| NWA Quality Monitor Payback Calculation
Investment in Plant-Floor Quality Data Collection
and Analysis Software
| |
| PAYBACK 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 American
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
An American 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.
| Overfill
= (10,011,808 pkgs/yr) x ( 3.8954 |
- |
3.8125
) = 829,978 pounds of overfill per year |
| ( |
Avg
fill weight
per pkg |
|
- |
net
weight pkg
declaration |
) |
|
Cost of Overfill = (829,978 lbs/yr) x ($1.05/lb)
= $871,477 in overfill costs per year
Solution
The American 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
- 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.
- 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 |
Payback Calculation