THURSDAY, JULY 19, 2018
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Implementation Case Studies Reducing Costs by Controlling Raw Material Consumption

Reducing Costs by Controlling Raw Material Consumption

All product manufacturers are being pushed to produce the best quality products without exceeding budget. Effective resource management can be instrumental in achieving this goal.

A particular textile processing mill, which dyes and prints handloom fabric predominantly used in school uniforms, decided to follow the DMAIC (Define, Measure, Analyze, Improve, Control) approach to reduce its annual expenditures. By analyzing the raw materials used in production, the mill was able to better control consumption of certain chemicals and dyes.

Define

To identify improvement opportunities in the system, the Six Sigma project team studied the various activities involved in the processing of textiles. Within the process, the improvement team found:

  • Uncontrolled usage of natural resources (logs, water, electricity, diesel, lubricants)
  • Unmonitored usage of dyes and chemicals, leading to higher levels of environmental pollution
  • Unlimited expenses toward electrical and mechanical items

Because there can be a substantial return on investment from improved quality and from successfully employing quality as an integral part of overall business strategy, the expenses involved in the study were considered critical.

Of the various processes involved in the dyeing of fabrics, such as customer relationship development, resource planning, purchasing, production, quality control, electrical and mechanical maintenance, and housekeeping, the team chose to focus on the production process. The team found the process, which involved bleaching, dyeing, finishing and dispatching fabrics (Figure 1) to be critical.

Figure 1: Production Process

Figure 1: Production Process

The total expenditure involved in the purchase of various resources used for production is represented in the following equation:

Total expenditure = Dyes + chemicals + electricity + electrical items + mechanical items + logs + diesel + furnace oil + kerosene + lubricants

Measure

The data related to the purchase of these consumables was collected from log books and registers for the periods of April 2005 – March 2006 and August 2006.

Analyze

After performing a statistical analysis on the data to find the most expensive item, the team found that 59 percent of the total expenses for consumables were accounted for by chemicals and dyes (Figure 2). Of these, the more expensive item was chemicals, which accounted for 34 percent of the total costs. Hence, the consumption of these resources had to be carefully monitored for effective quality management.

Figure 2: Expenditures on Consumables

Figure 2: Expenditures on Consumables

Quantity- and value-based activity-based cost (ABC) analyses also were performed on the dyes (Figures 3, 4). A list of 13 dyes that were critical by way of huge expense and consumption were obtained and the team found that Ind. Khaki 2G was the most critical of all dyes because the amount and value of the dye used had the greatest effect on quality cost. This dye was carefully examined for effective quality management.

Figure 3: Quantity-based ABC Analysis of Dyes

Figure 3: Quantity-based ABC Analysis of Dyes

Figure 4: Value-based ABC Analysis of Dyes

Figure 4: Value-based ABC Analysis of Dyes

Similarly, a list of 11 chemicals that were critical by way of expense and eight chemicals that were critical by way of consumption was obtained. The team found that caustic soda lye was the most critical of all chemicals that highly contributed to quality cost, and it was carefully examined for effective quality management.

Using the data collected, the actual consumption of the dyes was compared with the standard consumption rate and the percentage of excess consumption was obtained. The team found that Ind. Khaki 2G and Nov. Blue 2R were underconsumed by -2.29 percent and -36.66 percent respectively. The dyes Cor. Blue 2RX and Ind. Blue BC were overconsumed by 75.51 percent and 80.50 percent respectively.

Improve

A fishbone diagram (Figure 5) was drawn to understand the excess usage of dyes. The team explained the diagram and the crucial factors that contributed to the expenses of the mill to management.

Figure 5: Causes and Effects of Excess Dye Consumption

Figure 5: Causes and Effects of Excess Dye Consumption

Control

A checklist (Figure 6) for the critical dyes and chemicals obtained from the analyses was distributed among all the departments of the mill, and employees were asked to monitor the level of consumption on a daily basis.

Figure 6: Checklist to Monitor Use of Critical Dyes
DyesStandard Quantity (grams)Quantity Used (grams)Production (meters)Excess (gramsReason
Ind. Khaki 2G
Ind. Dark Blue B.O
Dark Blue 2R
Nov. Blue 2R
Ind. Black BC
Blue BC
Ind. Blue BC
Nov. Blue BC
Date:Department:

The checklist was reviewed in management meetings to ensure continuous improvement and effective quality management. Six months after the project implementation, the company succeeded in reducing its extravagant expenses by about 15 percent. With success achieved by way of the DMAIC approach, the company still continues to follow the principles of Six Sigma.

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Comments

kevin

usage in a continuous moving production operation can be more effectively monitored in terms of running into a + figure or a – figure. As an example the table Fig 6., the first column could be expressed as theoretical quantity: grams/ meter taken from the product specification, which we call ( A). The amount actually used in the production process: grams/meter second column, we call (B).

The Usage calculation is defined as B – A / B x 100 = usage %
A +ve value indicates low usage and a -ve value indicates high usage. Depending on the production situation a limit is set for the process. Our process sets a limit to run at

Reply
Devansh Mehta

Hi,

It was interesting article, I think Six sigma, is moreover a More Common sense visualization in the processes involved to reduce the cost and defects. Good article

Reply
Chris Seider

I would advocate a loss analysis and pareto the losses.

Reply
Ana González

Excellent article. I am doing a LSS in the Utilities area of the Engineering department , and this article is useful for my assignment .

Reply
swetha kotla

That was a good article on Six Sigma application. In the company that I worked has faced a problem in regulating raw material consumption and to bring the operating costs down. Likewise in any company, cost reduction has become the major concern in order to produce products with best quality and without exceeding budget constraints, what can be the common methodology that can be followed in organisations (in terms of Six Sigma) in order to reduce the operating costs?

Reply
anderson mike

Swetha, I think for this situation we can apply Six Sigma methodology to bring some considerable changes. One of the important tools of Six Sigma known as DMAIC is apt. By implementing each stage of this process in the right manner you can see the good results.

Define stage: Find various methods and techniques followed in an industry similar to the context or simply do benchmarking.
Measure: Measure all the collected data and document it in proper way.
Analyze: Identify the possible solutions received or developed from the obtained data.
Improve: Use Six Sigma tools and techniques like Fish-bone diagram for stabilizing the process.
Control: Use any standard tools of Six Sigma for controlling the process and stopping the process to get out of control.

Reply


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