optimization of upper making process for cost reduction

  HO CHI MINH CITY OPEN UNIVERSITY UNIVERSITÉ LIBRE DE BRUXELLES SOLVAY BRUSSELS SCHOOL OF ECONOMICS & MANAGEMENT MBQPM5 TRAN MINH PHUOC OPTIMIZATION OF UPPER MAKING PROCESS FOR COST REDUCTION MASTER FINAL PROJECT MASTER IN BUSINESS QUALITY AND PERFORMANCE MANAGEMENT Ho Chi Minh City (2016)       Statement of Authentication I hereby certify that all material within this report titled “Optimization of upper making process for cost reduction” is accurate and reflect truly my knowledge, experience and abilities All information has not been presented or published by anyone else for assessment Signature: Print name: Tran Minh Phuoc Date: 19 April 2016         Acknowledgement Firstly, I would like to express my gratitude to Professor Jacques Martin – General Director of Solvay Brussels School of Economics & Management (Vietnam) He is pretty persistent in providing me helpful advice and suggestions to my research of writing He consistently asks for my progress submission in order to keep me on track and complete my final report I would also like to thank production experts in my company who were providing me the ideas to validate the feasibility of my optimization initiatives as well as help me collect the data to understand the current state and future state of the manufacturing environment Lastly, I would be grateful to my parents who provide continuous support and encouragement throughout the period of my study to complete my research and writing of this report I would say this is one of my biggest accomplishments and it has been being done thanks to them                 Glossary DOE Design of Experiment PPH Pair per Worker per Hour TPM Total Productive Maintenance WIP Work in Process SOP Standard Operation Procedure         List of figures Figure 1: Organization chart Figure 2: Fishbone diagram of cutting Figure 3: Fishbone diagram of 2nd process Figure 4: Fishbone diagram of stitching Figure 5: Bar chart of leather waste in 2014 and 2015 Figure 6: Bar chart of synthetic waste in 2014 and 2015 Figure 7: Bar chart of textile waste in 2014 and 2015 Figure 8: Bar chart of embroidery efficiency rate in 2014 and 2015 Figure 9: Bar chart of embossing efficiency rate in 2014 and 2015 Figure 10: Bar chart of PPH of stitching in 2014 and 2015 Figure 11: Bar chart of leather waste in months of 2015 and 2016 Figure 12: Bar chart of synthetic waste in months of 2015 and 2016 Figure 13: Bar chart of textile waste in months of 2015 and 2016 Figure 14: Bar chart of embroidery efficiency rate in months of 2015 and 2016 Figure 15: Bar chart of embossing efficiency rate in months of 2015 and 2016 Figure 16: Bar chart of PPH of stitching in months of 2015 and 2016         List of tables Table 1: Raw data of material waste of cutting in 2014 and 2015 Table 2: Raw data of efficiency rate of 2nd process in 2014 and 2015 Table 3: Raw data of PPH of stitching in 2014 and 2015 Table 4: Optimization proposals Table 5: Raw data of material waste of cutting in months of 2015 and 2016 Table 6: Raw data of efficiency rate of 2nd process in months 2015 and 2016 Table 7: Raw data of PPH of stitching in months of 2015 and 2016 Table 8: Optimization proposals Table 9: Saving         General Introduction People are living in a fast pace changing of global business environment where the competition is tougher than ever A company would gain higher competitive advantage if they can innovate their products, or lead the market in terms of price Nike Vietnam is considered as a leader in footwear in Vietnam with the reputation of one of the most innovative companies However, with the stronger competition and higher pressure from rivals who target to lower the price to gain the market share, that being said, the company should try to keep the price as reasonable as possible to not only produce best products, but also with good price In order to that, optimization in manufacturing is one of the key drivers to lead the company to that goal The objective is to optimize the processes to reduce waste, increase efficiency in production with the target of decreasing manufacturing cost to support the creation of good retail price of final products The plan is to propose optimization ideas in manufacturing in November 2015 and the data captured is from January to April 2016         Contents Chapter 1: Organizational Introduction 1.1 History 1.2 Mission 1.3 Organization structure 1.4 Difficulties and challenges Nike Vietnam are facing 1.4.1 Inefficient manufacturing process 1.4.2 Labor cost is increasing 1.4.3 The competition is tougher 1.5 Objective Chapter 2: Analyze Inefficient Manufacturing Processes 2.1 Causes and effects of the issues 2.2 Data collection and analysis of the inefficient process 2.2.1 Cutting 2.2.2 2nd process 10 2.2.3 Stitching 12 Chapter 3: Optimize the Inefficient Processes 14 3.1 Optimization proposals 14 3.2 Apply proposed optimization ideas 14 3.2.1 Cutting 14 3.2.2 2nd process 16 3.2.3 Stitching 17 3.3 Data collection and analysis of optimized processes 18 3.3.1 Cutting 19 3.3.2 2nd process 21 3.3.3 Stitching 22 Conclusion 24 Reference 26       Chapter 1: Organizational Introduction Nike is the world leading brand in the sporting goods industry operating globally, and Nike Vietnam is one of its liaison offices Nike Vietnam that was established 20 years ago has been growing dramatically to become the biggest countries of Nike sourcing and manufacturing operation, contributing roughly 50% in footwear and 16% in apparel globally with a wide range of products such as sport shoes, apparels and sport equipment Nike Vietnam does not own production plants, they collaborate with factory partners to manufacture products and with forwarders to distribute products to desired destinations Every year, 200 million pairs of Nike shoes are exported, 80 million units of apparels and equipment are produced to serve the customers around the world Nike Vietnam work and support factory partners and forwarders to ensure the manufacturing operations run smoothly, efficiently and effectively in terms of quality, productivity, cost and delivery On the occasion of 20 year anniversary, the Vietnam government honored Nike with a special medal recognizing its socioeconomic contributions to the country Nike is the first sport footwear brand to receive this medal from the Vietnam government Moreover, Nike Vietnam also wins top honors as workplace in 2014 and 2015, particularly they were named No in Apparel/Footwear Industry, on a list of the 100 best places to work in Vietnam More than 9,000 professionals across industries all over Vietnam participated in the survey and companies were measured on Total Reward, Growth Opportunity, Culture & Values, Leadership, Work & Life Quality and Company Reputation 1.1 History  1995 Nike Vietnam was established focusing on footwear manufacturing with footwear factory partners  1997 The company started operating Apparel manufacturing and sourcing  2006 Nike Vietnam took over equipment manufacturing and sourcing from other countries  2009 Nike Vietnam and Converse Vietnam were merged together to become united organization  2013 Vietnam became the biggest country for manufacturing and sourcing of Nike  2015 Celebrate 20 year anniversary of Nike Vietnam 1.2 Mission Bring inspiration and innovation to every athlete* in the world *If you have a body, you are an athlete   12   2.2.3 Stitching Month January February March April May June July August September October November December Average (%) 2014 Pair/Worker/Hour (PPH) 2.1 1.9 2.2 1.9 2.3 2.2 1.8 2.4 2.07 2015 Pair/Worker/Hour (PPH) 2.2 2.1 2.4 2.3 2.3 2.5 2.5 2.4 2.1 2.2 2.6 2.30 Table 3: Raw data of PPH of stitching in 2014 and 2015 2.5 2014 1.5 2015 2014 2015 0.5 Figure 10: Bar chart of PPH of stitching in 2014 and 2015 The inefficient stitching process would lead to high waste in process (WIP), require higher number of workers and as a result, the productivity is low In order to measure the efficiency rate of stitching, there is one standard measure that is PPH PPH indicates the efficiency of     13   stitching line by taking the total output/ total workers/ total working hours The data above shows the PPH 2.07 and 2.3 in 2014 and 2015 respectively With the labor cost is increasing, there should be a plan to increase PPH to make the process more efficient     14   Chapter 3: Optimize the Inefficient Processes 3.1 Process Cutting 2nd process Optimization proposals Causes Optimization initiatives No clear guidelines for workers to cut efficiently Limitation in sharpness of cutting dies Not well designed cutting dies Cutting machine is out of date Machines are run under their capacity Operators not control the machine well Machines are not set up properly Machines are not maintained well Messy stitching process Stitching Set up clear SOP, guidelines with visible information to show operators how to cut in the most efficient way Using laser cut machine Redesign cutting dies which is to group the die to cut multiple components at the same time Purchase new machines with higher efficiency Run DOE (design of experiment) to figure out the optimal setting of the machine to reach the peak capacity Train and guide the operators follow the SOP strictly Require machine technical experts to set up the machines, create the SOPs, guidelines and require TPM team to follow and supervise strictly the standard Train the TPM team how to maintain the machine properly according to the guideline from the suppliers Relay out the process Manual process Unclear process flow Apply computer stitching with pallet to increase the efficiency and reduce manpower Apply auto conveyor between sides of the line to strictly control the process flow Table 4: Optimization proposals 3.2 Apply proposed optimization ideas 3.2.1 Cutting Cutting has been considered as one of the processes that should be optimized and improved the most That is because it produces lots of waste in material and loss in efficiency The most efficient cutting method is to ensure that the yield rate is as high as possible based on how the cutting dies can be placed to minimize the waste Therefore, in order to gain higher efficiency and material usage in cutting, there are several actions need to be done     15   Set up clear SOPs, guidelines with visible information to show how to cut in the most efficient way Previously, there are no clear standard guidelines to guide the workers how to cut efficiently, they just the job based on their experience As a result, skilled workers can make cut more components with less wasted material, compared to new workers who produce lots of material waste Reducing material waste to save material cost is a prioritized task for Nike Vietnam engineers Understanding that using software to optimize the use of material is a proven solution to reduce waste in the textile industry Thus, they work with manufacturing partners and an IT solution company to build exclusively software that can help to calculate and provide the best nesting method which can bring the best possible efficiency Thanks to the new software, all the components are scanned in a scanning system and the software automatically arrange and calculate the best efficient method with visible guideline for workers to cut more efficiently Using laser cut machine Laser cutting machine has been used for industrial manufacturing applications with a number of advantages       Clean cut edges without burr or dust formation Cutting of extremely fine contours and practically radius-free inner edges Low thermal influence, i.e., no delamination Cutting of various material thicknesses and combinations in one operation No material deformation due to contactless material processing High level of precision and positional accuracy of the cut edges due to automatic recording  Maximum utilization of circuit boards because no space has to be kept free for cutting channels With these advantages, the use of laser cutting machine in manufacturing would probably help the company gain more material yield, higher efficiency and less defects Redesign cutting dies, which is to group the die to cut multiple components at the same time Instead of using single cutting dies to cut single component each time, it is recommended to redesign cutting dies which is to group single cutting dies to group dies that can cut a number of components at the same time and also set up the most efficient nesting on the cutting dies     16   That said single cutting dies will be connected according to the most efficient nesting to prevent the workers from nesting inefficiently This would not only reduce material waste, but also increase the cutting efficiency and productivity Purchase new machines with higher efficiency There are a number of outdated cutting machines which are still being utilized in production Particularly, due to the construction and size of the machines, it is quite difficult to determine clearly the material stretchiness, especially for leather material As a result, workers cannot place the material completely properly according to the stretchiness direction and that lead to defective parts – waste if the stretchiness is not correct Besides that, those types of machines also has lower cutting precision and that is potential to cause material lost/waste due to the fact that lower cutting precision leads to unqualified parts and material waste Therefore, upgrading to new machines is a necessary action 3.2.2 2nd process 2nd process has been playing a very critical role in creating more attractive design and building eye catching features in finished products However, it has been reported these machines at 2nd process are under-utilized and consequently the efficiency and productivity are not as high as expected In order to boost the efficiency and productivity of 2nd process, the following actions should be done  Run DOE (design of experiment) to figure out the optimal setting of the machine to reach the peak capacity Running DOE is considered as` systematic method in figuring out the optimal setting of machines that can reach their designed capacity based on specific It is defined that DOE is a systematic method to understand the relationship between factors affecting a process/machine and the output of that process/machine In other words, it is used to assess the input factors and find cause-and-effect relationships that are critical to the output in order to be optimized (Khan, n.d, 2013) For example, we have figure the optimal setting for no-sew pressing process (a part on 2nd process) which is as below in order to gain perfect bonding o Pressure: 5.5kg/cm2 o Time: 30 seconds o Temperature: 145oC  Require machine technical experts to set up the machines, create the SOPs, guidelines and require TPM team to follow and supervise strictly the standard     17   One of the main reasons that make the machines cannot run with their 100% capacity is due to the fact that operators not know how to set up and control the machine properly and timely regarding to the requirements and manual guidelines provided by the supplier Therefore, the company should ask machine technical experts to set up the machine, create the guidelines and SOP which a process document that details the steps operators should follow to perform a given task (Gidey ASmar, 2012) And after that ask TPM team follow and supervise strictly the standard  Train and guide the operators follow the SOP strictly Another root cause to the inefficiency in the operation of 2nd process would be because operators not understand clearly what they should to run and control the machine Therefore, it is very helpful to train and guide the operator to follow the SOP created by technical experts strictly in order to minimize the risk of poor control and operation that would lead to the process inefficient  Train the TPM team how to maintain the machines properly according to the guideline from the suppliers Every machine is strongly recommended to be maintained periodically after being used for a while to ensure that the machine can take a break and broken parts can be replaced to make sure that it can run smoothly without outstanding issues That said, well-maintained operations keep a key role in determining whether the machine can run well or not Therefore, the company should train the TPM team how to maintenance the machine properly according to the guideline from the suppliers to ensure the machine is always ready to reach the target 3.2.3 Stitching Stitching operation is a complex and labor intensive process where the material flow needs controlling well to meet the plan demand as well as minimize the labor usage and work in process (WIP) However, in reality, the current process is rather messy due to many bottlenecks and high number of WIP And traditionally, more workers are needed to be arranged in the line to meet the target productivity And obviously more workers lead to higher labor cost which is increasing recently In order to increase the efficiency of stitching process, there are three main activities should be addressed  Relay out the process To create the most efficient layout, it is necessary for production engineers to visit production lines to observe the processes, measure the cycle time of all stitching operations to figure out where the bottlenecks are, which operations are wasted After getting information, they line balancing analysis to determine which operations should be eliminated, which steps can be     18   combined to rebuild the stitching line which is more balanced and efficient This should be bottom-up approach starting from basic operations and operators  Apply computer stitching with pallet to increase the efficiency and reduce manpower For a big number of shoe models, stitching is the main operation to connect different components, particularly in some designs, it is rather difficult and take time to connect properly all components, especially long and curved components This would require more people to complete that type of stitching operation with a high level of accuracy And in order to ease those stitching activities and target higher the process efficiency, computer stitching with pallet should be applied Engineers will create an auto program set on the new stitching machines with an exact shape of stitching line regarding to the designs As a result, the operators just load components into a jig and then load the jig into the machine, after that the machine will run automatically and precisely as programmed Additionally, while the machine is running, they can prepare to load new components into a new jig This new application would help to increase the efficiency and reduce manpower significantly  Apply auto conveyor between sides of the line to strictly control the process flow For the issue of high inventory in the line – work in process (WIP) which can lead to quality issue and low productivity and affect negatively to PPH since the process is not controlled well One of proposals to reduce the WIP would be that applying auto conveyor between sides of the stitching line with the speed is set based on the takt time calculated from planned outputs Therefore the production managers need to set up the layout carefully and efficiently to help workers complete their job on time to meet the speed of the conveyor and transfer that component to the next station This concept called “One piece flow” Otherwise, the following stations will be waiting and leading to the fact that the target output cannot be reached On the other hand, applying auto conveyor in the middle of the lines will help the line more lean to prevent quality issue and reach the target output in a good manner 3.3 Data collection and analysis of optimized processes After these suggestions have been tested and applied to real production Below are the data captured until the April 2016     19   3.3.1 Cutting Month January February March April May June July August September October November December Average (%) 2015 Material waste (%) Leather Synthetic Textile 33 30 40 30 44 28 33 37 37.5 31.25 29 30 31 29 29.75 2016 Material waste (%) Leather Synthetic Textile 25 29 29 25 27 25 25 25 28 26 30 25 25.25 27.75 Table 5: Raw data of material waste of cutting in months of 2015 and 2016 50 44 45 40 40 35 30 33 33 25 25 25 26 25 2015 20 2016 15 10 January February March April Figure 11: Bar chart of leather waste in months of 2015 and 2016     26.75 20   50 44 45 40 40 35 33 30 33 25 25 26 25 25 2015 20 2016 15 10 January February March April Figure 12: Bar chart of synthetic waste in months of 2015 and 2016 35 30 29 29 31 30 28 25 29 25 25 20 2015 15 2016 10 January February March April Figure 13: Bar chart of textile waste in months of 2015 and 2016 After the optimization ideas are tested and applied to production, the material waste has been reduced rather significantly, especially with leather Specifically, the waste of leather has been decreased 33% from 37.5% in the first months of 2015 to 25.25% in the same period of time in 2016 Whereas, the waste of synthetic leather is lowered down by 3.5% in 2016 compared to 2015 Lastly, the figure of mesh is 3% better in 2016 than 2015     21   3.3.2 2nd process Month January February March April May June July August September October November December Average (%) 2015 2016 Efficiency rate (%) Efficiency rate (%) Embroidery Embossing Embroidery Embossing 82 89 83 89 79 85 85 90 77 87 85 90 81 85 87 92 79.75 86.5 85 92 Table 6: Raw data of efficiency rate of 2nd process in months 2015 and 2016 88 87 86 85 84 85 83 82 82 81 80 2015 79 2016 78 77 76 74 72 January February March April Figure 14: Bar chart of embroidery efficiency rate in months of 2015 and 2016     22   94 92 92 90 90 89 90 89 88 87 86 2015 85 2016 85 84 82 80 January February March April Figure 15: Bar chart of embossing efficiency rate in months of 2015 and 2016 Regarding to the data captured, after implementing optimization ideas, there has been an increase in efficiency of Embroidery, from 79.75% in the first months of 2015 to 85% of 2016 While, the efficiency of Embossing gained 5.5% in the first months of 2016 3.3.3 Stitching Month January February March April May June July August September October November December Average (%) 2014 Pair/Worker/Hour (PPH) 2.2 2.1 2.4 2.3 2015 Pair/Worker/Hour (PPH) 2.3 2.3 2.4 2.4 2.25 2.35 Table 7: Raw data of PPH of stitching in months of 2015 and 2016     23   2.45 2.4 2.35 2.3 2.25 2.2 2015 2.15 2016 2.1 2.05 1.95 January February March April Figure 16: Bar chart of PPH of stitching in months of 2015 and 2016 The inefficient stitching process would lead to high waste in process (WIP), require higher number of workers and as a result, the productivity is low In order to measure the efficiency rate of stitching, there is one standard measure that is PPH PPH indicates the efficiency of stitching line by taking the total output/ total workers/ total working hours To improve this PPH figure, the above optimization ideas have been applied to production and there is a gain in PPH in first months of 2016 compared to of 2015 Specifically, the PPH is 2.25 and 2.35 respectively in 2015 and 2016     24   Conclusion Nike Vietnam is still a leading footwear brand in Vietnam, but the pressure to its crown has been elevated stronger than ever from competitors who are Adidas Vietnam, New Balance Vietnam and Under Amour Vietnam Besides focusing on innovation to create innovative and highly advanced products shoes, Nike Vietnam should also pay high attention to manufacturing processes which is to increase the efficiency, boost the productivity, minimize waste and reduce manpower There are three main processes that the company should address Process Causes Effects Cutting No clear guidelines for workers to cut efficiently Limitation in sharpness of cutting dies Set up clear SOP, guidelines with visible information to show operators how to cut in the most efficient way Material waste Not well designed cutting dies Cutting machine is out of date Machines are run under their capacity 2nd process Operators not control the machine well Machines are not set up properly Low efficiency and productivity Machines are not maintained well Messy stitching process Stitching Optimization initiatives Using laser cut machine Redesign cutting dies, which is to group the die to cut multiple components at the same time Purchase new machines with higher efficiency Run DOE (design of experiment) to figure out the optimal setting of the machine to reach the peak capacity Train and guide the operators follow the SOP strictly Require machine technical experts to set up the machines, create the SOPs, guidelines and require TPM team to follow and supervise strictly the standard Train the TPM team how to maintain the machine properly according to the guideline from the suppliers Relay out the process Low PPH Manual process Unclear process flow Apply computer stitching with pallet to increase the efficiency and reduce manpower Apply auto conveyor between sides of the line to strictly control the process flow Table 8: Optimization proposals     25   After implementing above optimization initiatives, it is reported that there is a rather significant gain in efficiency, productivity and PPH Process Leather cutting Synthetic leather cutting Textile cutting Embroidery Embossing Stitching Gain Reduce 12.25% material waste Reduce 3.5% material waste Reduce 3% material waste Increase 5.25% efficiency Increase 5.5% efficiency Increase 5% in PPH Table 9: Saving This is just a starting optimization project to increase the awareness of building more efficient production environment with a purpose of supporting the company to grow sustainably The company should encourage employees to continue producing great products with efficient process to bring the best products to customers around the world     26   Reference Gidey ASmar (2012) Reviewing the Values of a Standard Operating Procedure Ethiop J Health Sci, 22(3), pp205–208 Khan, R (n.d.) (2012) Problem solving and data analysis using Minitab     [...]... the number of manpower as well as increase the productivity There are specific processes that need to focus which are Cutting, 2nd Process such as Embroidery, Embossing and Stitching That is a key point that leads me to carry out this report titled Optimization of upper making process for cost reduction     4   Chapter 2: Analyze Inefficient Manufacturing Processes 2.1 Causes and effects of the issues... intensive process And the majority of the process is still done by manually Therefore, there is no surprise that this process need to be optimized to increase the efficiency     7    Unclear process flow There was not clear process flow in stitching process, what should be the next destination after the previous task is finished Instead of going into one direction, it could run with multi direction Therefore,... from the suppliers Relay out the process Manual process Unclear process flow Apply computer stitching with pallet to increase the efficiency and reduce manpower Apply auto conveyor between 2 sides of the line to strictly control the process flow Table 4: Optimization proposals 3.2 Apply proposed optimization ideas 3.2.1 Cutting Cutting has been considered as one of the processes that should be optimized... 84.75 Table 2: Raw data of efficiency rate of 2nd process in 2014 and 2015 84 82 80 78 76 74 72 70 2014 2015 2014 2015 68 66 Figure 8: Bar chart of embroidery efficiency rate in 2014 and 2015     11   90 88 86 84 82 80 2014 78 2015 76 2014 74 2015 72 70 Figure 9: Bar chart of embossing efficiency rate in 2014 and 2015 There are two main processes in supporting process (2nd process) which are embroidery... 2.4 2.1 2.2 2.6 2.30 Table 3: Raw data of PPH of stitching in 2014 and 2015 3 2.5 2 2014 1.5 2015 1 2014 2015 0.5 0 Figure 10: Bar chart of PPH of stitching in 2014 and 2015 The inefficient stitching process would lead to high waste in process (WIP), require higher number of workers and as a result, the productivity is low In order to measure the efficiency rate of stitching, there is one standard measure... efficiency of     13   stitching line by taking the total output/ total workers/ total working hours The data above shows the PPH 2.07 and 2.3 in 2014 and 2015 respectively With the labor cost is increasing, there should be a plan to increase PPH to make the process more efficient     14   Chapter 3: Optimize the Inefficient Processes 3.1 Process Cutting 2nd process Optimization proposals Causes Optimization. .. Figure 3: Fishbone diagram of 2nd process After using fish bone analysis, there are a number of causes to the inefficiency and low productivity of 2nd process identified     6       Machines are run under their capacity Operators do not control the machine well Machines are not set up properly Machines are not maintained well Stitching Methods Manual process Low PPH flow process process Unclear Methods... i.e., no delamination Cutting of various material thicknesses and combinations in one operation No material deformation due to contactless material processing High level of precision and positional accuracy of the cut edges due to automatic recording  Maximum utilization of circuit boards because no space has to be kept free for cutting channels With these advantages, the use of laser cutting machine in... Apply auto conveyor between 2 sides of the line to strictly control the process flow For the issue of high inventory in the line – work in process (WIP) which can lead to quality issue and low productivity and affect negatively to PPH since the process is not controlled well One of proposals to reduce the WIP would be that applying auto conveyor between 2 sides of the stitching line with the speed... February March April Figure 16: Bar chart of PPH of stitching in 4 months of 2015 and 2016 The inefficient stitching process would lead to high waste in process (WIP), require higher number of workers and as a result, the productivity is low In order to measure the efficiency rate of stitching, there is one standard measure that is PPH PPH indicates the efficiency of stitching line by taking the total