Value Proposition

Burns Bridge has a decades long track record of adding value as an agent of change. Working in numerous indirect positions as an engineer, manager, or executive manager, I have always deprecatingly referred to myself as a leech who adds no direct value to the product. Accordingly, I have always strove to save at least my wages every year in terms of quality, process and cost reduction improvements. I admonish staff that it is management's job to make it easy for the employee to be successful.

It helps to use a metric which is easy to understand. Accordingly the following examples of hourly dollars saved per hour worked are provided to give some perspective of the benefits of having someone such as Burns Bridge focus on an organization's effectiveness at a senior level:

Domglas Inc. 1980 to 1983: Improvement from $15 million loss to $35 million gross profit over 6000 hours of work: $8300 per hour savings.
Domglas Inc. 6 months from late 1986 to 1987: Improved percent pack from 50% to 90% after a furnace rebuild (new technology installed) and labour strike: $30000 plus per hour savings (financials here are a guess).
Indalglass Inc. Sept - Oct 1990: Identified in a few weeks why the plant was losing 1 million per month: $37,500 per hour (plant was slated to be closed a month later due to an oncoming industry recession).
Brampton Foundries 1990 to 1995: Over a five year period manning was reduced from 167 to 65 employees, working capital was reduced 50%, 75% reduction in natural gas, 50% reduction in floor space (rent): $700 to 800 per hour estimated savings.
General Motors Powertrain piston casting cell 1996 to 1998: Increased throughput from 6k to 14.5k per day 5.7 liter pistons, saved $750000 per year in durable tooling, perishable tooling and furnace maintenance, eliminated productive and maintenance overtime (45 employees total): $500 per hour savings not including any benefit to no longer purchasing pistons from Tonawanda engine plant.
Niagara Machine Products 2000 (12 months): Effected a 10 and 20 times increase in tooling life on steel and aluminum bar stock respectively. Assuming a 30% improvement in up time and a similar savings on 75 turning department machinists: $700 per hour not including scrap savings expected with the production of a dimensionaly more stable product.
SKD Automotive 2001 to 2002 (12 months: Improved bottom line from $12 million to $23 million per year: $5500 per hour.
Fluid Motion Technology 2002 to 2005 (almost three years) effected a tripling in speed of the factory bottleneck in a plant of 175 employees on two shifts: At least $600 per hour labour savings. This productivity improvement allowed the plant to retain most profitable of 17 Martinrea plants through a difficult economic period.
Flowserve Canada Inc. 2006 to 2009: Reduced cost of quality from 6.5% to less than 1%, achieved record on time delivery and profitability 3 years running: $1000 per hour is provided as a crude estimate.
Entropex Inc. 2011 in 4 months: Increased polyethylene grind line throughput from 20000 to 60000 kilograms per day: $5000 per hour in revenue improvements. Note that in a continuous process where all costs are fixed, any improvement in throughput, flushes straight to the bottom line.
Sulzer Pump repair centre Edmonton 2013: Achieved a 35 year record in sales and bottom line: At least $550 per hour in bottom line improvement.
Smith Cameron Process Solutions 2015 to 2016 (22 months): Drove bottom line improvements to 4 and 6 times 2014 levels: $350 per hour improvement.

Note: The above numbers are estimates only and may involve plus and minus errors of up to 30%. Numbers involved are all impacts on bottom line cash flow (real savings). While Burns Bridge was the primary agent of change driving the above improvements, in almost all cases these achievements were realized through persistent teamwork involving cross functional multicultural teams.

The above clearly demonstrates the need to have someone strategically focused on organizational improvement. The need to take a bottleneck approach to such improvements is paramount. Fixing anything other than a bottleneck will have no impact on the bottom line. Many organizations pride themselves in knowing the location of their bottlenecks but then do nothing to mitigate them. As an example, a large automotive OEM had such pride in their understanding of the location of the bottlenecks on each of their machining transfer lines. Tragically, in almost all cases nothing had been done to actually fix them with the result that chronic maintenance, quality and process problems had existed for 18 to 35 years.

In cases where more than one bottleneck has been identified, a few hours of analysis are required to quantify and Pareto rank the savings to ensure that staff are directed to work on the biggest financial problem first. Where resources permit, multiple bottlenecks may be tackled simultaneously. A rose colored glasses perspective by employees and staff is quite often the real reason for lack of progress; everyone is very proud of what they do and therefore fail to see the opportunities, where a process can be improved. Often it takes a new person with a "blank sheet of paper" perspective to see the opportunities.

Capital Budgeting: Once it is agreed to undertake a project, the benefits must exceed the costs. There are three methods of performing cost benefit analysis which is often called capital budgeting as follows:

Internal rate of return
Net present value
Simple payback

Business finance classes teach that using the net present value method maximizes shareholder value (value of the firm). The internal rate of return method is sub optimal because it selects only the highest IRR projects and may overlook a project with a high net present value and a lower IRR. IRR does not maximize the firm's value.

In either case options 1 and 2 require knowledge of complex math and finance. With rudimentary analysis it can be shown that a project with a simple payback (cost divided by annual savings) of 2 years or less is an attractive project. In practice at the process improvement level on the floor, projects having payback of 1-6 months are easy to find and should be undertaken first. Simple payback can be used by shop floor personnel to assess improvement projects for their merit.

Make versus Buy: In such a situation where you are considering outsourcing as a means to improving your bottom line, considerations to marginal cost are critical. For example if one chooses to outsource work while there are internal sources sitting idle, negative cash flow will result. In such circumstances where labour is underutilized, the marginal cost of fabrication labour is effectively zero or free since the employee will be paid regardless of whether he is productively busy. Outsourcing should never be undertaken unless a very careful detailed cash flow analysis is made at the margin. Often the buyer may be able to demonstrate that buying a part is cheaper than making it. However, if there is an internal resource which cannot be eliminated and which is underutilized, the cost of making the part is essentially free compared to the outsourced purchase price.

Often it appears that it is a simple decision to go off shore to strategically source material. This is the easy decision. Due to the increase in lead time associated with 12000 mile supply chains it is imperative that everything possible be done to improve local productivity first. Often such improvements once completed can mitigate over 80% of the off shore savings eliminating the bulk of any benefit which can be realized.

Finally when labour savings are used to justify a capital or expense item to fix a problem, one must realize there are no savings unless at least one person leaves the building..