Manufacturing Excellence

INDT 565 MANUFACTURING EXCELLENCE: PRINCIPLES AND APPLICATIONS

BOOK REVIEW: ATTAINING MANUFACTURING EXCELLENCE BY ROBERT W. HALL BACK TO BASISCS: YOUR GUIDE TO MANUFACTURING EXCELLENCE BY STEVEN A. MELNYK and R.T. “CHRIS” CHRISTENSEN

November 2, 2008 BY ANTHONY CAPPUCCI

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ATTAINING MANUFCTURING EXCELLENCE BY ROBERT W. HALL Introduction Attaining Manufacturing Excellence describes what management champions need to know about contemporary manufacturing in order to exercise leadership in world class competition. In this book, Robert Hall takes a global view of the manufacturing process. He explores new ways for integrating shop for activities with company strategy and provides a blueprint for improving operations in all key areas. He sets forth principles of manufacturing excellence that will guide executives as they create a new corporate culture that combines the concepts of just-in-time manufacturing, total quality and total people improvement. Chapter 1: The Empty Strategy Manufacturing survival is war, combat on speaking terms perhaps, but war nonetheless. Every resource must be in readiness and every skill at full alert. True, some reasons for the difficulty Americanmade goods have with foreign competition are labor rate differentials, trade restrictions, national promotion of various industries, and so forth, but at some point manufacturing competition comes down to basics, the infantry tactics of industrial management. The company that cannot compete in this battle cannot forever be defended. The real defense is to think aggressively of what it takes to compete in a world market: world-class manufacturing, even if the company is too small to actually get world market volumes. If a thriving company waits for excellent competitors to attack before becoming worried, it will sit in comfort until this event really happens. Development of production capability is war on the “home front.” The first step in recognition that something must be done. This must be followed by rededication to the art of manufacturing. Rethinking of techniques is necessary, but not enough. Concern by production managers is necessary, but not enough. Manufacturers with all their constituencies must have some degree of concern. Manufacturers would do well to ponder one of the precepts of the Toyota Motor Co., "Win first. Profit later.” Though a little obtuse, this slogan is very indicative of the attitude necessary to build superior production capability and thus avoid an empty manufacturing strategy.

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Chapter 2: The Philosophy of Value-Added Manufacturing The "new approach” to manufacturing is a pragmatic philosophy distilled from world wide experience in manufacturing. The major concepts are independent of technology, though they may be applied differently with technical advances. Taken independently, none of the concepts are new; all have antecedents dating to the early 20th century, if not before. Those long in manufacturing experience who feel that they have heard it all before have a point--but one that may deceive them into missing the major point: the novelty of thinking is to combine the best and simplest practices one can find it into an elegant whole for a given application. Anything that broad in scope is a philosophy. Began with the objectives: • •

Eliminate waste. Reduce lead times for:

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o Customers. o Materials. o Tooling and engineering changes. o New product introduction. Increase quality. Reduce costs. Develop people: Increase skill, morale, and productivity. Improve continuously.

The goals are broad and ambitious. Attaining them demands basic, fundamental improvement in all aspects of manufacturing. The mind should not focus narrowly on a particular technology or technique but should open widely. Many problems stem from non understanding or non acceptance of all goals, as in believing that the objective of something called J I T is only to cut inventory. Trivial goal; trivial achievement. Chapter 3: Total Quality—A Matter of Detail This entire chapter is but an overview of the thinking necessary to attain its superior quality in manufacturing. A poor quality situation cannot be turned around with one or two ideas, although a good start can be made in improving quality before developing expertise in statistics. Attitude is most important. If a company is hell-bent on perfecting quality, it will persist in both discovering the methods to do so and in finding the means to employ them. Crafting a quality approach for a manufacturing company is not a short-term task. It requires making quality a centerpiece of the company culture. Many of the ideas are simple enough, but none are quick and dirty to put into widespread use, so quality must matter more than turning a quick profit. However, quality is not only free, it pays dividends. Many methods for improving quality also improve productivity. Total quality is the basis for developing just-in-time manufacturing adapted to the particular circumstances of a specific manufacturer. To do it on time, everything, it must be done right. Chapter 4: Just-in-Time Manufacturing

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To properly understand J I T manufacturing, the objectives need to be reviewed from time to time: eliminate waste, improve quality, reduce costs, improve morale, and continue improvement. The subject cannot be discussed without reference to techniques, but techniques are not sacrosanct. The importance lies in attaining the objectives in context of the necessary manufacturing tasks. Began with people. No matter how automated, the equipment improvement begins with people, and those who transform their companies regard the physical changes as manifestations of success with the workers and managers. Just-in-time manufacturing may start in many ways, but the improvement of operations cannot long proceed without the development of skill in quality improvement. Just-in-time manufacturing is the pursuit of the very best management approach possible for a company to meet objectives from eliminating waste right on through continuous improvement. Usually it is seen as only picking up techniques or, at best, making in addition to the management methods known to the company. It really is a way to run a company. Not all companies can use all techniques. No one should expect them to. However, most of the ideas can be used in some combination by any manufacturer dedicated to manufacturing excellence. Chapter 5: Attaining the Effect of Automation without the Expense Why automate? Because when done well, automation attains much more than merely substituting machine labor for manual. The objective is to make overall improvement in manufacturing--to eliminate waste, improve quality, reduce cost, and increase flexibility (the same goals as for Manufacturing Excellence). Automation affects the total company. Many organizational functions must be closely integrated, starting with product engineering intertwined with production process engineering. A product designed for robotic assembly needs parts that can be grasped and orientated by robot. Seams welded by robots may be different in design than those welded by a human. A human can compensate for seam flaws, but a robot can't. However, a robot can reach angles very fatiguing to the human. The engineering of automated processes must create the exact sequence of operations and the positioning of material. It must be particular on work envelopes, reproducibility of conditions, and possible exceptions. Variance of process capabilities must be kept narrow enough to prevent random defects.

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However, this is not enough. Quality problems can come from anywhere, and one of the more common problems observed in automated machining cells, for instance, is finding them choked with cracked or porous castings. Sometimes they are equipped with automatic sensing to detect these conditions and also to compensate for dimensional variance in the castings, which should not exist in the first place. Design of the total automated process must consider quality in as well as quality out, product design evolution, maintenance, training, the versatility of operators (or of programmed equipment), flexibility, changeover times, scheduling methods, and on and on. Handling and turnaround of tools is as important as that of material. Lead times are important. Putting all this together, the conclusion is soon reached that a company must develop the way automation will fit with the total organization and the way the organization will fit with automation: marketing, personnel, scheduling, purchasing--everything, not just engineering and production. Chapter 6: Attaining Total People Involvement Once sure of future direction, the most critical factor of success is development of people. As soon as they are ready, give the action point people responsibility and expect performance. Even if the skill development has not progressed much, the change in work atmosphere produces improvement. A Navistar foundry improved quality by giving workers basic instruction on quality and the responsibility to do the job right. Workers at the final operation grind castings, inspect them, load them for shipment, and attach a quality certification tag, which they signed personally. The tag identifies the part and its source. It proclaims quality to the user and says that, in case of trouble; telephone the worker who signed the tag. Next to the grinders there's a telephone-the workers telephone. Now the workers know by telephone voice some of the people in far -off places who use the castings. Their interest in quality perked up. They do not hesitate to inform other workers in core room, furnace, or pouring when something is not right. Some of the “bureaucracy“ of staff and supervisors between customers and workers is gone. Call it job enrichment, job enlargement, or what you will, the added responsibility did not increase the work cycle times of the direct workers and it was real participation, not a make them feel like they are participating sham. The improved quality made their job easier, not harder, and it increased the productivity of the "bureaucracy“ also, provided they understood.

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Management and staff acceptance of a true worker responsibility comes hard. Most workers welcomed the approach. It is better than being treated as a child, but they will naturally question the sincerity of management, and management doubts the capabilities of workers. Some workers may only be capable of limited development; some are too immature to accept responsibility; but in general, workers accept this change easier than management and staff do. The job of management and staff is to enable the direct-action people to perform better. better. Chapter 7: Synchronizing the Company Timing is very important in operations. A repeated pattern of work contributes much to quality and productivity in production and in other operations as well, including those in marketing and engineering that feed into production. In fact, organizing a smooth flow of work there is necessary if a smooth flow is to be obtained in production. Scheduling and improvement go together. The objective is not to make some magic form of scheduling work, but to schedule so as to capture maximum possible advantage of regular cycles to improve every aspect of operations. This begins with the basic approach to the business. A passage from a long ago paperback, now forgotten, suggests the opposite condition: "Harbaugh’s advertisement read, ‘will do anything legal. Any time. Any place. Fee negotiated.’ Not surprisingly he was a little disorganized. “ Organizing in the sense is "nonrandomizing“ the part of the world one wishes to work with. It is done all the time without much thinking of it, as one developing a set of qualified leads for marketing enticement, separating the susceptible from the random heard. The wasteful effects of random activity are easily underestimated, as is the power of dispelling randomness so that wasteful work is much reduced. Chapter 8: The external Factory—Suppliers Half of the average manufacturer’s production cost is purchased material. If internal production is mostly assembly, as much of 80% of cost of goods sold is pass-through from suppliers. Competitive manufacturers must manage this external factory by the same philosophy as the internal one. Think of a material supplier in the operating sense. The true supplier is the last operation touching material in a remote facility. The true customer is the first operation to use the material received. Anything that unnecessarily complicates a simple hand-off of material from one to the other is superfluous--waste.

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Other activities are necessary to make the actual material transfer smooth and simple: product design, certainty of quality, schedule, containerization, transport, and financing. If one is trying to eliminate waste, detailed decisions on all these should not be necessary for each shipment. This simple concept mightily contradicts established business practice. American companies find it difficult to strip away the layers of custom that smother operation-to-operation supplier relationships with different ownership at each end of the line. Doing so is not easy if the supply relations are inside the same company. Chapter 9: Taking It to Them—Marketing Power All this would be beautiful were it not for the needs of real customers, or so it is feared by marketing representatives. By their instinct, if inventories are reduced, surely customer service will deteriorate. The promises are seductive but with little assurance how soon, and meantime a disaster might occur. With the exception of champions of change, almost everyone fears this, so companies temper a there adventuring with self-imposed marketing restrictions: Never shall customers be worse served than at present. Improvement targets shall include customer service -things a customer can see. Whatever pain the organization must endure for internal reform, the customer shall see none of it. To allay marketing fears, companies safeguard customers from operating changes at first. Finished goods inventories temporarily increase until customer service from lower inventory levels can be demonstrated. Make-to-order product may be actually built ahead to demonstrate shorter lead times, then held for shipment. Extra inspectors check the final products to be sure that responsibility at the source is working. Sooner or later, marketing must decide that it is part of the movement to manufacturing excellence--and sooner the better, because marketing is vital to it. It can no more afford to be independent of engineering and production than those two functions can be independent of it. J I T/T Q brings changes in how to think about marketing. Chapter 10: Reforming Permanently The concepts of total quality, of just-in-time manufacturing, and people involvement make up the substance of manufacturing excellence. By their implications they represent a different way of operating a company and are not techniques to be grafted onto a present existence.

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A few observations about the leaders in manufacturing progress may be helpful. First, they seldom work only 40 hours a week. Some work hard and play hard, but all have a dedication, and none think they face anything less than a supreme challenge. Second, a little experience with attempting low inventories and zero defects removes a great deal of braggadocio. The manager learns to compare performance with what could be and to not be self congratulatory on prior achievements for long. In this they are like runners who compete more against the clock than against other runners. Third, they understand manufacturing and a broad sense: technical, behavioral, marketing, and financial. Almost automatically they begin to think of manufacturing as very challenging, long run competition--challenging as almost of any human activity short of global politics or war. The importance of considering these things is in how to build the right kind of enthusiastic fire for manufacturing excellence. Sustained enthusiasm is necessary, and it differs from adolescent cheerleading. A large group of people must combine their talents in a fashion superior to a loose federation of independent agents. Manufacturing is often seen narrowly as a dull trade; but, done with excellence, it demands almost every talent humans possess.

BACK TO BASICS: YOUR GUIDE TO MANUFACTURING EXCELLENCE BY STEVEN A. MELNYK AND R.T. “CHRIS” CHRISTENSEN

Introduction As organizations move into the future, the operations environment needs to expand into a collaborative planning and forecasting replenishment (CPFR), vendor managed inventory (VMR), and Enterprise Resource Planning (ERP). These innovative and complex methods require an unprecedented degree of accuracy and knowledge of the basics in operations management. Once you grasp key concepts, you can expertly apply such new procedures as CPFR, VMI, and ERP.

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Back to Basics: Your Guide to Manufacturing Excellence provides a comprehensive reference for the fundamental principles of manufacturing. Not only do you get a solid definition of basic operational requirements, but also an easy-to-understand approach to resolving management problems. Chapter 1: Why the Basics? In the first chapter of the book, they explore some of the foundations on which this book and the various topics discussed in it are based. It is here that they show how important the basics are, in that everything we do in operations management, in general, and in manufacturing, specifically, are built on them. They show that, when it comes to technology, it is best to work on the basics first, before seriously considering implementation of the latest and best technology, be it hardware or software. In fact, we might consider the following hierarchy:(1) basics, (2) simplification--taking the basics and making them work better by simplifying them and making them easier to utilize, (3) integration--making sure that the basics in each area of the operations management/manufacturing system are working with each other rather than against each other, (4) focus--making sure that the basics we are implementing are consistent with the strategic stance of the firm, and (5) technology--after we have done everything that we can on the preceding four dimensions, we are ready and able to successfully implement technology and take it advantage of it Chapter 2: Understanding Management: The Basics of Problem-Solving Managers do more than simply manage. They are intensely involved in the process of directing resources and organizing activities in achievement of corporate or organizational objectives. Ultimately, what this means is that managers are problem solvers and decision makers. They must be able to bring order into chaotic situations. Furthermore, they must be able to examine the situation facing them and distinguish between the symptoms and underlying root causes. They must avoid the tendency of attacking symptoms and instead focus their attention on the problems.

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The problem with problem solving and decision making is that, for most managers, they are activities and processes that have been learned only after a great deal of experience and postgraduate work in the School of "hard knocks.“ This approach allows the new manager to learn the necessary skills of problem solving only after numerous periods of trial and error. This process is time-consuming, costly, and painful (for the new manager, the firm, and those working with that person). What this approach overlooks is that there are certain skills that can be learned by reading, rather than trial and error. Chapter 3: What Type of Company Are We? Most firms know that they build products and deliver services. They recognize that they embody some form of manufacturing or transformation process. However, when questioned, most managers would have difficulty in describing what type of firm or process that they have. In fact, if we were to ask the manager of a "typical" firm to described their processes and to identify the extent to which they are similar to other systems, we would find that they would see themselves as being unique. While it is true that every company is, to some extent, unique, it is also and more importantly true that every companies manufacturing/transformation processes can be categorized as belonging to one of a finite set of possible systems. This commonality is critical because it allows managers to learn from the experiences of others. It is also critical because it helps us to develop expectations of how a specific system should perform, what its bottle necks are, and the type of flows, type of equipment, and type of planning and control systems that we should expect to see. We can then use these expectations to evaluate systems and to look for gaps between what we expect to see and what we actually observe. These gaps often flag opportunities for improvements. Further, this commonality is important because it helps to guide our selection and evaluation of potential software packages. Chapter 4: Understanding the Importance of Metrics

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If you had tried some five years ago to develop a list of topics that formed the basics of operations management, you probably would never have included the topic of metrics. Until recently, metrics, the process for capturing, measuring, reporting, and addressing the performance of activities, were largely overlooked. As a result, this process was often considered after the fact ("now that we have the system in place, how do we measure and report its performance?“) and often was carried out by other groups (typically accounting). It was also an activity that was assumed to be more punitive for than corrective. After all, measurement being done after the fact often meant that the factors that created the problem in the first place had passed. Because they were history, there was little opportunity for correction. In the last five years, however, there has been a significant increase in the interest in metrics. This increased interest is a result of several factors. First is a new awareness of the costs created by poor metrics. With poorly thought out and poorly integrated metrics, we find that there is often a great deal of confusion on the part of the users. In addition, managers have encountered numerous situations in which the metrics develop and used within one area of ran counter to the metrics being used by another group or area. The result of this situation is inevitably conflict and frustration. Furthermore, managers have found numerous instances where what their systems were measuring was what they could measure, not what they should measure. Chapter 5: Process Thinking: Key to the Basics

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Increasingly, we are seeing the emergence of a new approach to the challenge of attaining manufacturing excellence--process thinking. Process thinking is a structured approach that views a firm and its various activities and functions in terms of the underlying processes. With this approach, managers design, and change the various processes with the goal of ensuring that these processes make the "desired " results inevitable. For example, when we look at McDonald's or Burger King Restaurant we see process thinking in action. McDonald's can offer us fast delivery of a consistent quality product because it has standardized both the product and process ( the proof of this can be seen when we ask for a Big Mac made without the sauce and find ourselves waiting forever--why?) Until recently, McDonald's built standard products to stock. When we entered the restaurant and placed our order, we probably looked at the bins containing the burgers to make sure that the items we wanted were in stock. In contrast, Burger King has organized its processes and products on an assemble-to-order approach. It builds components (buns and cooked burgers) to stock. When we enter and give of our order, the preparer can assemble the burger our way. To ensure that it is hot, it is microwaved. The reason why McDonald's had difficulty satisfying special orders but Burger King easily could was the structure of their processes. Chapter 6: Capacity: You Can’t Build It if You Don’t Have the Capacity Capacity is central to nearly everything that is done in manufacturing. Whenever a decision is made to change a process or to reschedule work, there is also an accompanying implication for capacity. We define or evaluate the feasibility of a schedule or a proposed change in terms of capacity. In many ways, the development of manufacturing excellence is really the story of the development and maintenance of effective capacity planning and management. Effective capacity planning and management are not easy to develop and implement. In part, this is because the concept of capacity is not an easy one to define and understand. There is not just one type of capacity; rather, a there are multiple different types of capacity that we must be aware of. In addition, there is the issue of assessing capacity in isolation and within the context of a process. Finally, there is deeper into relationship between capacity planning management and production scheduling. Chapter 7: Understanding the Nature of Setups

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Before the advent of just-in-time (J I T) manufacturing, with its emphasis on short, predictable lead times, set up was viewed as a given. Set up times were often given to manufacturing people after being determined by the engineering group. This time allowance determined what resources we needed and when. When process improvements were sort, setups were often overlooked (after all, they were a given); however, this view of setups has now radically changed. We are now beginning to see setups for what they are--a necessary but not value adding activity. Our customers do not pay us to do setups. Setups are rarely, if ever, seen as being something of value to the customers; however, we need setups so that we can carry out the operations necessary to convert inputs into outputs of value to our customers. Furthermore, we now recognize that setups have major implications for the attainment of manufacturing excellence. They consume capacity and time. In addition, they can be a major source of manufacturing variability. Variability, in turn, leads to lead times that are not predictable. As a result, a task for many manufacturing systems has been to reduce setups. Yet, before we can reduce setups, we must first understand what is meant by the concept of set up. This challenge is easier said than done. In reality, there is a great deal of confusion surrounding this concept. Chapter 8: Inventory: The Most Misunderstood Corporate Asset We all have inventories in our operations and have lived with inventory ever since man first began to make more than one of anything. Inventory record accuracy was not an issue to us even as recently as a few years ago because we always had inventory, and we always talked about the accuracy of our records but did little to improve their record accuracy. Inventory provides a cushion or insurance policy to protect us from Poor inventory record accuracy. We are beginning to think that one way to protect ourselves from problems arising from poor inventory record accuracy is to just put more inventory in our warehouses to compensate.

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So what is the big deal about how accurate records are, anyway? We have the situation covered with our inventory. Why bother with record accuracy? In the past, we saw that we were running on of something, we just bought more. And if we found that we still ran on of stuff, we bought even more. No big deal, right? Not so. What are accounting friends have told us is that inventory is a fixed investment that generates no revenue. The accountants have always been after us to lower the amounts that we have in inventory so they could spend the money elsewhere (something about investment opportunities or profit, or something like that). But isn't inventory something that we need to stay in business? Without any inventory, we would be in a position of not being able to supply our customers. Where would McDonald's be if they did not have any inventory of hamburgers to give us when we came in the restaurant? Isn’t the same thing true at your company? Don't we really need inventory to be in business? Yes, we do need inventory of some sort to stay in business but not as much as we had in the past because now we have systems that can plan our operations and eliminate the need to carry as much inventory. By lowering the inventory that we have at our disposal, though, we have less protection from the unknowns. Let's take a look at how things have changed. Inventory is a buffer against the unpredictable. It protects us from variations in our ability to manufacture, as well as variations in our customers' ability to determine demand and give us an accurate forecast. Inventory also protects us from supplier quality and delivery problems, which are very important to us in the light of today's demand for quick delivery. What about our inventory record accuracy, though? There are four things we need to do correctly in today's manufacturing arena. We need accurate bills of materials, accurate route sheets, excellent capacity definition, and inventory record accuracy. We need accurate bills of materials to tell us what we need to meet the order, and we need good route sheets to tell us how to assemble that product and how much time will need to do the work. It is also important to define our demonstrated capacity and the capacity we have available to complete the order. Chapter 9: Odds and Ends of Manufacturing Basics

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We have focused on certain central themes; however, these themes, while critical to manufacturing excellence, are not sufficient by themselves. There are other elements that contribute to manufacturing excellence. In this chapter, we have brought together all of those elements of excellence, and our attention will be directed primarily to two major areas: part numbering and bills of materials. These two areas that are central to every production system--be it in manufacturing or the services. For many firms and managers, however, these two elements are poorly understood. As a result, they have generated a great deal of confusion in many systems, especially as firms undertake the upgrading of their Manufacturing Resources Planning (MRPII) systems or have made the move to Enterprise Resource Planning (E R P) systems. Chapter 10: Getting Things Done, and Done Right, the First Time: The Basics of Implementation No discussion of the process of generating savings would be complete without a discussion of how we go about identifying savings potential and achieving savings. Every organization goes through the steps every year to plan for changes that will generate savings through the annual goal and objective planning process, but that is just where we fail in our attempts to generate savings. We look at the savings that we think we can get and set our goals on achieving those savings. There of a lot of business books that are written on just that premise: Identify the savings potential and implement. That is the problem, though. We tend to look at the savings that we can be achieved without ever defining the process that needs to be implemented to generate the anticipated savings. When we look at the goals and objectives of our corporations, we sometimes get the feeling that those goals really are the anticipating savings. Most companies have a goal that might sound something like this: "It is our goal to reduce the work in progress inventory by 10 percent this year." A lofty goal but one that most companies set for themselves. Then we spend the rest of the year trying to attain that goal and usually fail because we do not know how to achieve the savings. We have a really easy way to achieve this goal--stop buying materials for about a month, which should pretty much achieve the goal of a 10% inventory reduction. We have accomplished the goal that the company established and have met the objectives and the needs of the company, but this is the wrong solution to the problem.

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This example, while obviously not being a valid solution to the problem, does illustrate the problem quite well. What we really did was to implement the savings. The goal was to reduce inventory, and that's just what we did. What we did not do was to implement the tools necessary for us to reduce inventory the proper way. We selected the wrong tools to generate the savings in inventory. There is no doubt that there really was a reduction in the inventory level, but the corporation is not able to sustain operations at that lower inventory level based on the method that was used to generate the reduction. This was a case of implementing the savings, which is not the way to achieve excellence in our operation.