| ManEx Minute - 16 - We lost how much to Attrition & Scrap? |
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January 28, 2009
Issue 16
Greetings,
There is no time like the present to find ways to become more efficient and ensure long-term viability and success.
In our last survey, we asked about production attrition and scrap. Although the levels reported are around expected levels, we were surprised to see just how expensive attrition can be. This is especially true in this industry, which is notorious for slim margins.
For example, a company that averages 65% COGS and 7% profit may have to increase sales by 8.5% just to recover from component attrition of less than 1%.
The case study provides methods to identify and reduce scrap. Will those solutions help you?
As always, we look forward to your participation and feedback as you gain new insights and become a more effective provider of Electronic Manufacturing Services.
Sincerely,
David Sharp
ManEx, Inc.
Business Case - Inventory Control
Production Attrition & Scrap
North Eastern Company* (N.E. Company) shipped over $17M in product last year. This year looks promising, but they have a few months before the next upswing in business. Management wants to use this time to tighten their processes and increase their efficiency and profitability.
One area under review is production attrition and scrap. Production required well over $11M in materials to complete all shipments last year.
Initial analysis showed weighted attrition was just under 1%. While production was pleased they were able to keep attrition and scrap so low, it still resulted in well over $100K in wasted material for the year and that loss came directly off the bottom line. That represents more than 8% of their profit for the year.
Management knows that small improvements can have significant impact on profitability. According to their estimates, reducing scrap by only .43% could increase profits by almost 4%. The same increase would require an additional $1.4M in sales, which would be difficult in today's economy.
How can NE Company better plan for and manage attrition and scrap? What are their most common sources of scrap? What steps can they take to reduce scrap?
* Company name has been changed.
Business Case Solutions
To effectively reduce attrition and scrap, NE Company must be able to identify, track, and eliminate common sources...
Read the full Business Case Solution
ManEx Case Solution
ManEx has several standard and optional features designed to simplify the process of identifying, tracking, and...
Read the full ManEx Case Solution
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PRODUCTION ATTRITION & SCRAP
We track attrition in production with a 100% count upon restocking.
-Tom, OR
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Please share your ideas and insights on a topic below. Use the questions to direct your response. You can submit your thoughts to mym@manex.com by clicking the topic title. Where appropriate and space permitting, we will post responses in a future newsletter so all may benefit.
Work Center Scheduling and Priorities
- How do you determine priorities for each work center?
- How do you communicate those priorities with each work center?
- Do you know when the capacity for each work center will be reached?
- How easy is it to update work center schedules and priorities to ensure they are completing the most important jobs each day?
Counterfeit Components
- What percentage of your parts are considered at-risk for counterfeiting?
- What are you doing to ensure your components are not counterfeit?
- Have you been impacted by counterfeit parts? If so, how?
- Are you promoting your counterfeit measures to your customers to increase confidence?
To suggest a new topic please send an email to mym@manex.com.
To see additional topics, please click here.
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ManEx Minute is a weekly email distributed by ManEx, Inc.
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| Article ID: 3240 |
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