We often think of assets and liabilities as kind of accounting terms. To oversimplify, assets are things of value that you own, and liabilities are things you owe. As we were putting together diagnostic tools, we started to use the asset/liability terminology referring to manufacturing processes. It depends on whether your process is adding value to your company or decreasing your company's value. If you can outsource a current process and save money, you definitely have a liability on your hands. If you have a process where you outperform your competition, you have an asset. If you can’t save money outsourcing and you can’t outperform your competition, we say you’re neutral. If you’re looking to convert some processes to assets, start with your most expensive, your finishing process.
Why are the finishing processes so expensive? It’s actually a number of reasons and one of them is energy usage. With large ovens and wash systems, finishing departments often consume more energy than any of the other manufacturing processes. In some cases, it can consume more energy than all of the other departments combined.
Another expensive consideration is environmental. Finishing processes use a lot of volatile materials that ultimately need to be remediated. These processes pollute both air and water. The air and water need to be cleaned up before they can be returned to the environment, for obvious reasons. This leads to waste disposal. What’s left after the process and the clean-up is a significant volume of hazardous waste and this has to be disposed of safely. This is not an inexpensive proposition.
Scrap & Rework
Finally, there’s scrap and rework. Reworking quality defects from the finishing department costs more than defects from virtually any other department in the manufacturing process. As finishing is done to a nearly complete product, scrapping a product at this stage is the equivalent of scrapping a fully completed product. Something that could have otherwise been sold.
Process Problem or Business Problem?
So, if you take off your process hat and put on your business-person hat, you can see that focusing effort on your finishing process can potentially yield the biggest impact on your company’s manufacturing cost structure.
If you’re looking to create assets out of your manufacturing processes, the finishing process can be an impactful place to start.