Measuring and analysing waste and scrap
We are starting to tread upon the ground of quality costing now, by measuring and analysing waste and scrap. This is a two-pronged approach; improving quality is as important as reducing costs. Indeed the one (cost reduction) should occur naturally as a result of the other (quality improvement). Target one or two processes for improvement. Your first objective will be to deal with failure costs, since these have the greater impact on customer satisfaction. The easiest areas to target are where waste is evident. Waste is insidious and can take the form of time, space, energy, equipment, people and materials, as well as cash.
Take a look at the Case Study below. Whilst the example is straightforward and merely points out savings which could be achieved, there are non-measured costs to consider also - what else could people have been doing? What were the negative effects of stress and demotivation?
In larger examples, such as where goods or services have been supplied before problems are identified you can add documentation, transport, peoples’ time and loss of reputation.
The vital element in the equation is how often the process occurs and if things need to be corrected more than once - all will add to the cost of the waste. Your objective is to solve each problem only once, so if a problem does occur, you can put it right and build in a preventative mechanism to ensure that it doesn’t happen again.
Measuring the costs
Having identified the area for improvement and gained the commitment of staff, you should aim to define exactly what you are going to measure, and how, before you begin.
It is a good idea to implement a pilot study, covering one or two processes for a period of time. Set a defined limit on your data collection (maybe one week, or the next four Mondays) and take into account any factors which may aid or hinder the success of your pilot (for example, if Fridays are mad, with people rushing around to finish things, avoid them for your survey).
Be sure staff are aware of what is happening and why, and that the exercise will in future be regular but not frequent (perhaps yearly or half-yearly).
Once the data has been collected, it should be analysed. Time measurements should be multiplied by salary or wage costs and materials at purchase price. Simple calculations can give you an estimate of annual costs for each part of the process.
Improving the process
Completion of the analysis will give you figures for conformance and non-conformance activities. The people who were involved in the process of collection should look for ways to reduce the failure (ie non-conformance) costs. Inevitably these prevention activities will cost, but costs should be one-off. It is important that those involved in measuring the costs should be involved in the development of action to reduce failures - it is their problem and they should be given the opportunity to solve it. Once the suggested action has been taken, the cost of the process should be measured again (sticking as closely as possible to the previous parameters) so that success may be gauged.