Benefits of Empowerment

Numerous positive behaviors may be observed among the members of empowered teams.They often:

1-Focus to satisfy the organization's purpose such as satisfying the customer and achieving financial objectives rather than trying to satisfy the supervisors.They talk about customer and business needs and the team's performance toward meeting those needs.They will question management when reasons for objectives are not clear.They want to know the why as well as the what.They will not afraid to question or offer suggestions to management because they work for the interests of the business and their customers.

2-Behave more as owners of the organization.Often employees do task which are not in the job description.They eagerly monitor performance indicators because doing so make them achieve their target and aims.Experienced member teach new employee proactively by sharing their ideas and suggestions to ensure everybody give their full strength to achieve team performance. Behaviors of this sort are evidence that team members feel responsible for the success of the organization,and prefer to take responsibility rather than abdicating that responsibility to the boss.

3-More Entrepreneurial and innovative.If they see a problem,they will energetically try to solve it.They freely seek to implement their ideas,and are willing to try new techniques which may yield improvements.Members are often observed constructively building on ideas from each other in search of solutions to problems.

4-Communicate well within the team as well as outside the team.Open communications are key in all of the above examples.

Freedom from Fear

Ideas and feedback from employees are essential.These can only come when employees feel they can give their comments without exposure to blame,reprisals,or other consequences administered by a management.Employees feared their ideas might be ridiculed or cause others to view them as troublemakers.

Fear that management will view any negative comment as adverse is a powerful disincentive for employees to provide suggestions,challenge the status quo,or to offer accurate and honest feedback.

This sort of fear prevent people from making improvements suggestions,employees fear that their suggestions will be viewed as criticism of managerial practices.

Fear also cause people distance away from working to improve efficiency,they may believe that such activities will cause job elimination.

Fear of reprisal to an employee who makes a mistake may caused employee to cover up their mistake and make them deliver low quality product to customers.

It has been estimated that more than 80% of quality problems are caused by management action,whereby less than 20% caused by worker error.More than 80% problem causes rooted from managerial control-the systems,procedures,policies,equipment,etc.

It requires substantial effort and cultural change to replace this fear with open communication.

There are too many new skill to learn and to many old habits to overcome.

Plant Management

The plant
The factory
The place where products are made

The business strategy
The location
Dedication: The focused factory
Operations
Products
Processes
Communication

The Focused Factory

Product focused: production is organized around the type of product/service being produced, i.e. assembly line.
Process focused: production is grouped according to type of processes, i.e. batch production.

Alignment with Business strategy

Focus:
Low manufacturing cost through automation and technological superiority
High flexibility through lean operations
High volume through mass manufacturing

Alignment with Location
Location, Location, Location.
Location is strategic important to ensure low cost in shipping and transportation and logistics

Alignment with Strategic Partners
Proximity and communication with suppliers and strategic partners

Operations Management

The business activity that transforms inputs into outputs of greater value.
(Russell, 2002)
The business activity that involves the design, development, and maintenance of systems and processes that transform resources, such as raw materials, technology, and labor into goods and services that meet customers’ needs.
(Raturi, 2005)

Operations Management

The product
Tangible goods
It defines strategic objectives and decisions, customers, market and, of course, profit to an organization.
An effective product development approach offers 3 key benefits:
Market position
Resource utilization
Organization renewal and enhancement

The process
A set of activities that is arranged in sequence and taken together to produce a result of value to the customer.
It constitutes what can an organization do better than the rest of other players in the industry.
It defines the organization’s capability and the way it chooses to be in the marketplace.

Current Issues
Effectively consolidating the operations resulting from mergers
Developing flexible supply chains to enable mass customization of products and services
Managing global supplier, production and distribution networks
Increased “commoditization” of suppliers
Achieving the “Service Factory”
Enhancing value added services
Making efficient use of Internet technology
Achieving good service from service firms

Expectation
Excellent performance in:
Personnel safety
Process safety
Environmental
Product Quality
Reliability
Energy and other variable cost efficiency
Fixed cost
Staffing levels

Example from Manufacturing Sector

Annual Quality Cost -Tire manufacturer

1. Cost of quality failures -losses

a.Defective stock $3,276 0.37
b.Repairs to product 73,229 8.31
c.Collect scrap 2,288 0.26
d.Waste-scrap 187,428 21.26
e.Consumer adjustments 408,200 46.31
f.Downgrading products 22,838 2.59
g.Customer ill will Not counted
h.Customer policy adjustment Not counted
Total $697,259 79.10%

2. Cost of appraisal

a.Incoming inspection $23,655 2.68
b.Inspection 1 32,582 3.70
c.Inspection 2 25,200 2.86
d.Spot-check inspection 65,910 7.37
Total $147,347 16.61%

3.Cost of prevention

a.Local plant quality control engineering $7,848 0.89
b.Corporate quality control engineering 30,000 3.40
Total $37,848 4.29%
Grand total $882,454 100.00%

As a result of this study,management decided to increase the budget for prevention activities.Three engineers were assigned to identify and pursue specific quality improvement projects.

Prevention Costs.

These are cost incurred to keep failure and appraisal costs to a minimum.

1.Quality planning
2.New-product review
3.Process planning
4.Process control
5.Quality audits :Evaluating the execution of activities in the overall quality plan.
6.Supplier quality evaluation
7.Training

Appraisal Costs

These are the costs incurred to determine the degree of conformance to quality requirements.

1.Incoming inspection and test.
2.In-process inspection and test
3.Final inspection and test
4.Document review :Examination of paperwork to be sent to customer
5.Balancing:Examination of various accounts to assure internal consistency
6.Product quality audits
7.Maintaining accuracy of test equipment
8.Inspection and test materials and services : Materials and supplies in inspection and test work (e.g x-ray film) and services (e.g., electric power)
9.Evaluation of stocks :Testing products in field storage or in stock to evaluate degradation.

External Failure Costs.

This are costs associated with deficiencies that are found after product is received by the customer.Also included are lost opportunities for sales revenue.

Failure to Meet Customer Requirements and Needs

1. Warranty charges
2.Complaint adjustment
3.Returned material
4.Allowances: The costs of concessions made to customers due to conforming product that does not meet customer needs.
5.Penalties due to poor quality
6.Rework on support operations : Correcting errors on billing and other external processes.
7.Revenue losses in support operations : An example is the failure to collect on receivables from some customers.

Lost Opportunities for Sales Revenue

1.Customer defections : contracts that are cancelled due to quality.
2.New customers lost because of quality : Profit on potential customers lost because of poor quality.
3.New customers lost because of lack of capability to meet customer needs.

Internal Failure Costs.

These are costs of deficiencies discovered before delivery which are associated with the failure (nonconformities) to meet explicit requirements or implicit needs of the external or internal customers.Also included are avoidable process losses and inefficiencies that occur even when requirements and needs are met.These are costs that would disappear if no deficiencies existed.

Failure to Meet Customer Requirements and Needs.

1. Scrap
2.Rework
3.Lost or missing information
4.Failure analysis
5.Scrap and rework due to nonconforming product from supplier
6.100 % sorting inspection
7.Reinspection,retest
8.Changing processes to correct deficiencies
9.Redesign of hardware to correct deficiencies
10.Redesign of software to correct deficiencies.
11.Scrapping of obsolete product
12.Scrap in support operations:Defective items in indirect operations.
13.Rework in internal support operations
14.Downgrading:The difference between the normal selling price and the reduced price due to quality reasons.

Cost of Inefficient Processes

1.Variability of product characteristics
2.Unplanned downtime of equipment
3.Inventory shrinkage
4.Variation of process characteristics from "best practice" :Losses due to cycle time and costs of processes as compared to best practices in providing the same output.
5.Non-value-added activities

Alignment of Process to Customer Requirements.

In order to minimize customer losses,it is desirable to align the process (process center) with the customer requirement (specification target).

It is additionally beneficial to the customer if variation around the target value is continually reduced.

This practice is sometimes called aligning the "Voice of the Process" with the "Voice of the Customer".It should be noted that although no variation is assumed in the "Voice of the Customer" for this example,the "Voice of the Customer" (specification target) does vary in the real world and this further complicates achieving true customer satisfaction with a given process.

Finally,when an estimated translated loss is generated by considering the actual distribution of parts being produced by this process,in conjunction with the loss being generated by this process,it can be shown that,in this case,approximately only 45% of the total loss to the customer is being accounted for by the parts beyond specification,while the remaining loss is coming from parts within specification but not at the target.

This strongly suggests that the "Goal Post" mentality,or computing percentage of "Bad" parts (parts beyond specifications),in and of itself,does not provide a proper appreciation for understanding the effect the process is actually having on the customer.

Local actions and action on the system

Simple statistical process control techniques can detect special causes of variation.Discovering a special cause of variation and taking proper action is usually the responsibility of someone who is directly connected with the operation.Although management must sometimes be involved to correct the condition,the resolution of special cause of variation usually requires Local Action .This is especially true during the early process improvement efforts.As one succeeds in taking the proper action on special causes,those that remain will often require management action,rather than local action.

These same simple statistical techniques can also indicate the extent of common causes of variation,but the causes themselves need more detailed analysis to isolate.
The correction of these common causes of variation is usually the responsibility of management.Sometimes people directly connected with the operation will be in a better position to identify them and pass them on to management for action.Overall,though,the resolution of common causes of variation usually requires action on the system.

Only a relatively small proportion of excessive process variation-industrial experience suggests about 15%-is correctable locally by people directly connected with the operation.The majority-the other 85%-is correctable only by management action on the system.

Confusion about the type of action to take is very costly to the organization,in terms of wasted effort,delayed resolution of trouble,and aggravated problems.It may be wrong,for example,to take local action (e.g., adjusting a machine)when management action on the system is required (e.g., selecting suppliers that provide consistent input materials).

Variation : Common and Special Causes

No two products or characteristics are exactly alike,because any process contains many sources of variability.The differences among products may be larger,or they may be immeasurably small,but they are always present.The diameter of a machined shaft,for instance,would be susceptible to potential variation from the machine (clearance, bearing wear),tool (strength, rate of wear),material(diameter,hardness),operator(part feed,accuracy of centering),maintenance (lubrication, replacement of worn parts),and environment (temperature,constancy of power supply).

Some sources of variation in the process cause short-term,piece-to-piece differences eg.,backlash and clearance within a machine and its fixturing, or the accuracy of a bookkeeper's work.
Other sources of variation tend to cause changes in the output only over a longer period of time,either gradually as with tool or machine wear,step-wise as with procedural changes,or irregularly,as with environmental changes such as power surges.Therefore,the time period and conditions over which measurements are made will affect the amount of the total variation that will be present.

The distribution can be characterized by

1-Location
2- Spread (span of values from smallest to largest)
3-Shape (the pattern of variation-whether it is symmetrical,skewed,etc.)

Common causes refer to the many sources of variation within a process that has a stable and repeatable distribution over time.This is called "in a state of statistical control".Common causes behave like a stable system of chance causes.If only common causes of variation are present and do not change,the output of a process is predictable.

Special causes (often called assignable causes) refer to any factors causing variation that are not always acting on the process.That is,when they occur,they make the (overall) process distribution change.Unless all the special causes of variation are identified and acted upon,they will continue to affect the process output in unpredictable ways.If special causes of variation are present,the process output is not stable over time.

Risk Priority Number (RPN

Risk Priority Number (RPN): The risk priority number is the product of the severity (S), occurrence (O),and detection (D) rankings.

(S) x (O) x(D) =RPN

The value is between 1 and 1000 can be used to rank order the concerns in the process.
Engineering assessment for preventive/corrective action should be first directed at high severity, high RPN, and other items designated by the team.

The intent of any recommended action is to reduce rankings in the following order: severity, occurrence , and detection.

In general practice, when the severity is 9 or 10, special attention must be given to ensure that the risk is addressed through existing design actions/controls or process preventive/corrective action(s),regardless of the RPN. In all cases where the effect of an identified potential failure could be a hazard to manufacturing/assembly personnel, preventive/corrective actions should be taken to avoid the failure by eliminating or controlling the cause(s), or appropriate operator protection should b e specified.

After special attention has been given to severity rankings of 9 or 10,the team then addresses other failure, with the intent of reducing severity, then occurrence, and then detection.
Actions such as, but not limited to, the following should be considered:

1-To reduce the probability of occurrence, process and/or design revisions are required. An action-oriented study of the process using statistical methods could be implemented with an ongoing feedback of information to the appropriate operations for continuous improvement and defect prevention.

2-Only a design and/or process revision can bring about a reduction in the severity ranking.

3-The preferred method to accomplish a reduction in the detection ranking is the use of error/mistake proofing methods. Generally , improving detection controls is costly and ineffective for quality improvements. Emphasis must, however, be placed on preventing defects rather than detecting them. An example would be the use of statistical control and process improvement rather than random quality checks or associated inspection.

Occurrence

Occurrence ( O ) : Occurrence is the likelihood that a specific cause/mechanism of failure will occur.The likelihood of occurrence ranking number has relative meaning rather than an absolute value.Preventing or controlling the causes/mechanisms of failure through a design or process change is the only way a reduction in the occurrence ranking can be effected.

Table 2. Suggested Process Failure ‘s Occurrence Evaluation Criteria

Probability	Likely Failure Rates	Ranking
Very High : Persistent Failures	≥ 100 per thousand pieces	10
	50 per thousand pieces	9
High : Frequent Failures	20 per thousand pieces	8
	10 per thousand pieces	7
Moderate: Occasional Failures	5 per thousand pieces	6
	2 per thousand pieces	5
Low: Relatively Few Failures	1 per thousand pieces	4
	0.5 per thousand pieces	3
Remote:Failure is Unlikely	0.1 per thousand pieces	2
	≤0.01 per thousand pieces	1

Articles from FMEA Third Edition DaimlerChrysler Corporation, Ford Motor Company, General Motors Corporation.

How to categorize Process Failure by Severity Ranking

Table1.Suggested Process Failure’s Severity Evaluation Criteria

Effect	Criteria: Severity of Effect This ranking results when a potential failure results in a final customer and/or a manufacturing/assembly plant defect. The final customer should always be considered first. If both occur,use the higher of the two severities. (Customer Effect)	Criteria: Severity of Effect This ranking results when a potential failure results in a final customer and/or a manufacturing/assembly plant defect. The final customer should always be considered first. If both occur,use the higher of the two severities. (Manufacturing / Assembly Effect )	Ranking
Hazardous without warning	Very high severity ranking when a potential failure affects safe product operation and/or involves noncompliance with government regulation without warning	Or may endanger operator (machine or assembly ) without warning	10
Hazardous with warnings	Very high severity ranking when a potential failure affects safe product operation and/or involves noncompliance with government regulation with warning	Or may endanger operator (machine or assembly) with warning	9
Very High	Product or item inoperable (loss of primary function)	Or 100% of product may have to be scrapped, or product / item repaired in repair department with a repair time greater than one hour.	8
High	Product or item operable but at a reduced level of performance. Customer very dissatisfied	Or product may have to be sorted and a portion (less than 100%) scrapped, or product/item repaired in repair department with a repair time between a half-hour and an hour	7
Moderate	Product or item operable but Comfort/Convenience item(s) inoperable. Customer dissatisfied.	Or a portion(less than100%) of the product may have to scrapped with no sorting,or product/item repaired in repair department with a repair time less than a half-hour.	6
Low	Product or item operable but Comfort/Convenience item(s) operable at a reduced level of performance.	Or 100% of product may have to be reworked, or product/item repaired off-line but does not go to repair department.	5
Very Low	Fit and Finish/Squeak and Rattle item does not conform. Defect noticed by most customers (greater than 75%)	Or the product may have to be sorted, with no scrap, and a portion(less than 100%) reworked.	4
Minor	Fit and Finish/Squeak and Rattle item does not conform. Defect noticed by 50% of customers.	Or a portion (less than 100%) of the product may have to be reworked, with no scrap, on-line but out-of-station	3
Very Minor	Fit and Finish/Squeak and Rattle item does not conform. Defect noticed by discriminating customers (less than 25%).	Or a portion (less than 100%) of the product may have to be reworked, with no scrap, on-line but in-station.	2
None	No discernible effect	Or slight inconvenience to operation or operator, or no effect.	1

Note : It is not recommended to modify criteria for ranking values of 9 and 10.Failure with a rank of severity 1 should not be analyzed further.

Severity (S) : Severity is the rank associated with the most serious effect for a given failure. A reduction in severity ranking index can be effected through a design change to system,subsystem or component,or a redesign of the process.

Articles from FMEA Third Edition DaimlerChrysler Corporation, Ford Motor Company, General Motors Corporation.

Detection

Wednesday, October 21, 2009

Detection

Detection (D) : Detection is the rank associated with the best detection control listed in the process control. In order to achieve a lower ranking, generally the planned process control has to be improved.

Assumed the failure has occurred and then assess the capabilities of all “Current Process Controls” to prevent shipment of the part having this failure or defect. Do not automatically presume that the detection ranking is low because the occurrence is low, but do assess the ability of the process controls to detect low frequency failure or prevent them from going further in the process.

Random quality checks are unlikely to detect the existence of an isolated defect and should not influence the detection ranking. Sampling done on statistical basis is a valid detection control.

Table 3. Suggested Process Failure’s Detection Evaluation Criteria

Detection	Criteria	Inspection Types			Suggested Range of Detection Methods	Ranking
		A	B	C
Almost Impossible	Absolute certainty of non detection			X	Cannot detect or is not checked	10
Very Remote	Controls will probably not detect			X	Control is achieved with indirect or random checks only	9
Remote	Controls have poor chance of detection.			X	Control is achieved with visual inspection only.	8
Very Low	Controls have poor chance of detection.			X	Control is achieved with double visual inspection only.	7
Low	Controls may detect		X	X	Control is achieved with charting methods, such as SPC.	6
Moderate	Controls may detect		X		Control is based on variable gauging after parts have left the station, or Go/No Go gauging performed on 100% of the parts after parts have left the station.	5
Moderately High	Controls have a good chance to detect	X	X		Error detection in subsequent operations, OR gauging performed on setup and first-piece check (for set-up causes only)	4
High	Controls have a good chance to detect	X	X		Error detection in-station, or error detection in subsequent operations by multiple layers of acceptance: supply, select, install, verify. Cannot accept discrepant part.	3
Very High	Controls almost certain to detect.	X	X		Error detection in-station (automatic gauging with automatic stop feature).Cannot pass discrepant part.	2
Very High	Controls certain to detect.	X			Discrepant parts cannot be made because item has been error-proofed by process/product design.	1

Inspection Types :

A . Error-proofed

B. Gauging

C. Manual Inspection

Articles from FMEA Third Edition DaimlerChrysler Corporation, Ford Motor Company, General Motors Corporation.

Matsushita’s Seven Principles

1. Contribution To Society

We will conduct ourselves at all times in accordance with the Basic Management Objective ,faithfully fulfilling our responsibilities as industrialists in our community in which we operate.

2.Fairness and Honesty

We will be fair and honest in all our business dealings and in our personal conduct. No matter how talented or knowledgeable we may be, without personal integrity we can neither earn the respect of others nor enhance our own self-respect.

3.Cooperation and Team Spirit

We will pool our abilities to accomplish the goals that we share. No matter how much skilled we are, without cooperation and team spirit we will be a company in name only.

4.Untiring Effort for Improvement

We will constantly strive to improve our ability to contribute to society through our business activities. Only through such untiring effort can we fulfill our Basic Management Objective and help to realize lasting peace and prosperity.

5.Courtesy and Humility

We will be cordial and modest, always respecting the rights and needs of others in order to strengthen healthy social relationships and improve the quality of live in our community.

6.Adaptability

We will continually adapt our thinking and behavior to meet the ever-changing conditions around us,taking care to always act in harmony with nature in order to ensure progress and success in our endeavors.

7.Gratitude

We will act out of a sense of gratitude for all the benefits we have received, confident that this attitude will be a source of boundless joy and vitality, enabling us to overcome any obstacles that we encounter.




From The Matsushita Perspective – A Business Philosophy Handbook.

MISTAKE - PROOFING (POKA – YOKE)

Mistake - Proofing emphasizes the detection and correction of mistakes before they become defects delivered to customers. It puts special attention on the one constant threat to any process: human error.

Mistake – Proofing is simply to pay careful attention to every activity in the process and to place checks and problem prevention at each step. It’s a matter of constant, instantaneous feedback, rather like the balance and direction data transmitted from a cyclist’s ears to brain, keeping his or her bike upright and on the path.

USES OF MISTAKE – PROOFING
Mistake – Proofing can be used to:
Fine – tune improvements and process designs from DMAIC projects.
Gather data from processes approaching Six Sigma performance.
Eliminate the kinds of process issues and defects needed to take a
process from 4.5 to 6 Sigma.

BASIC STEPS IN MISTAKE – PROOFING
Mistake – Proofing is best applied after completion of a through FMEA
prediction and prevention review. Then we can
Identify possible errors that might occur despite preventive actions.
Determine a way to detect that an error or malfunction is taking place or about to occur.
Identify and select the type of action to be taken when an error is detected.

DIFFERENT KIND OF ERRORS

Forgetfulness – Rail gate closing
Errors due to misunderstanding – Steps on break car with auto transmission
Errors in identification – Bill amount
Errors made by Amateurs
Wilfull errors – No cars at sight crossing in red.
In advertent errors – Crossing without noticing
Errors due to slowness – Delays, step on break
Errors due to lack of standards – To discretion
Surprise errors – Malfunction without warning
Intentional errors – Crimes
Mistake happen for many reasons, but almost all can be prevented if we take the
Time to identify when and why they happen.

The basic types of “Mistake – Proofing Device” are:

Control:
An action that self – corrects the process, like an automatic spell –checker / corrector.

Shutdown:
A procedure or device that blocks or shuts down the process when an error occurs. Example. The automatic shutoff feature of a home iron.

Warning:
This alerts the person involved in the work that something is going wrong.
Example. A seat – belt buzzer. So is a control chart that shows that a process may
be “out of control”.

Some common types of Mistake –Proofing measures include:
Color-and shape-coding of materials and documents
Distinctive shapes of such key items as legal documents
Symbols and icons to identify easily confused items
Computerized checklists, clear forms, best-in-class, up-to-date procedures and simple workflows will help to prevent errors from becoming defects in the hands of customers.

MISTAKE – PROOFING “DOS AND DON’TS”

DO’s:
Try to imagine all conceivable errors that can be made.
Use of all your creative powers to brainstorming clever ways to detect
and correct errors as part of the work process itself.

DON’TS:
Fall into the “ to error is human” mindset.
Rely on people to catch their own errors all the time.

The 10 steps And Minimizing Inventory Investment

Step #1: Get Organized

Arrange warehouse/ store in a logical and orderly manner
Appropriate shelving/ racking
High- frequency items closest to entry / exit
Group like products
Clearly identified names and code numbers

Ensure a high standard of housekeeping at all times
Use visual management techniques.
Location indicators
Reorder indicators
Line marking

Ensure consistent sign in and sign out of goods.
Identify rush periods and level load activity accordingly.

Step #2: Apply the Fundamentals with Rigor
Use the fundamentals of supply chain management and stock calculation to set and review holding requirements.

Step #3: Focus on Function, not Cost
Recognize that the function of inventory is to maintain a supply promise to customers and manage the inventory to fulf1l this need.
Inventory that does not move does not fulfi1 this need
Base stocking policy on movement and service and not cost of product .

Step #4: Identify and Focus on Leverage Points
The key steps of cost in inventory are the ownership of the item and the length of time of ownership.
To minimize cost, activities should focus on eliminating ownership (as opposed to access) and/or minimizing the time between gaining ownership and shipping/using the item.

Step #5: Limit and Prioritize Resources
Limiting the funds available for investment in inventory will drive the need to prioritize inventory and extract greater value from the investment.

Step #6: Work on the 1% errors
A key 1% error in inventory management is the tracking of receipts and delivery. By ensuring that the systems are followed and records kept, the data will be available to make sound stocking decisions.

Step #7: Eliminate Duplication
This includes duplication of items, but also duplication of locations and duplication of safety stock.
Step #8: Question Everything
The assumptions made when inventory levels were first set may no longer be valid. Have supply dynamics changed? Have customer needs/usage changed? Has our appetite for risk changed?
Review inventory assumptions on a regular basis.

Step #9: Take Some Chances
Seek to use innovations that do not have an obvious direct payback. For example, apply visual management techniques-
Arrange for consignment stocks if this has not been your policy. Remember to understand and manage the risks.

Step #10: Ignore Tradition
Review what is preventing further improvement and change it!
Review e-business changes that might provide further opportunity.

Prof. A. Rajagopal,
HEAD, SQC&OR UNIT INDIAN STATISTICAL INSTITUTE

1 % error Adds Directly to The Bottom Line

This business was very focused on its core processing activity, but less focused on the support functions. One of these support functions was the off-line handling and managing of its molds, which were quite fragile and breakable.

This was considered to be a less important activity than production and, as long as the molds were ready for production as required, Plant Management largely ignored this activity.

Also, the budget for this section was relatively small; in anyone year they would spend about $200,000 on the replacement of molds that were broken off line. As this was only about 1% of costs, the activity was never previously targeted in typical cost reduction programs.

As part of an operational review, this organization investigated its 1 %errors and this previously ignored cost.

A comparison with similar plants showed that it was possible to operate with almost zero breakages and that the current expense could be eliminated with better handling and management. The procedures from the other plants were adopted to address the issue.

This resulted in breakages being almost eliminated. Focusing on this previously ignored 1 % error and adopting simple procedural changes added $200,000 to the bottom line.