Feb 10 2008

Vanishing Material

Published by at 10:55 am under Uncategorized

Requisition 1,000 pounds of raw material and ultimately ship 1,000 pounds of product.  While that’s the goal it’s amazing that at the end of the day production has requisitioned 1,200 pounds of material to ship their 1,000 pounds of product.  What happened to the excess? Did it vanish into the air or something?  Is this why this job is a money loser?
Be able to account for all your material.  There’s a thought  Yes?  But we can’t use the Management Approach of “The beatings will continue until morale and profits improve” because it doesn’t work.  Going LEAN to the point of a Forced Labor Camp also only shows momentary improvements but over time it doesn’t work without the dreaded Capital Expense.

Since management is always interested in improving profits without having any additional expense here are some things to look at:

ACCURATE ESTIMATES? While this phrase seems like a contradiction in terms it is amazing how many people don’t look at the product’s net part weight.  Net Part Weight has several definitions that need examining:

Actual Part Weight – This is an exercise in laziness.  It’s amazing how many parts are quoted at some part weight but nobody ever goes back and (dare we say it?) actually weighs the part and inputs this into the material usage equation.

Minimal Part Weight – Let’s assume you have a flat (as opposed to deep) part.  Logically if you burned the parting line together to get to a minimum wall stock thickness two things would happen:  Because the wall stock got thinner, you’d use less material/part and the cycle would speed up because you had less material to cool.

Factored runner weight – Just for giggles let’s assume you have a 10% regrind allowance and you’re not using hot runners.  Ideally the runner’s weight would be less than the allowable 10% regrind, however in the real world it almost always isn’t.  Therefore if you play by the rules, there will always be regrind left over at the end of the run.  Since your customer isn’t paying for this excess material, you are – directly out of your profits!

Moral:  Make sure what your customer is paying you accurately reflects what the part costs you to make it.  The SPI Standards clearly state you have the right to revise the part price once production commences.  If they threaten to pull the tool because you want a 2% price increase you are also allowed (by SPI)  for the first year of production to charge an engineering removal fee for your efforts in starting up the tool.

OVERHEAD, CHANGEOVERS, MATERIAL ALLOWANCES.

Change over material weight – This is partially a function of (1) the run’s volume, and your (2) production schedule.  Here’s where the whole LEAN thing gets silly. No matter what you do, the amount of purging – that usually can’t even be recycled – has to be entered into the costing structure.

Volume – Without regard to anything let’s say it takes 20 pounds of material to purge a machine.  If you run in JIT short LEAN runs; part of the price you pay is the 20 pounds each time you run the mold.  I’ve even seen runs where these 20 pounds of purge represented 10-30% of the overall material consumption (Although management was giddy about their LEAN management).  Does the LEAN philosophy pay for the 20 pounds of purging?

Schedule – Let’s say our production run is coming up and we’ve figured in the 20 pounds we’ll lose in purging. Let’s assume our material is optic clear crystal styrene.  Within the next day three machines will open up; all being capable of running this job.  The first machine is making housings out of color matched blue 10% glass filled Acetal. The second machine is running carbon black filled ABS making automotive parts.  The third machine that will become available six hours after the first one is available is currently running crystal styrene making optic lenses.  While this example is a ‘Duh!’ example; you’d be amazed how many schedulers will opt for the first machine available ignoring the fact it might take all day to purge before the blue material is no longer in the machine as opposed to delaying the run and taking advantage of not having to change any material.

SPILLAGE
Those plastic pellets you sweep off the floor cost more than a good steak on a per pound basis.  Even worse, profit margins are usually in single digit percentages.  If you’re making 5% net profit; for every dollar’s worth of material you put into the trash bin wipes out the profit you made from twenty dollars worth of parts.  Think about it.  Spillages comes of bad housekeeping, not paying attention to the grinders/hoses/ loaders as well as not having a stable platform to stack the material on in the warehouse (poorly taped bags, uncovered barrels, crushed Gaylords etc.)

If you did nothing more than address the above three your net profits would go up dramatically.

$  $  $  $  $  $

EXPLAINABLE VARIANCES – This is purely an accounting term.  It allows an explanation (an ‘accounting’) for something that isn’t in your costing structure.  For me (personally) an Explainable Variance is as acceptable as listening to my seventeen year old niece explain, coming home drunk from a date having acquired a skanky tattoo on her butt, on the back of a motor cycle driven by a Hell’s Angel who was not the guy who originally took her out on the date, arriving at home  at 4:00 AM when she had an 11:00 PM curfew.  While everything was explainable to me and her Dad it definitely wasn’t acceptable.  In a molding operation I feel the same way about the lame excuses for an ‘explainable variance’.

The biggest problem with profits is forgiving excess scrap.  You should not only find out its cause but correct the problem.  More importantly you shouldn’t tolerate the same excuse for the same defect the next time you run this mold.  Start with the goal of finding the ‘bad actors’.  These are either problem molds or certain problem machines.  Do the appropriate maintenance.  Your first goal is to cut the scrap from these bad actors by 50%.  Now go back and re-evaluate.  Some of your bad actors will fall off the list and other will come on.  Again set your goal at reducing whatever the scrap percentage is by half.  Keep this up until everything is lower than 1%.  This project will immediately show you poorly maintained equipment, tools and poorly trained operators.  All of these are correctable defects.

Reducing scrap has two sided benefits:  If you quoted 5% scrap but are now down to 1% scrap you not only consumed less material, but you completed the run faster.  This allows you to keep the money for the machine time you allowed in your 5% although you haven’t used it – unless you’re silly enough to give it to your customer as a cost reduction (Right!).

Time savings also generates excess capacity.  Let’s assume every mold in every machine had a factored in 5% scrap rate and you had a 20 machine shop that ran 24/7.  Now (somehow) you’ve managed to make savings by improving cycle time and reducing scrap so that you effectively have 0% scrap.  What this really means is that you have 19 machines doing the work that 20 machines did previously.  This (theoretically) opens up capacity of an entire machine year’s worth of production whose machine cost has already been paid for and is therefore pure profit!

Material doesn’t vanish into thin air. With some research you can find out where material variances are bleeding off your profits and will be able to take action to fix these problems.  Consider yourself successful when you can predict the usage of any product run within 99%.

* * * * * * * *

This article is virtual, a lot like your infamous ‘vanishing’ material.  You can use it as a basis to begin a project to improve profits.  You can also use it as something to scare middle management because they didn’t think of it.  Or you can do nothing and slowly watch your company go down the tubes because they aren’t making any profit.

It’s only your career.  Think about it.

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