Original Date: 06/26/1995
Revision Date: 01/18/2007
Information : Material Utilization
Dayton Parts, Inc. (DPI) realized in 1993 that the quantity of steel sold as scrap was excessive relative to the total raw steel consumed, but that it could be a controllable cost. To investigate the problem and develop solutions, a Material Utilization Task Team was formed with membership drawn from both shop floor and management departments. To minimize scrap, the team developed an information base to direct raw steel length purchasing decisions.
While the team knew the total scrap sold, it initially only had assumptions regarding the relative amounts of scrap steel (off fall) produced by the two major lines -- multi-leaf springs and taper springs. To correct this lack of accurate information, the team spent its first three months gathering data relative to the off fall that resulted from the production of each part number and the length of the raw steel from which each part was produced. The result of the data analysis indicated that while the overall off fall was approximately 3%, the total for taper spring operations was over 6% . This data also revealed that 51% of the total off fall was from 21% of the production. The data indicated that the majority of the off fall resulted from less than optimum raw steel lengths, usually 22 feet for all cross sections.
DPI may produce as many as 5000 different spring designs in a year, mostly in relatively small batches, and it is therefore not feasible to buy precut spring blanks direct from steel mills since the quantity of each length required is well below the minimum for such special cuts. The mills can supply stock cut to any length if at least five tons are requested in each length (for a given cross section) at no extra cost. Since the team’s analysis indicated that off fall can be minimized by optimizing the purchased lengths, the decision was made to base purchase lengths on part number requirements. This optimization resulted in specifying two purchased lengths for a number of cross sections, and three for a few. To ensure these changes were understood by manufacturing personnel, the BOMs were changed to reflect the new (and additional) steel lengths. Likewise, the routing instructions were amended to provide shearing instructions for optimal steel utilization.
Modification of its raw steel purchasing procedures to optimize utilization has resulted in over $42K in savings for the company since the team was formed and has brought the off fall from taper spring production to well below 3%. This is doubly important since the taper spring line represents the growth market for Dayton Parts.
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