Shop Floor Strategies - Managing Scrap and Rework
A tough business climate as today's challenges corporations to introspect and reinvent themselves. This also provides businesses with an opportunity to improve their odds of success during a recession by striving to achieve operational excellence in all functional processes including manufacturing. One of the keys to improving operational effeciency in the shop floor is to identify and reduce non- value adding activities and waste as much as possible. Managing rework and scrap is one such area to focus on. Rework and scrap often constitute a significant proportion of work content and material handling in the shop floor, yet organizations rarely expend the necessary effort to systematically reduce scrap and rework in the plant and floor areas.
Rework and scrap inject additional processing time to a production line and can also result in additional needs for material handling throughout the plant. In a machining plant for a world leader in industrial equipments, nonconformances resulting in rework and scrap accounted for about 21% of total transactions on an average per day. Yet, they were handling rework and scrap as they came every day, without any focused approach to analyzing these and formulating a process driven system to identify the prime causes and focus on their elimination. That is why historically they have had rework amounting to roughly one- fifth of their regular work.
Rework impacts the daily output of a production line because of the additional time and material required for the rework. It is necessary to develop metrics to measure the rework in quantifiable terms. Once the metric has been determined, it is necessary to collect the data related to rework as per the metric identified. Proper analysis of the collected data (statistical and emperical), would lead to identification of the main causes of rework. These analyses identify the process, or machines or resources that mostly induce the rework.
Scrap causes additional material handling in the plant in moving the scrapped material from the point of detection, to the point of inspection, and then upon disposition, out of the factory. As with rework, the data regarding scrap also needs to be captured and analyzed. This would help in identifying the major causes of scrap. Scrap can be caused in the shop floor due to various reasons such as a faulty machine, operator skill levels, or problem with the raw material provided by a supplier etc.. Preventive actions, such as automated quality checks for incoming raw material, quality checks built into each production process, automated measurement of process capabilities across the relevant dimensions etc. can help in reduction of scrapped quantities.
Effectively managing rework and scrap would lead to a lower cost of quality and less interruption to the regular flow of work. They present two areas of cost savings and operational improvements for plants that strive towards excellence in manufacturing. The current economic climate challanges businesses to squeeze costs and ineffeciencies in order to generate profits for their shareholders. This could be the key to surviving the economic downturn. The plant mentioned in the above example, has a lot to gain by focusing on systematically managing rework and scrap. Questions to fellow bloggers:
- What initiatives of managing and reducing rework and scrap have you come across?
- Can you share any metric developed to measure and manage rework and scrap?
Comments
It is in no one's interest to inspect every lot of material being received from supplier or manufactured inhouse. Inspection is wasteful activity and every batch inspection would be against lean principles. However, skip lot inspection (inspecting, say 1 in every 10 batches, being received or produced) has been effective in reducing scrap and rework. Skip lot inspection measurements, with the help of basic statistical tools, can identify process capability issues when done over a period of time.
Also, since a lot of scrap/rework is attributed to suppliers, treating suppliers like partners and inculcating quality in their manufacturing also goes a long way in combating internal scrap/rework.
Posted by: Gaurav Yadav | November 30, 2008 4:36 PM
I broadly agree, inspecting all the incoming material would definitely be an overhead, however, upon analysis of scrap and rework data, if a pattern is discovered for issues with incoming material for specific suppliers, the inspection strategy needs to be revisited, and a subsequent step would be partnering with those suppliers. There are several automated methods of inspecting incoming material, depending upon the specific material and industry which could be employed to ensure consistency in quality. At the same time, for a plant that averages 20% scrap and rework, should definitely look at more detailed inspection than they do now (they inspect the first few lots upon receipt and no more- so even skip lot will give better results than their current inspection practices). The tradeoff between upfront quality inspection and downstream costs of rework and scrap caused by faulty material is something that needs to be measured for a factory and then an optimum amount of inspection needs to be built in, keeping the total cost of quality in mind.
Posted by: Rupam Das | November 30, 2008 6:17 PM
One interesting perspective I would like to bring out is the treatment of scrap and rework when trying to map such transactions to any ERP package.
Broadly, scrap can be treated as Work in Process scrap and Inventory Scrap. Scrap Recovery is also a very interesting business process - in some industries scrap recovery percentages are higher so there is a greater need to treat scrap accurately. The accounting and finance implications of treatment of scrap is also very interesting in the ERP space.
It would be interesting to hear some of the ways you manage scrap and rework from an ERP system perspective along with the corresponding accounting implications.
Posted by: Somnath Majumdar | December 2, 2008 10:26 AM