ZERO LOSS THINKING

DELIVERS BREAKTHROUGH IMPROVEMENTS

A NEW TARGET FOR IMPROVEMENT

Every manufacturing executive wants to enhance quality, speed delivery, reduce costs, and improve customer satisfaction via performance improvements.

But they don’t always get what they want.

Why? Because most manufacturers rely on outdated approaches to establishing and achieving performance targets — and never reach their true potential:

1 Most performance improvement initiatives are too focused on current problems rather than long-term objectives that drive sustainable success. This
forces managers and employees to firefight the same mistakes, over and over. This can keep an operation afloat — sustain performance — but rarely
delivers sufficient improvements.

2 Most performance improvement goals are too limited and budget-based. Targets are negotiated between plant managers and senior leaders, with
an emphasis on “reachable” achievements instead of total opportunity. This approach thwarts real problem solving, with managers pointing to their
modest results instead of attempting to reach a real goal that advances the company.

3 Most performance improvement teams are too obsessed with a single, large-scale issue. An elite group is formed to “fix” the issue in plant after plant,
instead of engaging employees who actually make the product or deliver the service — missing chances to develop a culture of routinely finding and
fixing problems.

4 Most companies are too fragmented in their performance improvement approaches. Lacking guidance, frontline teams often pursue disparate
improvements, tackling what they feel is necessary to improve their area or make their lives easier. These efforts frequently lack the scope or corporate
support to be successful. At best, the result is an island of excellence without an enterprise perspective and connection, and with little or no impact on
customer satisfaction or the bottom line.

Fortunately, there’s a better way.

Most companies are too fragmented in their performance improvement approaches.

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TRANSFORMING LOSSES INTO GAINS

Consider all the problems that occur daily within your organization —
from small (a few seconds of delay in starting up a production line, an
expedited shipment to maintain on-time delivery) to large (the return
of a defective product, an equipment breakdown). Now imagine the
financial losses associated with each one — compounded daily for a
year.
WHAT IS A LOSS?
At most companies, the annual total of these losses can be staggering
— as much as 65 percent of cost of goods sold.
Total real dollars spent
Actual Cost
But instead of being overwhelmed by the total, consider a method to manufacture a
that examines all company processes and identifies and prioritizes product.
them as opportunities that generate the greatest gains and lead to
breakthrough performance improvements — Zero Loss Thinking.
Cost
How does it work? Rather than rely on the status quo and budget- Loss reduction
based goal-setting, compare current performances vs. a theoretical opportunity
perfect state (i.e., zero losses). For example, what if your organization
could:
Absolute minimum
• Deliver every product right the first time, every time cost required to
manufacture a product.
• Use only the optimal amount of time and resources for each Ideal Cost (zero-based)
(theoretical cost)
process
• Keep production at 100 percent reliability, without downtime for
adjustments
• Move materials and products seamlessly to the customer, with no
non-value-added actions
• Eliminate duplication and rework throughout the supply chain
• Synchronize production quantities with customer demand

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These goals may seem impossible, but it’s important to remember that Zero Loss Thinking promotes
the pursuit of perfection, not perfectionism.

Zero Loss Thinking clears away the often-contrasting opinions in a company of what to fix and when
to fix it. It instead focuses and accelerates improvement efforts by establishing a common language,
framework, and action plan for all individual improvements within an organization. More importantly, FOOD & BEVERAGE
a zero loss analysis of operations offers a continuous cycle for prioritizing opportunities, allocating ZERO LOSS
time and resources, and attacking losses — the size of the gap between actual cost and ideal (zero
loss) cost. ACHIEVEMENTS
Client: The canned-goods/frozen-
foods plants of a global food &
beverage company
Opportunity: Performance Solutions
conducted a zero loss analysis and
found one key area of focus was
to eliminate spills and waste. The
assessment identified savings if
all sources of waste (e.g., spills,
downtime, minor stops) were
eliminated. This effort led the plants
to measure how much waste hit the
floor, hold staff accountable for spills,
and develop more effective product
sequencing to minimize cleaning
between changeovers.
Results:
Waste reduced 31%

Productivity improved 28%

Equipment changeover times

reduced 64%

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PURSUING A ZERO LOSS IMPROVEMENT APPROACH

Milliken & Company has used Zero Loss Thinking to guide its improvement efforts since the 1990s. The company adopted the system after executive-level
benchmarking visits to high-performing Japanese companies. Milliken has applied Zero Loss Thinking to its dozens of facilities around the world, evaluating
performance against a list of 16 losses (see Milliken Loss List on page 6) most likely to impact bottom-line results.

Performance Solutions by Milliken, its consulting division, has helped hundreds of other companies pursue zero loss targets. Working with corporate leaders,
Performance Solutions practitioners use the Milliken Loss List as a starting point with a client. But because each manufacturer is unique, practitioners work
with client leaders to identify core activities at their companies, and the ways that cash, time, and resources are inadvertently lost. These executives build
their own loss lists, which resonate with their companies and cultures and strongly link to successful financial performances.

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MILLIKEN LOSS LIST

EQUIPMENT LOSSES MANPOWER/METHOD LOSSES

Equipment Production stoppage due to unexpected Management Waiting for instructions, materials,
breakdown, or decrease in performance auxiliary equipment, repairs, tools, etc.
Failure
due to equipment deterioration
Loss due to insufficient skill levels to
Operating Motion operate efficiently
Set-up and Change time after production stoppage
to prepare for subsequent production Workers tending multiple pieces of
Adjustment
equipment at the same time and/or
Line Organization suboptimal line layout, resulting in
Production stoppage due to processing delays and waste
Cutting Blade
components that have broken or worn Manhours spent on material handling by
Change
due to wear employees other than material-handling
Logistics
workers, and/or additional time spent by
Decrease in performance between material-handling workers
Start-up startup and stabilization, due to
equipment deterioration Too-frequent measurement and/or
Measurement
adjustments to prevent production of
and Adjustment defective products
Minor Stoppage Temporary trouble causes equipment to
and Idling idle or stop

MATERIAL LOSSES
Speed Difference between designed speed and
actual speed
Energy/utilities consumed minus energy/
Energy utilities used to produce product – losses due
to start-up, processing loss, idling, leaks, etc.
Defect and Defects that must be reworked; if not
Expenses to replace worn processing
Rework reworked, these are waste/scrap components (blades, bits, etc.); expenses
Die, Tool and Jig to repair these components for reuse (re-
sharpen, etc.); and items used to enable
Production stoppage for periodic repair (oil, grinding, etc.)
Shutdown maintenance and/or inspection and/or Difference between raw material weight and
“legal” inspection Yield weight of the finished quality product

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Losses vary by industry, by type of company, and by functions within an organization. For example, the loss list for an assembly-centric organization will be
different than one dominated by equipment-intensive processing. Losses in an administrative function will be different than those for a distribution center.

When assessing losses for a manufacturer, practitioners also evaluate the frequency and duration with which they occur in an organization, leading to eye-
opening, corporate-level estimates of potential cost savings. At Milliken & Company, the first decade of Milliken Performance System cost reductions from the
elimination of losses were dramatic.

LOSS LANDSCAPE

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DEFINING AND DETAILING LOSSES

Zero Loss Thinking becomes the language and currency of

improvement. For Zero Loss Thinking to work, everyone in the
organization needs access to consistently available data used to
calculate losses and to track progress toward loss reductions. Zero
Loss Thinking cuts through “improvement noise” within companies
and eliminates flavor-of-the-month methods. It instead focuses on
bottom-line data, allowing losses to build the map of where the
workforce should go next in applying improvement initiatives.

Much of the data required for a zero loss improvement framework CREATING LOSS DEFINITIONS
already exists (within enterprise systems, real-time monitoring
systems, etc.), although it may be stored, fragmented, and/or
customized by department or region. Some new data tracking Operational Loss Formula for
may be needed, which in itself is an eye-opening exercise that can Definition Definition Calculation
reveal hidden problems. Once the formula and data for losses is
standardized and established at the corporate level, more detailed
A clear, precise Variables,
assessments of plants, functions, and production lines occur, with description of calculations,
apples-to-apples comparisons underway across the company. the loss that and data
everyone will sources are
Executives at each company rank the losses to track, which helps understand well defined.
to establish operational strengths and weaknesses as well as the and interpret
overall “size of the prize” for the organization. This prioritization the same way,
every time.
process also helps Performance Solutions practitioners and compa-
ny executives to select the initial sites/plants for improvement, in-
cluding the implementation of a performance management system
to manage and standardize changes and best practices that drive
corporate success.

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At Milliken, the Milliken Performance System, with a foundation of strategic clarity and employee safety, has been the source of management standardization,
driving excellence in the following areas or “pillars”:

• Daily team maintenance

• 5S methodology
• Continuous skills development
• Focused improvement
• Production control
• Planned maintenance
• Quality management
• Early equipment maintenance
• Concurrent new product development

THE ROLE OF LOSSES IN THE PERFORMANCE SYSTEM

Segregate costs
Identify and Allocate resources
by “activity”
prioritize cost proportionately to
rather than “spend
reduction projects the opportunity
account”

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ZERO LOSS DETAILS

While corporate leaders can determine where — plants, facilities, lines — improvement actions will
begin, in most organizations leadership cannot be the ones to physically manage and execute the
changes. That’s where Performance Solutions practitioners put the Zero Loss game plan it into action.

First, practitioners conduct a plant- or function-level zero loss assessment. This analysis determines ZERO LOSS
the selection of a model area within the plant for improvement. Although this is typically an area with
ACHIEVEMENTS–
high losses, other factors are also important: urgency for improvement; capacity to replicate new
standards and best practices to other areas of the plant; and the ability to improve the model area as PACKAGING PRODUCTS
close to perfection (zero losses) as possible. Performance Solutions worked with
27 locations of a multibillion dollar
Within the model area — which can be a function, production line or cell, or even a single piece of
packaging-products manufacturer.
equipment — practitioners then conduct an area-specific zero loss analysis, identifying and stratifying The company faced a changing
detailed buckets of losses — i.e., taking a large loss category, such as equipment failures, and further customer environment — smaller
identifying losses by machine, by type, etc. (see Loss Stratification on page 11). The process they use for orders, smaller run sizes, and
increased complexity due to
the model area will then be repeated throughout the plant, and then the company.
customization — and was looking
Practitioners utilize existing systems and sources of information; collect data manually (shift reports, to improve to a world-class level.
A zero loss analysis helped the
maintenance records); and observe operations where the work occurs (the “gemba”). The resulting loss company’s plants to address common
buckets guide Performance Solution practitioners and company improvement teams to the actions production problems, including poor
required to reduce losses. machine uptime, product rework,
and slow equipment changeovers,
and to establish changes (e.g.,
standardization, training) to
eliminate the problems rather than
just reactively manage them. The
client achieved a 15-to-1 return
on investment with Performance
Solutions, driven by breakdown
performance improvements of 60 to
70 percent, minor stops reduced by
50 to 60 percent, waste reduced by 80
percent, and equipment changeover
times reduced by 50 to 60 percent.

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LOSS STRATIFICATION

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ZERO LOSS EXECUTION
In most manufacturing plants, problems are “solved” by managers
and supervisors who rush to “fix” them, only to see them recur the
next day or week. At some companies, a continuous improvement
(CI) group is called in to try to permanently resolve the issue. Loss Name
Milliken & Company uses a different approach: It relies on frontline
associates to find and solve problems.
Definition
In fact, when executives tour Milliken & Company facilities as
part of the Performance Solutions AED (accommodate, educate,
demonstrate) program — which offers a hands-on overview of
Zero Loss Thinking and the Milliken Performance System — it’s the Calculation
frontline staff who describe how and why they do what they do.
Practitioners help clients establish frontline ownership of
operations: specific losses and improvement projects are assigned Data Source(s)
to frontline “pillar teams” with management support and coaching.
For example, equipment failure losses would be addressed by the
“daily team maintenance” pillar team or training losses would be
addressed by the “continuous skills development” pillar team. Pillar
Action Items-
teams continue loss stratification until they reach the root cause(s) owner and
of the loss. For example, equipment breakdowns will be defined completion
by the failure mode and the precise circumstances that led to the date
breakdown. To help teams capture, organize, and analyze this data,
Performance Solutions has developed loss worksheets/templates
(see Loss Worksheet Example).
PerformanceSolutionsbyMilliken.com 12
LOSS WORKSHEET EXAMPLE
Breakdown - Downtime
Cost associated with an unplanned equipment stoppage
requiring non-production support to restore to a running
state
+ (#hours-down) * ((FL Op Rate * Ops) + (FL Tech Rate * # Techs))
+ (Avg Parts Cost + Avg Scrap Startup Cost) * OCC
+ (#hours-down) * (Energy/Hour)
+ (#hours-down) * (Line-Specific lbs/hour * Margin per lb)
Sharepoint Downtime Log - Occurrences and total
Downtime hours
Mick - Determine Fully Loaded Rate for Operator and
Technician
John - Determine Energy Consumption Rate per Hour
John/Dave R. - Determine Average Part Cost per
Occurrence
Dave R. - Determine Average Margin per Plant
Jason - Determine Average Lbs per hour per Line
Jason - Review Sharepoint Downtime form to ensure
proper coding of Breakdown Occurrences and
Hours
© 2017 Milliken & Company
Pillar teams work to improve the model area toward zero losses, getting as close to perfection as
possible in all performances (this usually occurs within 10 to 12 months). The model serves as a
demonstration for other areas in the plant that undertake improvements during a “replication” phase.
At the same time, information-gathering and zero loss analysis by the pillar teams establish new,
standardized processes for data collection and reporting at the plant level. The experiences and new
best practices of model area pillar teams are codified as part of a standardized performance system
ZERO LOSS
for the plant and company.
ACHIEVEMENTS –
CHEMICAL
Client: 55-acre chemical plant

Opportunity: A plant assessment

and zero loss analysis conducted
by Performance Solutions revealed
recurring problems, including
issues with product quality, on-time
delivery, and customer satisfaction;
a need to improve agility (i.e.,
changeovers took too long); a lack of
visibility into key plantfloor metrics
that align with strategic goals; and
frequent management firefighting.

Results:

$2 million in variable cost savings

in two years significantly improved
on-time delivery and quality yields
reduced customer complaints by
80 percent.

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EXTENDING ZERO LOSS THINKING

Teams in the initial model area continue to assess, prioritize, and reduce losses while identifying new areas for improvement (some losses diminish, while
others emerge due to changing products and/or processes). Through replication, other areas examine their own losses, establish their own pillar teams and
improvement projects, and apply the new, facilitywide performance management system.

Gradually the entire organization begins striving toward perfection. Zero Loss Thinking becomes improvement second nature within the enterprise and out
into the supply chain. This is made far easier by the increase in data quality — formats, accuracy, access, etc. — required for zero loss improvement decisions.

Dramatic as these gains are, it’s important to recognize that perfection will never be achieved. Milliken & Company, for example, has worked for 20 years to
reduce its own losses — capturing hundreds of millions of dollars in cost savings — yet has only eliminated 60 percent of the losses it originally identified.

At Milliken & Company and other organizations guided by Performance Solutions, Zero Loss Thinking has become an embedded component of the daily
management system and a critical piece of corporate culture. It’s a mindset — not just a planning process —applicable far beyond plant floors. Many
organizations working with Performance Solutions have come up with new and unique ways to apply Zero Loss Thinking, such as:

• Are advertising and marketing activities optimally productive while achieving their objectives?
• What losses can be found in the employee recruiting, hiring, and onboarding processes?
• Even in R&D processes where trial and error is necessary, what losses can be agreed upon and reduced?

With a little creativity, there’s no limit to the new losses (opportunities) that Zero Loss Thinking
can find. Performance Solutions has helped manufacturers in many industries — automotive,
chemical, aerospace, food and beverage, consumer-packaged products, paperboard and packag-
ing, plastics and rubber, etc. — to leverage Zero Loss Thinking to improve their bottom lines.

Shouldn’t your company be one of them?

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 PUT PERFORMANCE SOLUTIONS TO WORK FOR YOU

Performance Solutions by Milliken® works side-by-side with companies interested in strengthening and
improving their operations. The strategic approach that made Milliken one of the safest, most efficient
manufacturers in the world is the backbone of the consulting and educational services that Performance
Solutions offers worldwide. Performance Solutions by Milliken practitioners are serving over 350 operations,
in 27 countries, and covering a wide variety of industries. Visit www.PerformanceSolutionsByMilliken.com to
learn more about Performance Solutions’ consulting and education services.

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