Establishing a monthly scrap cost target

Nath2892

Starting to get Involved
#1
Hello! I'm working for a small company which manufactures electrical accessories. We've been tracking our scrap products qty and cost associated with it through our SAP system. Since i have all the data, I'd like to set a realistic scrap cost target or scrap qty target based on the record of previous months data. I tried using "forecast by one period" by adding linear trendline in excel sheet but it doesn't help me much in setting a target for following month. Does anyone here have any suggestions for me in order to set realistic goals?

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Sebastian

Trusted Information Resource
#3
Standard element of setting product sells price is determination of organizational costs related to its manufacturing. One of direct costs elements is expected maximum scrap value. This is a natural goal. When you achieve it, you can start think about improvement setting "-1%", "-2%", ... goals.
 

Ajit Basrur

Staff member
Admin
#4
Hello! I'm working for a small company which manufactures electrical accessories. We've been tracking our scrap products qty and cost associated with it through our SAP system. Since i have all the data, I'd like to set a realistic scrap cost target or scrap qty target based on the record of previous months data. I tried using "forecast by one period" by adding linear trendline in excel sheet but it doesn't help me much in setting a target for following month. Does anyone here have any suggestions for me in order to set realistic goals?

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Welcome to the Cove :bigwave:

This article may interest you:

How Do You Set Improvement Goals for Lean Manufacturing Operations? | IndustryWeek
 

Eredhel

Quality Manager
#5
Most of the smaller shops I've worked in, less than 100 employees, use a <3-5% monthly scrap goal. My current shop sits at 50 employees and when I came on 3 years ago they had no QMS at all. I started with a monthly goal of <5%, then later it was changed to <3%, and now we are sticking with <2%. We can use our ERP software to break it down even further by employee, by machine, by part, et cetera. Occasionally we do that but unless we have something that make us want to dig in we stick with a shop wide percentage.
 

Nath2892

Starting to get Involved
#6
Some type of percentage reduction? Say 5 or 10%
Well, the only problem i find with setting ambiguous goals is that there's always someone who asks "Why 5%? Why not go for 50%?". However, If I'm able to provide a target based on previous data, I believe it's more realistic to achieve and the workforce believes that we CAN reach the target.
 

normzone

Trusted Information Resource
#7
Two things going on here - how is the scrap number defined, and what are the root causes.

My experience in my last outfit, a computer equipment design and assembly house, saw .5% of sales as a scrap average. After a while others wanted to look at the number differently and took over that calculation, but that remained the average no matter what you called it or how it was figured.

As for reducing that number, you need to have correctable challenges and clearly identified root causes if anything is going to change. At some point after all the low hanging fruit has been fixed, you are left with the inevitable cost of doing business in an electronic environment. But if you can get that low enough and track it accurately, people will be satisfied.
 

Nath2892

Starting to get Involved
#8
Thank you, Ajit for directing me to the article. I certainly agree with author on setting bold and aggressive targets for scrap reduction. We set our monthly target at say $10,000 (fixed number since an year) even then we had higher scrap rate than this number. But I somehow believe that in setting a target that varies by previous month's data, we might be able to motivate workforce in solving our problem.
 

Nath2892

Starting to get Involved
#9
Two things going on here - how is the scrap number defined, and what are the root causes.

My experience in my last outfit, a computer equipment design and assembly house, saw .5% of sales as a scrap average. After a while others wanted to look at the number differently and took over that calculation, but that remained the average no matter what you called it or how it was figured.

As for reducing that number, you need to have correctable challenges and clearly identified root causes if anything is going to change. At some point after all the low hanging fruit has been fixed, you are left with the inevitable cost of doing business in an electronic environment. But if you can get that low enough and track it accurately, people will be satisfied.
Thanks for your response. I agree and understand that it's not important to get stuck on numbers for too long. It's important to find reasons why we are having these issues in first place. Currently we have a fixed target and implementing various quality tools in containing our scrap cost. Soon, we might have to set a new target to challenge the existing process.
 

Mike S.

Happy to be Alive
Trusted Information Resource
#10
On one hand I understand Management's desire for improvement targets, etc. but I am a little surprised that no one on this forum has mentioned Dr. Deming's 10th of his 14 points.
 
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