A lean approach to address material losses: materials cost deployment (MaCD)

Abstract

In this paper, a novel lean approach to address material losses in production processes is presented. It is termed materials cost deployment (MaCD) and has the objective of identifying, analyzing, and reducing or eliminating material losses. Thanks to the modification of the manufacturing cost deployment framework, MaCD proposes an alternative structure for classifying and analyzing material losses, setting the focus on areas where the greatest losses are placed, and providing opportunities for greater efficiency and effectiveness in reducing and eliminating them. With the proposed approach, material losses within the factory are identified and classified into causal and resultant losses. Each loss is then quantified, also in monetary terms. The improvement actions to tackle each causal loss are identified and then evaluated by means of a quantitative measure in order to find the preferable ones. Finally, a practical decision procedure is applied to select which improvement interventions to start, and hence which causal losses to tackle, according to technical and economic factors. The effectiveness and practicality of MaCD in addressing material losses are shown by means of an industrial application concerning a European multinational group operating in the food and beverage industry.

Appendix

1.1 Detailed calculation of the case study C-Matrix (Fig. 12)

An exhaustive description of the calculations carried out to estimate in economic terms the observed material losses is reported below.

This quantification procedure requires a cost coefficient ρ_j to convert in economic terms the material losses recorded at each operation unit j. According to the adopted hypotheses, these cost coefficients can be derived as a specific percentage of the average product family’s unit cost c (which amounts to 5.047 €/kg) and are summarized in Table 3.

Table 3 Cost coefficient values

With the cost coefficients in Table 3, we can easily quantify in economic terms the material losses as ascribed in the case study C-Matrix (Fig. 12). We report below, as an example, the total cost calculation for the first row of C-Matrix in Fig. 12.

Loss: quality of supplies—Comments: Materials and finished products lost due to inadequacy of one of the ingredients of finished products’ recipe. Where: Silos and raw materials warehouse.

Causal loss

The amount of material loss at “Silos and raw materials warehouse” due to this loss factor was estimated as 1347.233 kg/year (see column “Direct loss” in Fig. 12). With the cost coefficient value in Table 3, we can derive a direct loss of 1347.233 kg/year · 3.0484 €/kg = 4106.95 €/year.

Resultant loss

In this case, the analysis team identified only one resultant loss.

Loss: material contamination—comments: materials lost due to wrong or expired ingredients. Where: dosing & mixing.

The amount of material loss at “Dosing & mixing” due to this loss factor was estimated as 1627.320 kg/year (see the corresponding column in the “Resultant losses” section of Fig. 12). With the cost coefficient value in Table A.1, we can derive the cost of this resultant material loss as 1627.320 kg/year · 3.5332 €/kg = 5749.62 €/year.