RT Tanner & Co Ltd
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Business Plan
Products and Production
2.01 Introduction
This section deals with manufacturing and includes a description of the Production Department in terms of machines, personnel,
products and processes. It considers current methods of operation in relation to the changing market and examines machine utilisation
in individual sections within the department. Finally it recommends changes with a view to reducing the cost base and improving productivity.
2.02 Background information
The Production Department is divided into five distinct sections – Cutting, Printing, Envelope Folding, Crayford Warehouse and Engineering. There are
currently 72 employees, four of whom are salaried staff and with the exception of four day workers, the remaining 64 work on a double day shift basis.
Since January 1990 numbers employed in the department have been gradually reduced by natural wastage.
All the machines were designed and built in Germany to a very high specification. With just a few exceptions they are old and slow running, but they
have been very well maintained and have continued to produce good quality products over a long period. The daily output is approximately 1,250,000
envelopes/pockets and at any one time the stock level at the Dartford Warehouse will be between 20 to 30 million. During the last five years there
has been a continuing growth in bespoke high value envelopes with a corresponding diminution of stock values.
Production planning, raw material purchase, estimating and costing is the responsibility of a small team comprising Product Planner, Production
Assistant and Trainee Production Assistant, whilst the day to day management of the department is the responsibility of the Production Manager.
The planning and machine scheduling is largely influenced by bespoke orders in order to maximise machine utilisation. Over the past twelve months however,
the effects of the recession have resulted in average envelope machine utilisation of less than 50%.
2.03 Products and Processes
The Production Department currently manufactures a comprehensive range of envelopes and pockets from a variety of different raw materials. More than
two hundred different products are manufactured from twelve envelope folding machines, six print machines and four cutting presses. The range includes
gummed flaps and self seal, with or without windows, printed or plain on buff, white or tinted paper including recycled material. Three of the twelve
envelope folding machines are reel fed and the remainder blank fed. Each envelope folding machine requires one or two operators depending on the machine
speed and product. The setting of machines is carried out by envelope machine adjusters and print units are set by printers. The operation in the Print
Section varies from one machine being operated by one printer and two operators, to another where two machines are run by one printer. The cutting presses
are used for cutting the blanks and are operated by cutters (one cutter per machine). All machines are maintained by engineers. The Company manufactures
a full range of bespoke and stock envelopes and the flow pattern of the process is shown at Appendix 2A.
The chosen method by which individual products are manufactured will be decided on the type, size, shape, total specification, size of run and machine
availability. During the last twelve months the pattern of sales has indicated the need to rationalise a number of stock lines. The diminution in sales
has been influenced by fashion changes, the effects of the recession and increased competition. The proposed changes to sales are covered elsewhere in this report.
2.04 Capacity, Constraints and Problem Areas
As stated earlier, all machines are well engineered and highly regarded throughout the industry. Unfortunately most of this plant is now old and whilst
in most instances the machines are in good working order and capable of producing quality products, maintenance costs are high as indeed are unit costs
because of slow running speeds. The majority of the envelope folding machines are blank fed which provides greater flexibility and the ability to meet short
runs, but the separate cutting process adds to the unit costs. Many machines have the capability of in-line printing (inside and outside) and window attachments.
In the past the relative flexibility of the slow running machines has been a distinct advantage to the company in enabling the acceptance of small special orders
(short runs). This coupled with purchase of high speed reel fed machines established total flexibility. In recent years however machine manufacturers have
developed high speed machines with “quick change” facilities. More and more competitors are therefore prepared to manufacture special sizes on a short run basis
at lower unit cost.
In addition the department has the capability to overprint finished envelopes and pockets to a very high quality (litho print). Unfortunately capacity is limited
to one machine. Since it was purchased in 1980 it has a full order book. A second machine would be a welcome acquisition which would improve delivery times on specials
and indeed increase use of stock envelopes for overprinting. All printing plates for the litho print machine are “bought-in” which reduces flexibility and adds
to the cost. Two of our printers are qualified platemakers which would reduce the need for training if platemaking equipment was installed. Our ability to react
quickly to overprinting is also hampered by the fact that all finished envelopes are stored in Dartford – away from the manufacturing site. The goods therefore
have to be “called up” from the warehouse which adds to the delay and increases the handling costs.
2.05 Envelope Folding Section
The machines in this section can be divided into two categories – Envelope and Pocket. The envelope category comprises reel fed and black fed machines whereas
in the Pocket category there are only blank fed machines. All are listed in Appendix 2B.
The maximum number of machines running at one time is restricted to eight because of staffing levels. Analysis of machine utilisation over the last 12 months
indicates that this number could be further reduced. Consideration has been given to machine utilisation, changes in demand resulting from market changes, and age,
and condition of machines. It is proposed that 4 machines should be disposed of immediately reducing the number available for production to 8. Staffing levels
could be correspondingly reduced to a level where a maximum of 6 machines could be run at any one time. This would ensure a more efficient use of machine time and
manpower and thus reduce unit costs. The staff changes are set out in the summary at paragraph 2.10.
During the next 3 years urgent consideration must be given to investment in new machines. The existing large pocket machine is 21 years old and is the only pocket
machine capable of manufacturing 15” x 10” and 16” x 12” pockets. It would be advantageous if the replacement incorporated in line printing and windowing facilities.
The proposed programmes of capital investment is detailed in the summary 2.10 at the end of this section.
2.06 Print Section
The Printers are responsible for setting and attending to print units on envelope machines in addition to adjusting and running the six machines in their section.
The full list of machines is shown at Appendix 2B. The demand for printed work has grown over the last decade and continues to do so. It is now clear that a second
litho print machine is required to cope with the increased demand for over printing and it is proposed that the additional litho print facility will necessitate the
introduction of in-house plate making in order to reduce lead times and improve flexibility. The staff changes are detailed in the summary 2.10 at the end of this
section.
2.07 Cutting Section
This section compromises four cutting presses, a programmatic guillotine and ancilliary box making equipment. Two of the presses are slow, labour intensive machines
and could be disposed of. The 27 year old semi automatic press is also approaching the end of its useful life. It is proposed that this be replaced as soon as possible
with a Smithe P.H.P. With the proposed reduction in blank fed envelope capacity it follows that the cutting requirement will also be reduced. This will result in reducing the
number of cutting machine operators. The staff changes are detailed in the summary 2.10 at the end of this section.
2.08 Crayford Warehouse
This section feeds raw materials to the factory floor, removes finished goods loads and unloads vehicles. There are two warehouseman on each shift. In addition there are two sackman
(one on each shift) employed in this section. These are employed to remove waste paper from the factory floor and operate the bailing machines. The Production Manager has investigated
the possibility of changing work practices for removing waste from the cutting section using cages supplied by a new waste paper company. This would eliminate the need for the vertical baler.
The new working practices and the amalgamation of warehouse/sackmen duties would result in a reduction in staff requirement. The staff changes are detailed in the summary 2.10 at the end of this section.
2.09 Engineering
The Engineering Section comprises two Maintenance Engineers (one on each shift). They carry out all routine maintenance on plant and equipment and manufacturing machine tools and parts such
as shafts, window knives and guards. The Envelope Workshop is adequately equipped but there is now a requirement for a replacement lathe and surfaces grinding machine. The proposed programme
of capital investment is detailed in the summary 2.10 at the end of this section.
2.10 Summary of Costs and Savings
(a) Investment
| Section | Machine | Approx cost | Priority | Comments |
| Envelope folding | W&D 149 with print window | New £450,000
Used £100,00 | 5 | To replace existing large pocket machine which is 21 years old
| | Smith RA 80 | £350,000 | 4 | To replace W&D38CS latex/gum envelope machine with high speed, quick change | Printing Litho Print m/c Halm JetPlate making equipment £80,000£10,000 12 To cope with increased demand for quality printed envelopesTo improve flexibility and reduce lead time on specific orders
| Printing | Litho Print m/c Halm Jet | £80,000 | 1 | To cope with increased demand for quality envelopes |
| Plate making equipment | £10,000 | 2 | To improve flexibility and reduce lead times on bespoke orders |
| Cutting | Smithe PHP | £80,000 | 3 | To replace Schone Cutting Press (27 years old) and improve productivity |
| Engineering | Lathe | £15,000 | 6 | To replace existing maintenance equipment |
| Surface Grinder | £5,000 | | |
The projections include investment in priorities 1,2 and 3 in the year ending 31 March 1993, and priority 4 in the year ending 31 March 1994. Priorities 5 and 6 will be purchased when
Crayford freehold is sold.
(b) Redundancies
If it is not possible to achieve the staffing levels required by voluntary redundancies, the company will select individuals on a last-in-first-out basis. The table which follow show
the sections in which the redundancies will be implemented and the costs and annual savings. Table 1 shows the worst scenario from the cost point if volunteers are taken out and Table 2
shows the least costly (last in first out)
Section
| Name
| Annual Saving
£ | Payment
£ |
| W/H | R.E | 12,168 | 6,201 |
| Cutting | T.P. | 12,584 | 4,235 |
| Cutting | A.O.D | 12,636 | 2,430 |
| M/c Op. | M.K. | 11,908 | 9,274 |
| M/c Op. | G.V. | 11,908 | 3,206 |
| M/c Op. | A.W. | 11,908 | 7,900 |
| Total | | 73,112 | 33,247 |
Table 1 Net saving £39,865
Section
| Name
| Annual Saving
£ | Payment
£ |
| W/H | B.L. | 12,168 | 1,404 |
| Cutting | T.P | 12,584 | 4,235 |
| Cutting | A.O.D | 12,636 | 2,430 |
| M/c Op. | M.K. | 11,908 | - |
| M/c Op. | R.B. | 11,908 | - |
| M/c Op. | C.W. | 11,908 | - |
| Total | | 73,112 | 8,074 |
Net Savings £65,038
Table 2
The projections reflect the loss of 6 production staff in August 1991, and have included redundancy payments of £40,000 in respect of all staff.
(c) Sale of Surplus Equipment
| Machine | Approx Value |
| W&D 26 FA (No. 153) | £5,000 |
| W&D 46 (No. 155) | £5,000 |
| W&D 49 (No. 62) | £8,500 |
| Bruno (No. 158) | £10,000 |
The proceeds of £28,500 are reflected in the period to 31 March 1992
Sanco Cutting Press £500,
Vertical Baler £500,
Total £29,500
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