I was walking round a prospects factory one day and decided to ask how much scrap they produced, thinking it would give me an inside line into how much savings could be created if they improved their quality through good automation.
“How much scrap do you produce each month?”
The owner told me that they typically get $500 to $1000 per month from the scrap metal merchant.
I whistled, thinking that that was a lot of money, but then started to question further. I was midway through my next question when we walked past the pile of scrap. It was immense. It also didn’t look like the kind of scrap I was expecting. I was expecting small slivers, off-cuts that could not be utilized anywhere else or the odd item that had been manufactured wrongly, with too many holes, or with incorrectly welded seams.
No – this looked more like a full product inventory piled high and randomly.
I pulled out a stainless steel door from the scrap pile and asked
“…so what’s wrong with this?…”
“...not sure, I guess it was the wrong size and didn’t fit...” came the reply.
I held the scrap door right next to one coming off the production line.
“…so these two doors cost the same to produce, the only difference is that one fits, and this one doesn’t...”
“Right” said the owner.
“So how much are each worth” I asked, curious now to see what logic he would follow.
“I guess the good one is worth $170 and the other is worth around $5 in scrap”
I felt I was on to something, so continued ”and how much did each cost”
I could see the logic now starting to run in his head. “$90 to manufacture”
As I started the next sentence, it dawned on him where I was going with the conversation.
“Do you mind if we start the conversation again”, I rephrased my original question “How much are you wasting in errors each month”
He was already doing the calculations, based on the pile of scrap in front of us and the amount that was work in progress and had therefore already incurred cost.
“I’m too embarrassed to work it out. I don’t even want to work it out”
I had a stab at it myself.
Each month they were wasting more in errors than the initial cost of DriveWorks.
They bought DriveWorks within a month.
