Original Date: 10/18/1999
Revision Date: 01/18/2007

Orenda Turbines believes the ability to maximize profitability while containing customer costs depends more on the application of good, practical business sense by managers and employees, and less on high-tech, automated financial systems. In 1995, the Finance Department developed user-friendly tools and resources to assist managers and supervisors in managing their resources effectively and efficiently. Prior to these tools, the Department recognized that its system-generated cost reports were rarely, if at all, being utilized by department managers. The reason was because these bulky, batch print-outs were too long, detailed, and complex. Line managers did not have the time or financial expertise to decipher and use them.

The Finance Department began looking at ways to provide simple, accurate, and timely reports. The Department also wanted to introduce line supervisors and managers to methods and techniques that would contribute to cost improvements and increased profits. They recognized that the most effective ways to improve profitability, while keeping customer costs down, were to reduce overhead and shorten turnaround time. They developed visual methods to display overhead costs and turnaround times by placing white boards on the shop floor. These boards show sales; cost of sales; gross margin by major product line; real-production times; and customer turnaround times in a visible and easy-to-understand format. The old financial data print-outs were eliminated and replaced with a weekly employee utilization report that clearly shows managers the productive and non-productive times for their workers. The employee utilization report helps managers ensure that their workers are engaged in useful and effective activities. Another report used is a one-page summary for all departments which displays manpower utilization and weekly trends. In addition, brief lectures are provided as part of the weekly Continuous Improvement Meeting on finance topics such as financial ratios, letters of credit, budgeting, and understanding financial statements.

Orenda Turbines’ tools and resources have raised the visibility and level of understanding of critical financial measures and made them useful to line managers for improving overall performance. Since this information became available, overhead charges by direct labor personnel decreased by 30%. The company also reduced lateness, absences, and other non-productive time activities by nearly 60%, which significantly increased profitability. Additionally, the weekly lectures have produced cross-training benefits and improved employee utilization.

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