Increasing Profits through the Reorganization of leftover pieces of metal (scrap)

Operation: Reorganization of scrap metal operations at sheet-metal factory.

Problem: First of all, Mr. S was asked about the situation at his work place by his boss. At his work place, their job was to cut out pieces of sheet metal into sizes as directed, and to place the leftover pieces of metal in their storage area. The person in charge there then decided which pieces were to be scrapped and which could be reused. The scrap was taken to the scrap storage and the reusable pieces were organized and stored by size and shape. This was the way it was supposed to be, but the fact was that most of the metal was merely scrapped without any categorizing at all. S felt that this wasted scrap was a treasure as it could be used to reduce material costs, and asked his group leader M, if anything could be done about it.

Understanding the situation in which Leftover Materials are not being used:

S with the approval of M looked at the problem from three points of view and got the following results.

Obvious problem: Loss due to the fact that reusable material was all being processed as scrap.

1. The amount of scrap is large (about 40%), which means that the yield rate is only 60%.
2. Even pieces that seem to be usable are scrapped. Workers are careless not to organize or use leftover.
3. The sheets are cut a little larger than called for so that the next process has something to hold on to, which means that fewer leftover pieces can be used.

Next S organized the types of losses which were occurring.

Occurring losses: Increase in material costs and scrap processing costs and reduction in production

1. Because leftover materials were not used, that much more material had to be purchased.
2. When leftovers that could be used are scrapped, scrap processing costs that much more.

Following this, S had a brainstorming session with the other workers to figure out the reasons why leftovers were not being used, and organized them as follows:

Causes of loss: The size of the sheets was too big due to careless cutting and rules for using leftovers are not established.

1. Cutting materials are expensive and have not been purchased yet.
2. The pieces of sheet metal are of a large size which inevitably makes a lot of leftover pieces when cut, workers also cut wastefully.
3. Because it is easiest to do so, pieces are cut from the middle of metal sheets and an odd sized piece remains.
4. Leftovers are not processed after they are cut, so sharp edges remain and handling them is dangerous. Consequently, nobody wants to use them.
5. Leftovers are not processed or grouped, they are just piled up.
6. Consequently, it is difficult to look for a piece of the right size, so workers just cut a new piece.
7. There is no chart which describes which types of leftovers would be suitable for processing. There is no designated place which is suitable for storing usable pieces.
8. There are no rules for utilizing leftover materials.

Yield rate: The percentage of materials used for products. The higher this rate, the more effectively the materials are being used.

Setting the Four Pillars (Improvement Implementation Policy) for Leftover Materials Reorganization:

S gave a detailed report to M that described the situation in which leftover material was not being utilized. M commended him. You have done a good job of moving in and getting the facts and organizing them. Then he gave S some advice. The main problem is not that leftovers are not being used, but even before that, that the leftovers are not grouped into reusable and scrap metal, with the reusable stored for easy use. How about approaching it as a reorganization system improvement and making improvements according to the system.

So S with the help of his workers’ team and advice of his boss M designed a suitable system which resulted in an increase of yield by 20% to 80%. Imagine the cost effectiveness on this additional usage and ultimately the reduction in manufacturing costs!