & MOVE EMPTY BBLSIDENTIFY & PREP TANKS

FILL BARRELS FROM TANKSRINSE EMPTY BARRELSSET-UP PUMPS & HOSES

MOVE FULL BBLS TO BBL ROOMSANITIZE EMPTY TANKSSANITIZE PUMPS & HOSES

21 STEPSENTER INVENTORY

In the Preceding Example, 10 Redundant Steps Were Eliminated by Combining 2 Processes (Empty & Fill)

No Additional Capital or Automation Was Required to Achieve This

Implementing Process Improvements Requires Three Things:1) Good Planning Process 2) Absence of “Strategic Myopia”3) Willingness to Implement Change

All 3 Items are Linked to “CULTURE”

LEVERAGING EXISTING RESOURCES & INFRASTRUCTURE


LEVERAGING EXISTING RESOURCES For Each Major Operational Area:1) Maintain Metrics to Track Efficiencies 2) Develop Bench Strength Within the Team3) Create Incentive Program(s) for Items 1 & 2

Before a Process Can be MANAGED it Must First be MEASURED

Leveraging Existing Resourcesand Infrastructure

Examples of Production Metrics:1) Barrels Filled/Emptied Per Man-Hour2) Barrels Filled/Emptied Per Shift3) Labor Cost/Barrel – Fill/Empty4) Bottling Change Over Times5) Bottling Line Run Efficiency6) Packaging Materials Shrink

Metrics Can be Used for the Following:a) Determining Trends in Productionb) Labor Utilization & Efficiencyc) Incentive Programs

Leveraging Existing Resources and Infrastructure

“I Have Been Working Here for X Number of Years and Haven’t Received a Decent Raise “


COMPENSATION

SKILLS

TENURE

Developing Bench Strength


SKILLS ASSESMENT MATRIX

EMPLOYEE Tank Sanitation Blending Additions FermentationPump Overs

Transfers Filtration

#1 3 3 3 3 3 3 3#2 3 3 3 3 3 3 3#3 3 3 3 3 3 3 3#4 3 3 3 3 3 3 3#5 3 3 3 3 3 3 3#6 3 3 3 3 3 3 3

AssesmentRating 1 Individual Has Little or no Experience With the Task & Requires Supervision/TrainingRating 2 Individual Has Prior Experience With the Task But Requires Some OversightRating 3 Individual is Completely Proficient With the Task and Can Train/Supervise Others

Cellar Activities

Degree of Proficiency

Skills Assessment Matrix Uses:1) Improve Overall Bench Strength of the Team2) Management Tool for Future Compensation

Main Benefits:1) Minimize Down Time & Lost Productivity2) Ensure Consistency of Production3) Improve Employee Retention


AUTOMATION

We Have Come a Long Way Since the Steam Engine

What is Automation ?

What is Automation ? Definition:A Method of Managing a Process For the Following Purposes:1) Reducing Overall Human Intervention 2) Improving Quality & Consistency,3) Reducing Waste and Losses4) Reduce Overall Expenses

What is Quality ?

As it Pertains to Production & Operations, Quality Can be Defined as:

“The Absence of Variance ”

Why Automate ?

Main Benefits:1) Reduction in Labor Requirements2) Reduction in Production Costs3) Improved Quality/Consistency4) Safety & Hazzard Avoidance

How is Automation Justified ?

Factors to Consider:1) Financial Justification2) Potential Sensory Impacts3) Operator Skill Level & Expertise4) Spare Parts Inventories Requirements5) Maintenance Requirements & Bandwidth

Methods To Achieve Automation

Two Approaches :

Managerial:A change in process or procedure which results in reduced human involvement, but does not require any additional capital investment

Capital:Implementation of new infrastructure which requires an investment in capital to achieve reduced human involvement

Traditional Method(Pump at Bottom)

- Method Has Been InUse for a Long Time

- It Works

- So Why Change it ?

Managerial Automation ExamplePump - Over

Traditional Method Modified Method(Pump at Bottom) (Pump on Top)

Managerial Automation ExamplePump - Over

Pump-Over Example: Advantages:1) Reduced Labor Requirements

(Cost Savings)2) Reduced Risk of Cross Pump-over

(Quality Risk Avoidance)3) No Additional Capital Required

Automation Was Achieved By Adopting a New Procedure & Process

Examples of AutomationRequiring Capital Investment

Degree of Automation & Capital Investment

Degree of Automation

CapitalInvestment

Low Capital Requirements* SS Transfer Lines* BBL Top/Sulfur* SS Must Lines* CIP Systems

High Capital Requirements* Barrel Lines* Bottling Lines* Lab Analysis (FOSS)* Cross Flow Filtration

Financial Justification Financial Measures:1) Payback Period (Years/Months)2) Return on Capital Investment3) Improved Flavor Profile4) Reduction in Waste5) Safety Issues

Identify Where Your Highest Labor Requirements Are. Target those Areas That Yield the Biggest Benefit Relative to the Investment

Automation - RisksHidden Costs:1) Spare Parts Inventories2) Maintenance Skill Levels3) Availability of Tech Support

These Items Are Difficult to Quantify, But Need to Be Considered With any Automation Endeavor Requiring a Capital Expenditure

Final Thoughts on Automation

Is It Possible to “Over Automate” ?

Two Case Studies

DTC Order Fulfillment Business

Case Study 1: Third Party Order Fulfillment Service Provider

Case Goods Warehousing

Case Study 2: Winery Expansion & Automation Project

The Paradox of Automation As the Degree of Automation Increases, Humans are Less Involved in the Process, But Their Involvement Becomes More Critical

WHY ?

When an Automated Process Creates an Error, That Error Will be Duplicated & Multiplied Until it is Corrected Through Human Intervention

QUESTIONS ?

Mark [email protected]

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OPERATIONAL EFFICIENCY BEST PRACTICES AUTOMATIONcdn.ymaws.com/.../Thursday/Operational_Efficiency_-_Bes.pdf · “ Operational Efficiency Requires a High Degree of Automation and