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AI Potential Profit Increase Estimation

The Data Mining and Cleansing process provides valid current cost data on:
  1. Total setup time,
  2. scrap, rework,
  3. machine downtime,
  4. On-time delivery failure to customer schedule.
Current Accounting Cost: is the potential profit impact of reducing the first three wastes by 75% to reduce current direct labor and capital cost. Opportunity Cost: How much additional Operating margin would be generated if:
  1. 75% of the first three waste costs were reduced and the labor used to produce more revenue.
  2. How much additional Operating margin would result from customer good will accruing from 98% on time delivery.
In general, the Opportunity cost is significantly greater than the Current Accounting cost. The generation of an estimate of the Profit Increase Opportunity of implementing AI requires a cross-functional team from AIT and client Accounting, Manufacturing, Quality and Marketing personnel. The Profit Increase Opportunity analysis will be reported to the relevant management with P&L responsibility. Should the P&L manager elect to move forward, the AIT practice leader and the P&L manager will confirm project scope. AIT will generate a proposal for consideration by the client.
Figure 6-1 AI-Enabled Plant Layout (Like Machines Virtually Grouped Together)

The Pull System dramatically improves the linearity of production through the month, measured as the cost of jobs finished in the last week of the month divided by the cost of jobs finished in the first week of the month[i]. (see Figure 1-6). This dramatically reduces peak loads throughout the plant as well as overtime cost, late delivery and expedited delivery cost. Most importantly, >98% on time delivery creates happy customers and more sales.
Reference: 1. “Lean Six Sigma in the Age of Artificial Intelligence” pp 43-55, 132-138