Identifying and Correcting the Causes of Giveaway Through the Investment in Plant-Floor Quality Data Collection and Analysis Software

Payback Analysis at a Glance Problem: Overfill leading to excessive product giveaway. Solution: Implemented NWA Quality Monitor data collection and analysis software to identify sources of excessive variation leading to overfill, and to monitor process improvements. Cost Savings: $435,739 Payback: 10.7 days

In tough economic times, resources are tight and directed at the investments that bring in the most revenue or result in the greatest cost savings. How can a plant-floor quality data collection and analysis system like NWA Quality Monitor^® help you meet these objectives?

This payback calculation illustrates a real-life example of how one manufacturer was able to reduce its giveaway due to overfill by 50%, resulting in annual savings of $435,739 and a payoff of their Quality Monitor investment in just 10.7 days.

Situation

A manufacturer of premium dry pet food is producing 39 million pounds (10,011,808 packages) of product per year, 829,978 pounds (or 27 truckloads) of which is overfill, resulting in $871,477 in product giveaway costs.

Cost of Overfill = (829,978 lbs/yr) x ($1.05/lb) = $871,477 in overfill costs per year

Solution

The manufacturer implemented a system to identify the causes of the overfill and improve monitoring of the manufacturing process. At the end of the packaging line, a scale was set up to electronically input sample weights into a test station running NWA Quality Monitor. Quality Monitor used this data to produce X-bar and Range charts enabling early identification of the sources of excessive variation. It also generated Process Capability histograms to monitor the process improvement efforts and to decide how much closer they could move their targets to the declared limit. The total cost of the system, including installation, hardware, software and training was $15,000.

Results

1. The manufacturer identified and corrected the causes of the overfill and gained tighter control of its process, allowing it to eliminate 50% of its giveaway costs, or $435,739 per year.
2. The manufacturer realized enough savings in just 10.7 days to fully pay for its investment in NWA Quality Monitor.

Savings = 50% x $871,477 = $435,739 in giveaway cost savings per year

Payback = ($15,000/$435,739) x 312 production days per year = 10.7 days to payback

back to top