Friday, December 18, 2015

Scrap Happens! The Importance of Minimizing and Removing Scrap

the importance of minimizing scrapElectronics, chemicals, metal, food... scrap happens in all industries and to some extent, it’s unavoidable. In most production processes, there will always be some amount of unusable product such as subpar raw material, product that was destroyed or damaged during the production phase, or finished goods that did not meet customer specifications. Reducing the amount of scrap or waste produced, as well as dealing with unavoidable scrap effectively, are two keys to reducing production costs.

Alternatives to Saleable Inventory
The goal of the manufacturing process is to produce in saleable inventory. Along the way though, four other possibilities exist:
  1. Spoilage: Inventory that is substandard and needs to be sold at a lower price or be reworked prior to sale.
  2. Rework: Inventory that needs to be repaired or redone prior to sale.
  3. By-product: Saleable inventory resulting from a manufacturing process and is often not the purpose of the manufacturing process.
  4. Scrap: Material left over from the manufacturing process, which has little or no apparent value.
Steps to Address Scrap
An effective program to control scrap includes the following steps:
  1. Make sure adequate measuring tools are in place. Cost accounting and the use of an Enterprise Resource Planning system can provide information for each production run. Track material usage variances over time to determine if the process is efficient.
  2. Turn scrap into a byproduct. Sometimes, this takes some imagination. Ask yourself, “Will the value of the scrap inventory go up if I use it as raw material in another manufacturing process?” The resulting byproduct may not even be used in your industry, but the sales value might increase.
  3. Keep your eyes on the marketplace for more efficient methods of production. Technology and manufacturing processes change over time. Feeling comfortable about your manufacturing process is a sure way to lose your competitive edge.
Scrap must constantly be evaluated and accounted for to improve the production process and to reduce production costs. It is much easier to reduce the amount of scrap produced when you are fully aware of the amount produced.

Avoid the Pitfalls
When dealing with scrap, avoid falling into common traps.
  • Disposing of unsold scrap can be very costly and should not be underestimated. When scrap cannot be sold to a secondary market it must be legally disposed of. Environmental disposal laws must be obeyed. The cost of disposition needs to be factored into the cost of the product in such a situation.
  • Accounting information never substitutes for good market intelligence and striving to always make your process more efficient.
  • Do not let scrap accumulate. It can become an eyesore and also creates other problems such as material handling issues and potential accidents.
Make scrap work for you by being an unexpected source of income – not an expense. If scrap and waste cannot be completely eliminated from the production process find a buyer that will happily pay for what you no longer need.

You can also reduce waste through more Lean and efficient processes. MMTC offers a variety of Lean Business Solutions. For more information, contact MMTC at 888.414.6682, visit www.mmtc.org or email inquiry@mmtc.org.



Since 1991, MMTC has assisted Michigan’s small and medium-sized businesses compete and grow. Through personalized services fitted to meet the needs of clients, we develop more effective business leaders, drive product and process innovation, promote company-wide operational excellence and foster creative strategies for business growth and greater profitability. Find us at www.mmtc.org.

Friday, December 11, 2015

Leadership as a Force Multiplier

Every organization, big or small, for-profit or not-for-profit, is only as good as the way its people work together to accomplish a goal.  If you look up ‘organization’ in a dictionary or online, it is defined as “two or more independent parts with a common aim.”

Sadly, the AVERAGE organization realizes less than the sum of their parts – together they achieve less than what each department is able to deliver independently. This is because the departments’ first priority is delivering on their departmental metrics no matter the consequences to other departments or the organization as a whole.

Understanding Good & Great Organizations
GOOD organizations are the sum of their parts – they realize an additive impact from the interactions of departments. There is cooperation between departments and department management reacts to issues rapidly. People in every department are willing to sacrifice short-term department results for the accomplishment of the overall aim of the organization.

GREAT organizations are the product of their parts – they realize a multiplicative impact from the interactions of their departments. Good organizations coordinate and cooperate across departments to solve customer problems quickly and effectively. Great organizations go beyond coordinating and cooperating – they anticipate and collaborate. They anticipate issues and collaborate to take advantage of opportunities, prevent problems from developing and lead market change.

Organizations that anticipate and collaborate feature a proactive culture of innovation. They can’t stand the status quo. They thrive on change. Everyone rallies to what’s new and what’s next. Even the organization’s structure is dynamic to provide the flexibility to put the right teams in place to meet opportunities head-on, ahead of the competition.

Making the Jump from Good to Great
To move from an average or good organization to a great organization requires company leadership to “turn on” the force-multiplier effect of their people. Great organizations start with great leadership.  Leaders who set the vision for where the organization is going and “get out of the way,” empower their employees to bring their best ideas forward to accomplish the vision.

Great leadership is about leading the organization into the future. It involves making strategic choices on what products, services and markets to invest the organization’s resources in. It is also about investing to build and enhance internal capability – such as employee education, tools and systems – to inspire employees to innovate faster and with greater success.

Innovation really isn’t about brainstorming. It’s about inspiring people to share ideas and empowering them to turn those ideas into reality. Leaders who inspire and empower can’t help but have great organizations.

The good news is you can move your organization from average or good to great, and MMTC can help.  As a leader, consider what you’ll do differently in 2016. Call on the consultants at MMTC to help you become a force multiplier to build a vision and culture of innovation that inspires and invigorates your organization top to bottom.


Since 1991, MMTC has assisted Michigan’s small and medium-sized businesses compete and grow. Through personalized services fitted to meet the needs of clients, we develop more effective business leaders, drive product and process innovation, promote company-wide operational excellence and foster creative strategies for business growth and greater profitability. Find us at www.mmtc.org.

Friday, December 4, 2015

Enterprise Resource Program (ERP): Manage Demand and Growth

enterprise resource program manage demand and growthEvery organization struggles with growing business. The on-boarding process can particularly challenge manufacturers when they obtain new clients. Learning how to integrate new processes, deadlines and demands from new customers is critical to client retention and “up-selling” efforts.

The Double-Edged Sword of the “Big Contract”
As a manufacturer, you long for the moment of scoring a big contract. You see the dollar signs and can’t help but think of how great this will be for your company. Not only will a big contract increase revenue, it can add credibility to your organization and assist with future marketing efforts.

However, euphoria can quickly fade and turn into worry if you aren’t ready. Your organization must now actually produce and deliver the products. This is where an Enterprise Resource Program (ERP) can help manage the process.

When You Need an ERP
For many small manufacturers, the typical manufacturing process can be handled with a simple information and control system. The information and process might simply “be known” amongst the staff members. The company already knows where to source raw materials, or how to meet their existing deadlines and serve current customers.

New sales growth challenges the existing information system because increased sales means new/less familiar customers and new products. The quantities of raw materials or parts needed may exceed the capacity of current vendors. Increased inventory also means increased risk, as order cancellations are always possible. Questions arise, such as:

  • When, how much, at what price and from whom should raw materials be procured?
  • When should raw material be put into production?
  • How much product is required to fill orders? How much is needed for safety stock?
  • What is the real cost of manufacturing this product?
Previously, the answers to these questions were simple. The owner could keep track of everything with a simple spreadsheet or text document. Because of increased volume, the possibilities begin to extend beyond human ability to calculate potential risks and rewards. This is where an ERP system comes into play.

How an ERP Works
An ERP will calculate the required inventory levels and number of production workers needed to meet your sales forecast. Other features include:

  1. Inventory shortages and excess inventory are reduced as the ERP will calculate when and how much inventory to order.   
  2. Production variances are instantly calculated providing management with a bird’s eye view of how efficient the manufacturing process is. Management does not have to rely on standard costs to calculate monthly profitability and production variances are readily available.
  3. Checkpoints can be put into the system to prevent inventory or shipments of goods held back for quality assurance or other purposes.
  4. Information can be produced on a real time basis so management does not have to wait until reports are generated, sometimes days or even weeks later.
  5. Sophisticated ERP’s even allow customers to check availability and place orders without human intervention.
The Downside of ERPs
Costs can be high when implementing an ERP system, but increased computing power seems to reduce the price. Increased computing power and the use of cloud-based software cut into the burdensome cost of ERP software and hardware. However, there are some pitfalls each company must overcome when it installs an ERP. The production schedule is only as good as the sales forecast. The old adage “Garbage In, Garbage Out” is particularly apropos here.

The ERP assumes raw material is available from vendors any time. In the real world, this might not be true. Vendors also suffer from shortages so sometimes a strategic purchase of materials is advisable. Company personnel must be committed to running and feeding information into the ERP. The use of personal computing spreadsheets must be avoided and new processes must be fully embraced to be successful.

MMTC offers a variety of Lean Business Solutions. For more information, contact MMTC at 888.414.6682, visit www.mmtc.org or email inquiry@mmtc.org.



Since 1991, MMTC has assisted Michigan’s small and medium-sized businesses compete and grow. Through personalized services fitted to meet the needs of clients, we develop more effective business leaders, drive product and process innovation, promote company-wide operational excellence and foster creative strategies for business growth and greater profitability. Find us at www.mmtc.org.

Friday, November 20, 2015

Improve Operational Performance through Production Preparation Process (3P)

Remember the old adage, “Build a better mousetrap, and the world will beat a path to your door”? It is no longer acceptable just to build a better mousetrap. That mousetrap must now be built using a team-oriented approach and it should deliver a product/process in less time, using less material and fewer capital resources. The mousetrap must be less complex and be high in quality. That sounds easy, right? Unfortunately, it isn't as simple as it looks. The good news is there is a process which gives your company a good shot at building the “better mousetrap”.  

Eliminate Waste and Become More Lean
production preparation process
Through the Production Preparation Process, or 3P, manufacturers use a Lean approach to select the best product and/or process design from multiple alternatives. 3P guides teams through the creative process, generating and evaluating alternatives until the best process is selected and implemented. The new process or product design should improve performance and results on all levels.

3P is the first time Lean methods are being applied to creating new processes and products, not just fixing them in existing products. The desired result is a better product requiring less initial capital expenditure and lower ongoing costs. One goal of the new process is to be a waste free system. In order to achieve these objectives, 3P requires responsible personnel to assist with design and development of the new products and processes.

3P Methodology focuses on five simple premises: get the right people involved, figure out what needs to be accomplished, create a prototype without fear of failure, review all prior attempts, and create the final plan to execute the process or build the product. This process should happen in rapid succession while developing numerous alternatives to obtain success.

Summary: The Five Steps of 3P
  • Team Selection
  • Define Needs
  • Prototypes
  • Design Review
  • Project Planning
In general, over-planning should be avoided. Fast product preparation should be emphasized. A fluid process flow without stops is the design goal. Equipment should be easy to set up.

Where to Use 3P
  • When Designing New Products
  • When Designing Changes to Existing Products
  • Increasing or Decreasing Plant Capacity to Meet Demand
  • Relocating Facility Operations
  • During Process Quality Improvement
  • When Purchasing Capital Equipment
Benefits of 3P
3P offers many benefits, including:
  • Quicker Launch Times
  • Reduced Costs
  • Built in Quality
  • Higher Return on Investment.
  • A Customer Centered Process (the goal is to always meet customer needs in a more effective manner)
  • An Emphasis on using a team approach (it brings talent from all areas of the company into the development process and results in greater “buy-in” from those participating in the group effort)
MMTC offers a variety of Lean Business Solutions. For more information, contact MMTC at 888.414.6682, visit www.mmtc.org or email inquiry@mmtc.org.



Since 1991, MMTC has assisted Michigan’s small and medium-sized businesses compete and grow. Through personalized services fitted to meet the needs of clients, we develop more effective business leaders, drive product and process innovation, promote company-wide operational excellence and foster creative strategies for business growth and greater profitability. Find us at www.mmtc.org.