Optimising the fiscal fitness of a manufacturing facility requires an approach that utilises multiple levers that includes managing operating expenses, increasing throughput, and the effective use of working capital
Today most companies have already taken steps to manage expenses while introducing automation and the streamlining of process flows on the production floor. Companies have hired consultants to reorganise their production areas to speed up the flow of goods by minutes or have made significant investments in software to optimise production, processes, and inventory management.
In recent years and in response to supply chain challenges companies have managed their cash conversion cycle by pulling in receivables, extending payables, and managing inventory levels while trying to maintain the increasing demands of their customers. Yet with all these efforts a 2021 J.P. Morgan study on working capital reported a 15% increase in days of inventory outstanding (DIO) in S&P 1500 companies from 2017 to 2020. Even more dramatic are the metrics showing a threefold difference in the DOI of top performing companies versus the lower performing companies in the same industry. It would seem that there is room for improvement.
For the attention that’s been given to operational efficiency for many manufacturers, it is still possible to literally cut days or more out of their production cycle time and inventories by looking at their approach to inspection time and implementing a high-throughput, rapid microbial screening system for faster product release.
Cycle Time = Process Time + Inspection Time + Movement Time + Queue Time. Surprisingly, many of today’s modern, automated manufacturing facilities still test for microbiological contamination using a method that dates back to the late 1800s. This “traditional agar plate method” requires a lab technician to collect and prepare samples in a growth medium, then wait until a set number of days have passed before releasing that product lot into distribution. The wait time for inspection is typically three to five days for non-sterile consumer products. During this time finished goods are unavailable, on a “QA hold”, adding days to production cycle times and tying up critical working capital that could be better invested elsewhere. Tying up this much extra working capital to support bloated inventories and extended lead times leaves the facility lethargic and far from fiscally fit.
An emphasis on ‘cost savings projects’ has created a focus on department budgets, at the expense of a more holistic approach to operational effectiveness and an automatic reflex against anything that costs money. What if it were possible to increase your budget and save money at the same time?
Of course, screening your products for the absence of microbial contamination is an important step in ensuring product quality. What’s out of proportion is the time it takes to get results with traditional methods, given the readily available alternative. Today’s rapid screening systems can provide accurate results on a broad range of product types in as few as 24 hours, trimming four days from the average production cycle. These alternative methods are validated and accepted by regulators around the world.
Rapid microbial testing provides a faster alternative to the traditional, time-consuming method of culturing samples to see if microorganisms are present. It generally takes from 3-5 days, using specific agar-based media, for organisms to grow to levels that may be detected as colony-forming units visible to the naked eye. During this time the individual agar plates must be examined regularly by an experienced laboratory worker, making the results both subjective and prone to human error. Meanwhile, manufacturing is pressuring the Quality Control department to release products from microbial testing hold. Using modern method, products can be incubated, tested, and released in as few as 24 hours using a rapid method.
A rapid microbial testing system can provide fast, objective results with instruments that automatically read results, drastically reducing subjectivity and the risk of human error. Rapid methods often make microbial testing laboratories more efficient, and can require less time, materials, and expertise to operate. Unlike the routine agar plate examinations of traditional methods, rapid microbial testing systems usually include some automation. They can be user-friendly, and some can be operated by the least experienced laboratory technician. Plus, they typically use fewer testing materials and generate less waste, so they support company sustainability initiatives.
A rapid microbial testing system represents a new best practice for manufacturers whose profitability can turn on cycle time speed and supply chain efficiency. Further, by identifying a contamination event earlier, and releasing replacement lots faster, manufacturers can reduce the volume of goods that must be scrapped or, worse yet, recalled in the event of contamination, and can recover faster - both operationally and financially.
This is an opportunity to improve your company’s profitability by effectively streamlining the manufacturing process. But there is a catch: your micro department will need to spend more in order to do so. However, by engaging management in a conversation about the financial benefits of rapid microbial testing, obtaining the support and funding should be easier than you think.
When looking at adopting technology to streamline the supply chain, there’s a tendency to overlook the activities of the quality department. A review of opportunities for improvement tends to end where production leaves off and picks up again in distribution, leaving the typically poorly understood quality function untouched and underfunded.
At the same time there’s a tendency for people to only look within their individual departments and to overlook the broader impact and financial savings across the organisation. One of the most common reasons cited by quality professionals for maintaining traditional methods is the higher consumables cost associated with rapid screening technology. While it is true that on a per-test basis rapid methods are more expensive than standard agar methods, a financial analysis that takes into account reduced inventories and working capital requirements, plus improved operational efficiencies and manufacturing responsiveness, finds that rapid systems cost significantly less overall than traditional methods.
Fortunately for the makers of rapid screening systems and their prospective customers, it is possible to quantify the financial value of time. For example, a high-throughput rapid microbial screening system for a mid-size personal care product manufacturing site can be purchased and installed for less than $50,000 in capital expenditure, achieve payback in six to nine months, and realise an average five-year net present value (NPV) in excess of $500,000.
These numbers are based on averages generated using a Financial Impact Assessment developed by a global consumer products company in conjunction with a
global management consultancy. The Impact Assessment, which was designed to quantify the value of implementing rapid screening, estimates the payback period and five-year NPV using a company’s specific manufacturing and testing data—such as cost of capital and average daily output of finished goods. Proven accurate over years of use, the analysis is routinely used to support capital equipment purchase requests.
A physical fitness program improves one’s overall health while quantifiably reducing risk factors such as weight and cholesterol levels. Likewise, implementing rapid screening goes a long way toward boosting one’s overall facility fitness score with a host of quantifiable benefits:
Even if you’re managing a fairly efficient operation, most companies today have room for improvement. The realisable cost savings and reduction in production cycle times and working capital requirements may enable your company to pursue more productive endeavors, like funding new projects, developing new products or simply conserving cash. Take a close look at your current product release method to see if there is any time in micro-hold that can be reduced. That old method from the 1800s may be comfortable, but it doesn’t do a thing for your figure(s).