Case Study 2-10820
IET delivered a true labor cost for an entire product line for an automotive supplier after a change in process specifications required a change in process production. The labor variance measured against the original quote to the automotive supplier yielded a price increase that was equal to $2 million in additional revenue to their business in 2010.
An automotive plastics molding and paint supplier.
IET performed all the required time studies from molding through final inspection of the paint line. By defining value added activities and non-value added activities, IET was able to clearly delineate between what the customer would be willing to pay for and what they would expect to be leaned out of the process.
IET summarized the new time studies and compared them to the time studies performed at the quoting stage earlier in the life of the product to show how much additional labor was introduced into the process with the more stringent quality standards. Because of the completeness and accuracy of the time studies and report, the customer agreed to increase the part price to more aptly reflect the labor required for production. This increase in piece price netted IET’s customer approximately $2 million in revenue in 2010.