Manufacturing conversion cost reduction using quality control tools and digitization of real-time data

Abstract

Abstract: Two-wheeler automobile manufacturers in India are currently facing a big pressure to reduce the overall manufacturing cost in order to sustain the position in hypercompetitive domestic and global market. The manufacturing conversion cost is one part of the overall manufacturing cost. It consists of three major components i.e. product or parts scrap cost, consumables cost and tool cost. The scrap cost is the cost of defective products, which are not produced in accordance with standard and can't be sent to market. The consumables cost is the cost of other than basic raw material used in manufacturing i.e. filters, filler materials, fuel, gases, chemical, coolant and lubricants etc. This study has tried to emphasise role of conversion cost in making organisations cost competitive. Case study-based approach is used in this study. The case manufacturing system comprises three main processes: machine shop, frame plant (weld and paint shop) and assembly shop. In frame plant, paint shop and weld shop are the two main sub sections of this automobile manufacturing. More than 50% of overall manufacturing conversion cost is consumed in these two areas. This study attempts to illustrate the reduction of the manufacturing conversion cost by prioritizing and analysing the cost factors using DMAIC (define-measure-analyze-improve-control) approach using quality control (QC) tools like Pareto chart, Cause & effect diagram and digitization of real time data. Authors have identified eighteen elements of conversion cost in this study. It has been observed from this study that even small saving in conversion cost per vehicle i.e. INR 24.18 (0.35 US$) per vehicle has resulted in annual saving of 2.2 millionUSD.Initiatives taken by this organisation for cost saving has also resulted in cleaner production and more sustainable manufacturing processes. Findings will be motivating to other manufacturers for reducing manufacturing cost using QC tools on smaller and insignificant activities.