When it takes 10,000 labor tasks and 1.2 million labor hours to build one product, tracking costs is quite a task. Aker Philadelphia Shipyard, a leading U.S. commercial shipyard constructing vessels for customers including the U.S. Navy, employs 700 full-time and 500 contractors to build 2.8 ships per year.
Managing such a large workforce requires complex tracking system. "Before you start collecting data, make sure you know how you will use that data," advises Michel Boeckx, Chief Technology Officer at Aker Philadelphia Shipyard. Boeckx deftly used safety data he collected, via software company Kronos, in order to improve work practices. The company saw 41% fewer eye incidents over a year as well as other improvements. These collective improvements enabled the company to reduce medical insurance by two million dollars.
And tracking labor costs is no small feat for Aker. Contract labor is a high cost for the company as it must bring in expertise from around the world. The company was able to move away from separate paper-based contracting systems used for full-time employees and contractors into one system under and was able to reduce the contact agency invoice reconciliation time from four days to one hour.
Another savings was realized by reducing payroll service bureau and error filing fees when the company was able to use systems that allowed for performing tax calculations required by the various countries on employees' wages. Annual fees for errors were reduced from $90,000 per year to $5,000 per year.
Data collection was also instrumental in allowing the company to increase its throughput from 2 ships annually to 2.8 ships. This was accomplished without having to increasing the size of the facility. "The increased visibility into our costs gave us the tools we needed to increase productivity," said Boeckx. He cites that by using overall labor effectiveness (a measurement created by Kronos) he reduced hours per ship by 30%, or over 300,000 hours. That translated in to a savings of $3 million.
"The key to success was our rigorous and disciplined analysis which was able to provide direction to our IT investment. Combining best of breed can deliver competitive advantage that the ease of a single system cant deliver," says Boeckx.
For more details on Aker's success listen to IndustryWeek's webinar entitled,
"Best of Breed Strategy: Lean Labor Results."