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Training Programs for 2005

JANUARY
33^rd ADVANCED PROGRAMMABLE LOGIC CONTROLLER COURSE (PLCC)

10^th EFFECTIVE BUSINESS COMMUNICATION (EBC)

77^th MANAGERS’ COURSE (MC)

7^th ACCOUNTING FOR NON-ACCOUNTANTS (AfNA)

APEC TRAINING AND CERTIFICATION FOR BUSINESS COUNSELLORS PROGRAM (APEC-TRACE)

FEBRUARY

23^rd PRODUCTIVITY THROUGH EFFECTIVE SUPERVISION (PES)

34^th ELECTRO-PNEUMATICS SYSTEM AND SENSOR TECHNOLOGY (EPSST)

4^thIMPROVE YOUR BUSINESS (IYB)

MARCH
20^tSTART YOUR OWN BUSINESS (SYOB)

What to do when your profit margin drops


by Myrna Rodriguez-Co

When your sales volume is stable – more or less – and yet your gross profit margins steadily decline, what do you do?

If you are tempted to raise your prices to make up for lost income, hold it. Take time to look at your production costs.

Declining margins may be traced to high prices of materials and labor, high rate of wastage, pilferage of materials, high cost of labor, and low productivity of manpower.

Manufacturers wishing to plug leaks in manufacturing expenditures should look into purchasing policies, inventory control, and labor productivity and from here adopt a strategy of cost reduction. It is not that easy to know which operational aspects are inefficient and wasteful. It would take a closer study to accurately identify cost culprits in your workplace. However, you may be able to pick up an idea or two from the following checklist, categorized into the major cost areas: manpower, materials, machinery, and methods.

 

Manpower

1. Determine which sections in the plant have the highest frequency of absences and overtime work. Institute controls and practices to minimize these.
2. Instruct foremen to periodically rate and rank their men. Make them responsible for rating based on productivity and potential, not favoritism.
3. Create daily and weekly schedules for all tasks. Reschedule and reroute production to avoid paying premiums for night work.
4. Inform each employee of his or her role in the company and the importance of respective jobs to the final product.
5. Make job performance evaluation personal to each employee. Cite strong points and help overcome weak ones. Boost employees’ confidence in themselves by giving them a say in setting their own performance goals.
6. Review organization chart for clarity and simplicity. Neither overload nor overburden individuals. Consider job generalization to attain a more flexible workforce which can be put to full utilization.
7. Upgrade training of service workers: teach them the use, technique and care of equipment.
8. Keep permanent workers stable. For peak periods, use manpower leasing agency or hire additional workers on contractual basis.

Materials

1. Get each foreman to forecast his specific material needs for the next quarter. Review results.
2. Inspect material scrap file. Select the most frequently recurring items and get workers to shoot for a 5% conservation program.
3. Whenever possible, avail of price discounts offered by suppliers by buying materials in bulk.
4. Put your next scrap materials sale on a competitive bid basis instead of accepting the going rate for it.
5. Order your bulk materials in job lot packages that can be meted out directly to operating groups without opening or counting.
6. Review inactive materials inventory. Eliminate or find substitutes for high cost, slow moving items whenever possible.
7. Determine the possibility of getting some of your suppliers to furnish 15% of your incoming material purchases on consignment. You will find that this will cut inventory and loosen up some tied-up cash.
8. Keep materials for future orders out of your inventory. Postpone or stretch out deliveries, and cancel those that tend to swell your stock.
9. Try matching your material supplies with your sales volume, especially if this volume is slipping. Otherwise, you’re bound to build up a big inventory.
10. Run a “make-or-buy” cost comparison on your biggest manufacturing component item.
11. Measure material costs in terms of overall production expenses. If it yields a factor bigger than10%, you need a formal material utilization program.
12. Conserve precious plant storage warehousing space by using rigid stocking racks for coil or bar stock.

Machinery

1. Find out which of your machines has an output directly proportional to motor speed, yet must be driven by an AC, induction single-speed motor. Replace induction motors of the same size and horsepower. You will get about 5% more output without changing sheaves or belts or overspeeding two machines.
2. Don’t wait for funds to buy industrial grade automatic control or mechanization equipment. Use low-priced home appliances. For example, any electric can opener makes a good high torque drive. Home electric ovens and roasters will stand several months of industrial duty. Other useful devices are tank type vacuum cleaners, corn poppers, hair dryers, and heat lamps.
3. Install foot- or knee-operated control spots where employees’ hands are used for pushing buttons or turning valves. These cheap gadgets allow workers to use hands for skilled tasks.
4. If you are assembling pipings or fittings by pipe wrench, cut the time by 99% by using an air or electric impact tool with proper adaptor.

Methods

• Visit a nearby progressive plant to compare production methods and pace with yours. Comparison stimulates cost reduction ideas.
• Try using low-priced aerosol containers to dispense small quantities of paint or lubricant on the production line and on your quick maintenance jobs.
• On small lot production, use “kit” materials to prevent operator errors and assembly line parts shortages. A kit, prepared at the storeroom, contains all necessary parts to complete an assembly.
• Investigate the use of multi-purpose or double-ended work bench to save on operator time. Or mount tools on spring suspension devices to get them nearer the workplace.
• Re-examine your stock of old dies. Surely, a number can be modified to do new jobs.
• Modify jigs and fixtures for multiple uses.
• Employ point-of-use storage to eliminate the need for a receiving warehouse and automatically hold down inventory.
• Place the bulk of inspection in the first 2% of the process, since 80% of defect generation occurs there.
• Rent space in a public warehouse for short-span, high-peak inventory accumulation rather than build a new one.
• Set up low-cost improvements in working conditions at the plant and watch productivity jump.

(For inquiries, please e-mail info.issi@up.edu.ph.)

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