I've been going on (and on) about Value Added per Labor Hour and how it drives (or ought to drive) manufacturing improvement.  If you've read the first four posts you've probably seen some things that strike you as really old school ("Scrap is bad?  Wow!  There's something new!)  and other things that are newer but fundamental agile concepts (Don't run product that's not scheduled to be delivered and don't run above rate.)  that you probably agree with because you're tuned into lean ideas but that some manufacturing managers might quibble with. 

In this post, I want to go a bit farther looking into how the metric ought to be driving manufacturing practice, if it's taken seriously.

Let's take one of the elements of the formula that, I'm guessing, no one finds controversial: scrap is the enemy.

I had a client that had a number of plants around the country.  Two had serious scrap problems, so I was sent to form employee teams (to it's credit, the company had good success with and was committed to employee involvement) that would, it was hoped, solve these scrap problems.  Over several months, here's what I found out as I worked with the teams, focusing on scrap more carefully and more intently than we ever had before.

1. Operators tracked scrap.  Data were entered in to the company's very capable ERP database.  I found that it was possible to identify scrap by line, by type of scrap, by shift, by type of equipment, and by plant.  I also found out that, for the most part, no one had ever dug into any of this data beyond the point of looking at the scrap rate for the entire plant each month.
2. The equipment wasn't in terrible shape but it wasn't difficult at all to find C-clamps, duct tape, and binding twine holding things together.  The teams went down each line and made long lists of minor repairs, fixes, improvements.  These lists were treated (initially) as "not addressing the real problem of scrap".
3. There had been attempts to develop setup sheets and run sheets but they weren't in regular use.
4. Initial employee training focused on quality and spent a good bit of time making sure operators knew how to inspect the product they were making.  Operators were responsible for checking their own quality.
5. There was a strong QA function at the plants, in that QA inspectors also carefully checked product.  The relationship between QA and production was usually fairly testy and it got worse as scrap problems got worse.
6. When a problem with the line occurred, lead technicians made valiant efforts to fix the problem without shutting the line down.  In part this was because, often, it helped to have the line running as adjustments and repairs were being made (so long as it could be done safely).  In many cases, though, it was because shutting the line down and starting it back up was a pain, and lead techs were perenially hopeful they could solve the problem before they needed to shut the line down.  So they'd work on the problem, running scrap the whole time for six, ten, twelve hours.
7. Setup scrap was a big part of the problem.  Changing tooling was quick and easy enough, but getting good product often took a long time.  Changeover times (last good part to first good) weren't measured.  Setup scrap was measured but, insofar as I could tell, no one looked at it apart from the overall scrap measure.
   
8. The product was plastic so scrap was immediately re-usable.  It was simply ground up and put back through the manufacturing process.  In fact, high scrap in one periond led to low material costs in the next period.
9. The raw material (plastic resins) was tough to work with because it was so variable at its best.  (Changes in humidity could change the characteristics of the material.) The company used lesser grades of raw material as cost savings. 
   
10. There was little collaboration between the folks in charge of raw materials and the operating folks.  Some of the worst "scrap days" came when the characteristics of the raw material changed, the raw material folks knew of the changes, but they didn't tell anybody in operations.  Lines that had been running perfectly good product one minute, started running unusable scrap the next.  Supervisors and lead techs would run around madly looking for causal tooling or equipment issues only to learn, perhaps hours later, that changes to the raw material had taken place.

Everybody knew "scrap was the enemy".  Plant managers were getting beaten up by their boss because of high rates of scrap at their plants.  The company genuinely had a focus on quality and spent time and money on that focus.  The company had a genuine focus on employee involvement and continual improvement.  But, at least at these two plants, there was a "scrap accepting culture" as evidenced by all the points above.  Everyone was genuinely committed to doing a good job.  Everyone was committed to seeing their plant do well.  But, though, "scrap was the enemy", no one was focused on creating an ongoing culture of "scraplessness".  If it wasn't a problem, it wasn't a problem.  If it got to be a problem, there was energy and focus and attention and blood, sweat, and tears.  But there was no ongoing sense of "We design our operations, our policies, our operating tactics, our training, our everything with a clear and direct focus on the idea that 'scrap is the enemy'".  There was no "We just don't make scrap" culture.  On anybody's part.

Remember, I picked this particular element because it's probably the least "controversial".  The point is that, even in the case of an element as apparently straightforward as "reduce scrap", there can be difficulty in changing the culture and behavior of the organization.  Imagine how tough it is with something like "Run at rate.  Not above.  Not below."

The story has a happy ending.  As the plants addressed the issues above (and their overall cultures regarding scrap and other elements of performance) the scrap problems went down.