How Ceradyne Increased Productivity through Effective Labor Management

March 17, 2008
With real time data and workforce analytics Ceradyne has 24x7 shop floor visibility that gives them the ability to adjust on the fly and gain maximum savings by synching up the right resource with the most pressing need.

If there is one thing that is common to virtually all manufacturers it is that they face incessant pressure to lower costs while maintaining high quality. Most manufacturers have already automated as many aspects of production as possible so the final frontier for wringing costs out of the process is to increase productivity. This is a challenge because increased productivity that truly improves a company's performance only comes through improving the cumulative effect of labor availability, performance, and quality.

Shop Floor Visibility Key for Ceradyne

Headquartered in Costa Mesa, Calif., Ceradyne Inc., is a 40-year-old fully integrated developer and manufacturer of advanced technical ceramic products and components for defense, industrial, automotive, nuclear, electronic and medical markets. It is a high-growth, maturing company with revenues growing aggressively -- more than doubling from 2005 to 2007 -- going from $368 million to $757 million.

Ceradyne is committed to developing leaner -- not meaner -- manufacturing practices. In the spirit of putting such guiding principles in place, the company relentlessly seeks to lower costs and eliminate waste while positively impacting worker morale.

Uncovering True Workforce Availability

To combat the challenges often faced by Ceradyne with shifting lead times and uneven product demand, and to maintain shop floor visibility in real-time, the company selected the Kronos for Manufacturing workforce management system.

The new system helped Ceradyne solve critical issues that enabled it to quickly redeploy resources and maximize workforce efficiency. For instance, one of operations real-time reports is called the "Who is here" report, which allowed the operations managers to know at all times who is on the premises, and working and what skills he/she possesses.

Say, a machinist has the flu and will not be in that day. Operations would have to manually go through employee records trying to find someone who could fill the position or go to an agency and hire someone on a temporary basis. Now Ceradyne can quickly identify potential replacements within the organization and fill the gap while using employees who are already on the payroll without any additional paperwork to fill out for labor allocations and adjustments. All required labor transactions are automatically tracked. This is a significant cost avoidance opportunity for Ceradyne's operations in its effort in achieving Lean Manufacturing.

This speed of workforce information flow -- real time data and workforce analytics along with lower transaction costs -- provides 24x7 shop floor visibility and gives Ceradyne the ability to adjust on the fly and gain maximum savings by synching up the right resource with the most pressing need.

Going Virtually Paperless

Another area of concern for Ceradyne was the challenge of a paper-based reporting system. The company found that the latency of this system was a real impediment to enhancing productivity gains in the deployment of its workforce. Employees didn't appreciate having to fill out numerous paper forms and many errors were made as forms were re-entered into multiple business systems. The data was also hard to compare since operations management wasn't receiving standardized reports.

Using the new system, Ceradyne's data integrity improved significantly as data could be validated and the ease of use of the system better ensured user compliance. This resulted in far fewer data corrections and lowered overall transaction costs. Complete labor audit trails also led to improved revenues for the company due to the nature of the government contracts.

Employee morale also improved. There was less paperwork to be filled out, less redundant work, more mobility and flexibility, and fewer administrative activities, which led to more transparent performance information and, in the end, higher pay.

Overall Labor Effectiveness

In order to successfully increase productivity, cumulative effects of labor availability, performance, and quality need to be balanced. Otherwise improvements in one area, such as performance, only come at the expense of another area such as quality.

A new model for providing this capability is called Overall Labor Effectiveness (OLE). This model and tool set, developed by Kronos, provides insight into workforce productivity, clarifying the impact of both direct and indirect labor so companies can trim costs and recognize opportunities for increasing overall productivity and profitability. It gives manufacturers a balanced key performance indicator (KPI) that breaks down workforce efficiency into three categories: availability, performance, and quality:

  • Availability refers to providing and scheduling the right mix of employees with the goal of ultimately increasing the number of productive hours
  • Performance refers to the time it takes for new employees to become productive and relates it to the timing and content of the training process
  • Quality refers to the ability to detect variability in the quality of output and having the data to take steps to reduce the scrap rate

While all three categories are critical, availability is one area where manufacturers with in-place workforces can leverage to consistently provide and schedule the right mix of employees to enhance the number of productive workforce hours.

Manufacturers have made great strides in optimizing materials usage by implementing powerful supply chain applications, but the labor side of the equation, which concerns a company's most vital and controllable resource, has been largely neglected. Companies will continue to miss the productivity rewards that can result from optimizing labor availability, performance, and quality of work, if appropriate metrics are not adopted. The productivity gains include significant cost savings and improvement in market competitiveness.

Mark Nguyen is IT Project Manager at Ceradyne Incorporated. Ceradyne is a 40-year-old fully integrated developer and manufacturer of advanced technical ceramic products and components for defense, industrial, automotive, nuclear, electronic and medical markets. Learn more at

Gregg Gordon is Global Manufacturing Practice Leader at Kronos Incorporated. Kronos Incorporated specializes in managing the workforce, more than 30 million people using a Kronos solution every day. Kronos for Manufacturing is a comprehensive offering of software and services designed to improve business productivity and profitability, increase resource utilization, and ensure compliance. Overall Labor Effectiveness(tm) (OLE), the model and toolset pioneered by Kronos, is a key performance indicator (KPI) that measures the utilization, performance, and quality of the workforce and its impact on productivity. Learn more at

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