Rework in the production process refers to the creation of additional products, when a certain amount of items of the initial production turned out to be faulty or below standard. Rework is both costly for a business -- as it adds additional production expenses while the total output remains the same -- and time-consuming. In addition, excessive reworks also result in raw materials drainage, with the business having to dispose of, or recycle, the unwanted products. For this purpose, it is essential to take a series of measures to track the cost of reworks and determine the weak link in the production process.
Determine the individual stages of the production process in detail. Note down the actions taking place during each stage, such as painting a vase or adding the legs of an action figure. Also, have a clear picture of the product's features when it exits a production stage; this helps you determine the stage during which the production error happened.
Determine the daily cost of production, summing up the cost of raw materials used, the workers' wages and the machinery maintenance. Divide daily production cost by the amount of products made within a day to find out the production cost per unit. You need this information to determine the money wasted on faulty products.
Accumulate the faulty products in two pools: distinct areas in the factory. One pool -- Pool A --must contain the faulty products with minor mistakes, which can enter the rework loop, be repaired and sent back to the production line, while the other pool -- Pool B -- must comprise totally useless products which can only be discarded. Pool B products cannot be reworked, so discard or recycle them.
Multiply the number of Pool A products by the production cost per unit to determine the money you lose because of faulty products. The products must remain in the Pool for 24 hours, so that you can record their number and financial cost, before they enter the rework loop.
Keep a day-to-day record of the number of reworks and their cost. Using a spreadsheet software, such as Microsoft Excel or OpenOffice Calc, for this task. As the cost of raw materials or workers' wages fluctuate, the cost of reworks can change even if the number of reworks remain steady.
Examine the faults of the products before they enter the rework loop. As you have already determined the features the product must have when exiting a production stage, you can easily tell where you must search for the error's root cause. For example, if several bottles lack a back label and you know the back label is attached during Stage 5, then you know where the problem most probably lies.
- How to Calculate Wastage and Rework in Production Processes; Paul J. Zepf et al.
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