5S Provides Organized Approach for Continuous Improvement

by Gary Kerslake

5S, which stands for Sort, Straighten, Shine, Standardize and Sustain, is one of the core principles used as a tool for implementing either a lean manufacturing or distribution process.

As noted in previous newsletters, lean is a philosophy that can be applied to all areas, departments, or processes in any organization from the front office to the shop floor to the shipping dock. The primary objectives of lean are to both eliminate waste and create value for the customer.

5S is an organized approach to housekeeping that ensures tools, parts and other objects are in known optimum locations. 5S is also a process that organizes individual workstations or departments to increase efficiency at the micro-level by keeping the workplace neat, orderly and accessible.

What exactly are the 5S?

• Sort - Sort through and sort out junk, seldom-used items and unnecessary items. Red tagging is a technique for identifying and eliminating items that are not used
• Straighten - A place for everything and everything in its place. Establish firm locations for tools and equipment
• Shine - Clean and paint regularly. Also, inspect working conditions while cleaning
• Standardize - Define and standardize work processes, 5S activities and tasks
• Sustain - Make 5S a way of life, institutionalized in the organization

The key advantages to understanding and implementing a 5S program include quicker customer response, a more predictable work environment, improved employee safety, more productive time management, improved product quality, lower warehousing costs, less material handling and improved visual control of raw materials or finished product.

Why 5S?

• To eliminate wasted time and money
• To create a “zero tolerance” for waste
• To stabilize the production or distribution environment

What other advantages are there?

• Lower operating costs
• Improved visual control of both office and plant
• More productive time management
• Quicker identification of real problems in a work area
• An organized and clean work area is more predictable
• Increased support for the customer “pulling” production through the operation
• Raw materials and finished products are better managed
• Communication of production or distribution status is improved
• Organization and visual management support possible job rotations

What types of waste can we eliminate?

• Overproduction of product
• Delays or employees waiting
• Unplanned transportation
• Unnecessary process steps
• Unnecessary raw material or product safety stock
• Unplanned motion
• Defective products
• Untapped resources
• Misused resources
• Unnecessary expediting
  

How do we sustain the 5S? And Why?

• Celebrate successes
• Recognize improvements
• Set high standards then continue to test yourself for conformance
• A clean and orderly workplace facilitates positive change
• A cultural atmosphere for continuous improvement is established
• Space is made available for increases in business
• Pride in the workplace becomes a personal commitment for all
• 5S separates excellence from mediocrity

Please watch for future articles in this newsletter that address each of the other core principles of lean manufacturing or distribution.

*Gary Kerslake is a Supply Chain Consultant with Suby, Von Haden & Associates, S.C.

 

 

New Law Allows Faster Write-Off of Business Assets

The new 2008 Economic Stimulus Act includes several provisions that will benefit businesses by providing enhanced expensing and depreciation provisions for equipment purchased and placed into service in 2008. This tax relief will encourage businesses to make investments that will enable them to keep growing, and the requirement for investment in 2008 will achieve the stimulus bill’s goal of injecting money into the economy right away.

Section 179 Expensing
Code Section 179 allows taxpayers to elect to treat the cost of Section 179 property as an expense deduction for the tax year in which the Section 179 property is placed in service, instead of having to capitalize the expense and recover the cost over several years. Generally, Section 179 property is acquired by purchase for use in the active conduct of a trade or business, and is generally either tangible property to which accelerated cost recovery applies or computer software (to which depreciation applies) placed in service in tax years beginning after 2002 and before 2011. The property must be used more than 50 percent for business.

The 2008 Economic Stimulus Act made no changes to the general rules for the types of qualifying property but did increase the 2008 Section 179 expensing limits from $128,000 to $250,000, and increased the 2008 phase-out threshold from $510,000 to $800,000. The new law does not alter the Section 179 limitation imposed on sport utility vehicles, which have an expense limit of $25,000.

Bonus Depreciation is Back
For assets purchased and placed in service during 2008, the Economic Stimulus Act allows trades or businesses to depreciate an additional 50 of the cost of the assets. The types of property eligible for this 50 percent bonus depreciation will be the same as those included in previous bonus depreciation packages: (1) tangible property that had a recovery period not exceeding 20 years (2) purchased computer software (3) water utility property, and (4) qualified leasehold improvement property. The original use of the property must begin with the taxpayer. The bonus depreciation will be allowed under the alternative minimum tax (AMT).

Note: When using both the Section 179 expensing and the 50 percent bonus depreciation on the same asset, the Section 179 amount is applied first. Any amount not expensed under Section 179 or depreciated under the 50 percent bonus depreciation is depreciated in the normal manner.

Vehicle Depreciation Limits Increased
For vehicles, the luxury auto limits still apply. However, the limits for 2008 have been adjusted to account for the new 50 percent bonus depreciation by adding $8,000 to the luxury auto first-year depreciation limit, allowing a taxpayer to deduct up to $11,060 for a passenger vehicle (which is the normal $3,060 cap plus the additional $8,000). For qualifying trucks and vans, the cap increased by $200 (to $11,260). When a vehicle is used partially for business and personal use, some pro-rations may apply.

Caution: The new 50 percent bonus depreciation automatically applies unless a taxpayer elects not to take it.

Please call your SVA professional if you would like to discuss how these new tax benefits may apply to your business situation.