This Not-So-Hidden Manufacturing Cost Is Cutting into Your Profits

This Not-So-Hidden Manufacturing Cost Is Cutting into Your Profits

Bluestreak

Reading Time: 3 minutes

While every manufacturer strives for optimal efficiency, we all know that perfection in everything we do is rarely achieved. Even the most-efficient top performers in the manufacturing industry still wind up with some scrap and rework.

On average, these top performers’ waste, scrap, and rework total 0.6% of revenue. Less-efficient manufacturers spend as much as 2.2%. That means inefficient companies waste more than three and a half times as much of their revenue due to scrap or rework. That’s real money. Some companies do even worse. The COPQ (cost of poor quality) can account for as much as 30% of gross sales.

Tracking Scrap and Rework

Do you track the amount of scrap and rework in your operation? If so, congratulations! Most companies don’t and have no real idea of how much money they are losing. In some cases, the estimate of wasted manufacturing cost can be off by millions of dollars.

Cost of Scrap and Rework in Manufacturing

Many factors can create rework and scrap:

  • Errors
  • Omissions
  • Failures
  • Damage
  • Change orders
  • Machine breakdown
  • Poor maintenance
  • Poor design

The costs of rework and scrap can be substantial. Material costs, labor, and wear and tear on the equipment all add up—so do energy costs. A study by the US Energy Information Administration states that improving a manufacturer’s scrap and rework can shave 5-15% off a company’s energy bill.

It can also lead to project overruns that reduce—or eliminate—profit margins.

These issues are bad enough, but if poor quality work gets out the door to the end customer, that can lead to even bigger problems.

How Do Top Performers Reduce Scrap and Rework?

A recent survey of world-class performers revealed that they approach quality differently than other manufacturers. They have a relentless obsession with quality assurance (QA) and continuous improvement. This attention drives down manufacturing cost and increases quality.

When asked about their top priorities, these top performers said that they focus their attention in five key areas that they believe are essential to improve:

  1. Reducing manufacturing costs
  2. Improving workplace safety
  3. Eliminating process waste
  4. Setting up time reduction

Each item can be addressed with a quality management system (QMS) as part of a QA program. The most efficient performers use end-to-end QMS software that tracks raw materials from the moment they get ordered until the finished parts go out the door.

Using a paperless workflow, they can make sure every detail is instantly available in one place to anyone who needs it. When a work order is changed, the new specifications are in place, and a process can’t move forward until someone on the production floor acknowledges the change. By eliminating information silos, clear communication cuts down on scrap and rework.

These companies also have formal QA programs to reduce defects, avoid conflicts, and mitigate errors. They have documented, consistent processes and practices, as well as continuous improvement programs to increase quality and efficiency.

How Bluestreak Reduces Scrap and Rework

Bluestreak’ Integrated Quality Management System ties quality control and QA directly to individual work centers and processing steps on the production floor. Every detail is in one inclusive database, with no separate silos of disjointed data. Paperless workflow can be viewed by everyone in the production chain on workstations or mobile devices.

Job tracking and routing create an efficient production pathway that ensures personnel and equipment are qualified and available for the job. Real-time updates, including work order changes, and risk scoring provide total transparency.

Front office personnel can centrally manage customer information, including billing, shipping, part data, POs, quotes, and specs.

Managing Scrap and Nonconforming Parts

One other way that Bluestreak’s MES/QMS system excels is in the management of nonconforming parts and scrap. It automatically issues non-conformances that prevent parts from entering the next step in processing. It can stop small issues from becoming big problems.

Bluestreak also manages advanced disposition control of scraps and parts.

When corrective actions or preventative actions (CAPAs) are needed, they are automatically connected to future orders. Quality managers can track CAPA instructions, which must be viewed and acknowledged by shop floor personnel before proceeding. It also helps enforce data collection from the shop floor during processing.

As parts are produced, quality test data is stored and a complete audit trail is available for compliance. This includes everything from version tracking, approvals, and notifications to policy administration of quality documentation. Bluestreak provides a detailed, time-stamped, and user-identified audit trail for each document to meet required accreditations, certifications, and compliance standards, such as ISO 9001 or AS9100.

Conclusion

All these practices can help reduce scrap and rework. By having a consistent, transparent process with end-to-end tracking, manufacturers can improve their quality and reduce waste. This leads to a lower overall manufacturing cost, which leads to a more profitable company!

Contact Bluestreak, and reduce the amount of scrap and rework in your manufacturing operation.

Bluestreak’s MES + QMS solution helps service-based manufacturers drive quality straight down to the production floor to minimize scrap and rework and therefore, protect their profit margins.

If you’re ready to leave manual, time-consuming, service-based manufacturing tasks in the past, drastically reduce your scrap and rework percentage, gain visibility of your production floor processes, and build better relationships with your customers, contact us for a free consultation today!