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Description of Problem The bakery had steadily increasing freezer costs. Unable to freeze all product in house, freezer trailers were being used and freezer storage space at other locations was being rented. The Cold Cutz Team was asked to reduce freezer costs. |
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Approach The team immediately made two changes to the ordering process. Internally, the ordering of frozen cake was changed to twice a week instead of weekly. Externally, other bakeries were asked to provide an additional 24 hours in lead time. The team began collecting data on the specific blast freezer space being used. (The freezer was set up to house skids and racks of product.) The data on rack vs. skid space showed that although the freezer was in an overflow condition with respect to skid space, available rack space was going unused. The team had maintenance modify the blast freezer by removing rails to create more skid space from the unused rack space. Additionally, the team began collecting data on the sales and inventory of two large product lines — product #519 and product #724. Analysis of Product Sales and Inventory Data Sales figures for product #519 showed a cyclical pattern. Control charts (Individuals) on sales for each day of the week were constructed with two sigma limits following tests for normality. The charts showed Monday through Tuesday sales were in a state of control, as were Wednesday sales, as were Thursday sales, etc. As daily sales were predictable, the upper three sigma limit for each day's sales was then computed to establish the upper limit of frozen product required each day. This number was used as an upper specification limit in a capability study on the inventory data. The research question was “how often do we inventory (using valuable freezer space) more product than we need?” Product #519 was baked on Tuesdays and Fridays.
Tuesday's bake had to cover Wednesday and Thursday sales and Friday's bake had
to be sufficient to handle sales for Friday, Saturday, Monday, and Tuesday.
Wednesday and Thursday sales figures were combined and control charted, using
an Individuals chart. Likewise, sales figures for Friday through Tuesday were
charted. Both charts were in a state of control making a three sigma upper
limit a good prediction for the maximum product required. Production began
scheduling the bakes according to these predictions. For example, at the end of
the bake on Tuesday, the production scheduler made sure the maximum product
required to cover Wednesday and Thursday sales was in the freezer. Results Inventory levels for product #519, where the production change was made, and inventory levels for product #724, where the production process was unchanged, were compared. The table below shows the results.
In addition to the 413,000 saved in external freezer costs, the freezer trailers have been eliminated resulting in a savings of $98,800. The total direct savings accrued by the Cold Cutz Team by the end of 12th Period 1995 amounted to over $500,000. The team is currently working on expanding the use of SPC and eventually control charting sales for every product line each day of the week. They will then have the necessary data to schedule appropriate levels of production for specific bakes. The team predicts supplemental benefits resulting from more lengthy product runs and, therefore, fewer changeovers. |
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