Tag Archives: Increase Manufacturing margins

Where’d the money go? – How to turn Manufacturing Assets into Profit

If you don’t know where your materials are and how many you have, you don’t know where your money is. The purchase and storing of assets (materials, tools, parts) for manufacturing is one of your largest expenses, so why don’t you have complete control of it?

We see many cases where manufacturers simply don’t know what they have. One shop in particular comes to mind. In walking through a manufacturing shop floor for carbon components in the aerospace industry, we passed the Material Review Board (MRB) area. It was enclosed by a cage to protect the parts from walking off. Inventory in this area was scrap but too valuable to just throw out.

There were shelves upon shelves, and stacks upon stacks, of carbon parts rejected by Quality. Oven times may have fallen short of required minimums or temperatures may not have registered high enough.  Without a fast process for review, these parts were being housed and shelved (literally). They were useless. The manufacturer had an enormous, labor-intensive future job to go through all these parts and create a disposition for each.

The Connection Between Process Control and Manufacturing Scrap

What the team was ignoring was the money that was tied up in these parts. It seems obvious from the outside, yes, but they were focused more on the disposition process and what they were going to do with all those quality rejects. Not to mention how sloppy it looked when upper management came through.  But what they were really missing was the key, hidden issue that this prospect had yet to uncover.

When I see that many pieces of contained scrap [and yes, it happens all the time] I begin looking for the scrap that hasn’t even made it to the cage. The amount of scrap in the screened area signals to me that there is a process problem. Solving process problems are what we are really good at. Control the manufacturing process and you control the scrap. Control scrap and you have a really tight handle on costs, too. That’s where you really start making up lost margin.

When a team is unable to control what is happening on the manufacturing shop floor, especially within the tolerances that their own engineering teams have thought possible, it signals a lack of control in parts and tools. Have you asked for an inventory count of your tools recently? Are you over-ordering or over-stocking in order to make up for “lost” tools [which are inevitably found on the shop floor]?

Ultimately, that same prospect closed manufacturing for a few days to complete a tool inventory. Yikes.

Know where your stuff is, know how much what you build costs you and control the processes that you use to build your parts. These three key concepts are completely linked and fundamental to successful manufacturing, and completely controllable with the right tools. Just ask us how.

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