November, 2008

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Article Index

Expanding Lean Manufacturing Concepts to the Office
Article by: Audrey Thomas
Loyalty, enthusiasm and pride are valuable gifts from an employee to his/her company. Management can give back by sharing their Lean factory program with the office staff.
Going Green May be Good for the Bottom Line
Article by: Brad Theisen
The Energy Efficient Commercial Building Tax Deduction has been extended. If your company owns or leases commercial buildings that have been remodeled to be more energy efficient, you may be eligible for a deduction for all or part of the costs associated with the installation.
Major Food Processor Updates Equipment and Saves Energy
Article by: Kim Lidbeck
There's no question that energy costs are on the rise. Consider a partnership with your utility company to make sure you're running your business as efficiently as possible.
MN Economic Condition
Article by: Dr. Ernest Goss
For the month of November 2008, reported December 1, 2008. For the eighth time in 2008, Minnesota's Business Conditions Index tumbled below growth neutral.
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Expanding Lean Manufacturing Concepts to the Office
Loyalty, enthusiasm and pride are valuable gifts from an employee to his/her company. Management can give back by sharing their Lean factory program with the office staff.

While “Lean” doesn’t arrive in a colorful box to be unwrapped and installed, its tangible results are visible in the positive attitudes of the employees and increased efficiency in the factory and in the office.

Transferring Lean manufacturing concepts to the office may take some convincing. First, office employees must accept the philosophy as appropriate for their work space. Individuals may find it hard to imagine implementing concepts originally designed for factories into a working office environment. While they wade through company policy, orders and emails, the factory folks are already steeped in the language of Lean and comfortable with words like “kaizen” and “kanban.” How Lean relates to the office workers may not be clear, yet.

As management unwraps the colorful box filled with Lean ideas, office workers should be informed that Lean will reduce their daily stresses by eliminating office clutter and cutting costs. Clearly and positively defining “Lean” plays a big part in how fast employees will embrace the techniques and how excited they feel about the change. Ongoing communications and education will boost employees’ understanding of this new philosophy and culture.

Here are some common misconceptions that need to be sorted out and straightened up before lean can flourish in the office:

Myth #1 Lean is for the shop and can’t be applied or adapted to my office.

When first introduced, improving efficiency and decreasing clutter in just five steps can easily be looked upon with suspicion. A proper introduction will result in the “buy-in” necessary for success—that means showing that your company is dedicated to good results.

For example, I helped a company with a 5S Kick-off, where an entire day was devoted to Sorting and Straightening. This showed employees that the company was willing to let the employees invest their full time and energy to the project. People can not be expected to welcome 2 to 3 hours of Red Tagging items and then head back to their desks to tackle their daily chores. At the end of the “Sort Day” the company was thrilled to report that nearly all of their employees had Sorted to their hearts’ content, filling a myriad of dumpsters and sifting through countless file cabinet drawers.


Myth #2 Lean will require me to work faster and harder.

Lean isn’t about increasing the pace or the drudgery; it’s about allowing for increased productivity by establishing a roadmap to more efficient business methods. It’s important to show employees possible ways to implement systems and standardize processes in and around the office. I’ve seen employees’ eyes light up when they learn how to save time with their email or how to cut down on the steps to processing an order.

Myth #3 Lean Office is a management fad.

Management needs to show that Lean matters. Most companies that introduce Lean keep it because it has proven effective and results in sustained efficiency and higher productivity. Regular communication with employees about the Lean process is one way to increase understanding and reinforce these new policies.

Myth #4 Lean’s language is so different I’ll probably have trouble applying it to my office.

Patience is imperative as employees begin to learn and integrate the unfamiliar language and concepts. Lean books and literature should be available in common meeting areas such as the cafeteria or break room. In-house Lean tip sheets can make learning easy, fun and practical.

Once office employees increase their confidence level with using Lean concepts, they’ll want to share improvements and ideas with their shop floor counterparts, bridging the gap between the shop and the office, and increasing loyalty, enthusiasm and pride within your any company.
<img src="http://www.mfrall.com/newsletter/authorpics/audreythomas.jpg"align="left">Audrey Thomas, president of Organized Audrey, LLC, helps lean manufacturing companies to reinforce lean principles in their offices. She can be contacted at www.LeanOffices.com

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Going Green May be Good for the Bottom Line
The Energy Efficient Commercial Building Tax Deduction has been extended. If your company owns or leases commercial buildings that have been remodeled to be more energy efficient, you may be eligible for a deduction for all or part of the costs associated with the installation.

Eligible costs include anything that can be capitalized, including labor. This deduction applies to property placed in service after December 31, 2005 and before January 1, 2014.

Companies that qualify for this deduction have the potential for immediate expensing of costs that would otherwise be capitalized and recovered through depreciation over 27.5 or 39 years. Taking the deduction will allow companies to benefit from increased cash flow.

For purposes of this tax deduction, "energy- efficient" commercial building property is defined as follows:
  • Installed on or in any building located in the United States that is within the scope of Standard 90.1-2001, Energy Standard for Buildings Except Low-Rise Residential Buildings, of the American Society of Heating, Refrigeration and Air Conditioning Engineers and the Illuminated Engineering Society of North America,

  • Installed as part of interior lighting systems; the heating, cooling, ventilation and hot water systems; or the building envelope, and

  • Certified as being installed as part of a plan to reduce the total annual energy and power costs of interior lighting systems, heating, cooling, ventilation, and hot water systems of the building by 50 percent or more when compared to a reference building, which meets the minimum requirements of the Standard noted above.
The deduction is equal to energy-efficient property expenditures made by the taxpayer, subject to a cap. The deduction is limited to $1.80 per square foot of the property where the expenditures were made and is allowed in the year the property is placed in service - defined as when the property is ready for its intended use. The company or individual that pays for the construction is generally the one eligible for the deduction. Usually this is the building owner, but for some lighting efficiency or HVAC projects, it could be the tenant.

In order to qualify for the deduction, certain requirements must be met and detailed in a certification with respect to the property. Certifications must be made by a qualified individual not related to the company who is claiming the deduction. The certification should also come from an individual who is licensed as an engineer or contractor in the building's jurisdiction.

For buildings that do not meet the whole building requirement of a 50 percent energy savings, a partial deduction is allowed for each separate building system that comprises energy-efficient property and is certified by a qualified professional as meeting or exceeding specific savings targets.

Due to their ease and availability in upgrading, as well as the known energy efficiencies, building owners are encouraged to focus their initial energy-efficiency projects on lighting. The system energy savings target for lighting systems is met by a reduction in lighting power density of 40 percent, 50 percent for warehouses. Partial deductions are also available, depending upon the reduction in lighting power density.
Going green is not only good for the environment it is also good for your bottom line! If you would like more information please contact Brad Theisen at 952.918.3539 or btheisen@eidebailly.com.

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Major Food Processor Updates Equipment and Saves Energy
There's no question that energy costs are on the rise. Consider a partnership with your utility company to make sure you're running your business as efficiently as possible.

For example, Xcel Energy offers online, ENERGY STAR® benchmarking, and on-site energy audits to help you get started.

The programs provide a way for Xcel Energy customers of all sizes and energy-use habits to learn how their businesses use energy today. This allows them to identify measures that could help them save energy and reduce operating costs in the future. As an extra incentive, you get rebates for many of the measures identified in your energy audits.

One local case study shows how much energy and money you can save.

Case Study: Archer Daniels Midland (ADM)
Customer: Dave Turner, Plant Manager, ADM



Situation Analysis:
Archer Daniels Midland (ADM) of Red Wing, Minn., produces oil and meal - basic components for many of the company's food products. Sunflower and flax seeds are brought in bulk to the processing facility. Conveyor systems are a significant part of processing because so much bulk material is transported. ADM achieved significant energy savings by opting for premium-efficiency equipment.

Facility Statistics:
ADM had an existing transfer system that consisted of three screw conveyors, a mill and a bucket elevator with a total electric load of 115 horsepower (hp). The company wanted to upgrade the system to improve efficiency and reduce repair and maintenance costs.

Challenge:
The planning team at ADM wanted to reconfigure its system layout to take advantage of a more efficient drag conveyor system.

Required Results:
  • Increase energy efficiency in conveyor system

  • Reduce downtime for maintenance

  • Increase productivity

  • Improve work environment and safety
Financial Summary
Estimated total project cost $120,000
Xcel Energy rebates earned $13,000
After-rebate cost $107,000
Annual energy savings $23,000
Payback term 4.7 years

Solution:
ADM opted for a system with two sections of drag conveyors and a static separator, which used just 30 hp or 74 percent less than the old system. ADM had worked with Xcel Energy on previous conservation efforts when they replaced their motors and upgrading lighting.

Conveyor systems such as the type ADM installed are applicable to many industries with continuous demands such as mining, pulp and paper production, plastics and pharmaceutical production, waste treatment and recycling businesses, and other industries that move sand, gravel and other bulk materials.

Benefits and Results:
  • Incentive: Xcel Energy rebate paid for more than 10 percent of the total cost

  • Productivity: Increased production efficiency and reduced maintenance costs

  • Energy savings: Long-term energy savings of approximately $23,000 annually

  • Maintenance reduction: Reduced housekeeping costs due to cleaner operation; new system keeps raw material from escaping from the conveyor

  • Employee safety: Improved safety due to system design

  • Work environment: Better work environment for employees with a cleaner, safer system and less downtime
<img src="http://www.mfrall.com/newsletter/authorpics/KimLidbeck.jpg"align="left">Kim Lidbeck is a Product Portfolio Manager at Xcel Energy in Minneapolis. She manages the Custom Efficiency program which covers energy conservation for business customers. For more information on this and other conservation programs through Xcel Energy, please contact the Business Solutions Center at 1-800-481-4700.

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MN Economic Condition
For the month of November 2008, reported December 1, 2008. For the eighth time in 2008, Minnesota's Business Conditions Index tumbled below growth neutral.


The November index declined to 33.5 from 39.1 in October and 43.4 in September. Components of the overall index for November were new orders at 23.4, production at 29.1, delivery lead time at 52.5, inventories at 48.7, and employment at 32.5. "The state has lost 2.7 percent of its manufacturing jobs over the past year. I expect this direction and pace to continue well into 2009. During the 2001 recession, Minnesota's unemployment rate rose to only 4.4 percent. I expect the seasonally adjusted jobless rate to rise to 6.5 percent by February 2009," said Goss.
Dr. Ernest Goss of Creighton University, used the same methodology as The National Association of Purchasing Management to compile this information. An index number greater than 50 percent indicates an expansionary economy, and an index under 50 percent forecast a sluggish economy, for the next three to six months.

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