Better tool awareness, machine maintenance and supplier management drives reduction in costs for AC Floby

At the beginning of 2020, AC Floby launched an initiative to drive down costs across the organization. A key feature of this was building greater cost awareness around machine maintenance, tools and components – both in the way they operators work on a daily basis, and the contract arrangements with key suppliers.

Tool management and machine maintenance provide some of the biggest cost elements for AC Floby. To stay ahead of budget and drive continuous improvement in supplier relationships, senior managers knew there needed to be a systematic approach to cost awareness that could filter down to every individual in the company.

On a daily basis, AC Floby has approximately 1400 tool pieces in operation. These tools are handled and monitored by 368 people in the workshop operating around the clock on shift patterns, so implementing any meaningful change to working practices was a challenging prospect.

“My intention was to make everyone in the workshop more aware of tool efficiency,” says Pär Johansson, Team Manager, Engineering. “This meant supervisors had to communicate new ideas down to all the operators in their teams, so the awareness filtered through the whole workflow and every individual became more mindful of the cost impact their tool usage was having.”

Likewise, on the machine maintenance side, Maintenance supervisor Jesper Hermansson wanted to ensure any changes to processes didn’t have a negative impact on the overall performance of his team. “What we have done during the year is that we have increased our cost awareness without risking production deliveries,” he says. “Instead, we have tried to make active decisions about how, what and when to repair and improve, whilst always being mindful of the risk/benefit balance.”

Encouraging a more proactive mindset

For several years, tooling costs had exceeded what was written in the budget. Being more transparent about the big picture was vital in making sure everyone within the department understood the scale of the challenge, and was on board with trying to drive costs down.

Previously, supervisors were only looking at the wider cost picture once a month when the figures were produced, meaning they were always being reactive. Now, there is a more demanding set of expectations, with weekly assessment of the tools cost, meaning the team can identify issues more quickly and get ahead of any problems.

Improved partnership negotiations

Pär also worked closely with colleagues responsible for procurement and purchasing. New contracts with suppliers were sought that could drive down the cost-per-piece and provide long term solidity to AC Floby’s partner network. This meant certain suppliers were offered longer contract lengths, as well as having exclusivity clauses written into contracts.

One such deal resulted in a 30% cost reduction from a key tool insert supplier, demonstrating the excellent job done by both sides to get these mutually beneficial deals done.

Effect of Covid-19 on cost awareness programme

As with many businesses all over the world, the Covid-19 crisis has affected the AC Floby cost awareness programme.

In the Maintenance team, the decision was made to not lay off staff, but instead used the time to make improvements in production in the form of quality outcomes, cycle times, operational safety arrangements and stock value.

The pandemic also meant suppliers were unable to make their regular visits to the AC Floby workshops. Prior to March 2020, they would come on site to monitor daily work, look at the machines set up with new tools, and provide operators with more tailored solutions. This has resulted in lost opportunities for further cost efficiencies to be negotiated.

A successful start to the project

The tool budget for 2020 was 37m SEK, and the target for the project was to deliver cost reductions of 5%.

By the end of June, Pär and his team were on target to achieve an overall cost reduction over 8% and Pär believes there will be further possibilities to drive tooling costs down when suppliers are allowed back on site, hopefully by Q4 2020.

“We are extremely proud of the results we have achieved in the first half of the year, despite the challenging circumstances provided by events outside our control. I believe that with supplier activity returning to pre-Covid levels, we will see significant further cost reductions to the ones we have already seen.”

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