JMAC Consultant Tips: Concept of Loss Improvement #1 ~ What is Loss? ~ Total Productive Maintenance - TPM

In advancing loss improvement activities at production sites, achieving effective results is crucial. Being efficient can be evaluated from three aspects: 1) Speed, 2) Cost, and 3) Skillfulness. To achieve efficient improvement results, specific methods and key considerations are essential. One of these is the improvement step, which offers several key benefits:

Sharing the Process: Facilitates confirmation of direction among team members.

Visualization of Progress: Visual aids in schedule creation and progress management.

Human Resource Development: Enhances understanding of improvement methods and techniques.

Knowledge Accumulation: Simplifies the utilization of improvement outputs.

The goal of this page is to outline improvement steps for various types of losses and to explore the methods that best suit your organization. Improvement methods and implementation practices can be relatively easy to replicate. In this sense, the series of information that JMAC issues can be considered as a "HOW TO reference." We encourage you to read these articles as a reference to further accelerate and enhance your organization's improvement initiatives.

 

The improvement steps shared here are "sample procedures." While they serve as guidance, JMAC has developed these steps based on successful loss reduction cases from various companies. The steps and considerations for each type of loss will serve as a reference during implementation.

 

Of course, these suggestions do not limit how improvements should proceed. The actual process will vary depending on specific circumstances. As guidance from JMAC, we will introduce indicators to understand and quantify losses. We believe it is valuable to present fundamental improvement step processes, methodological differences, and specialized loss improvement steps designed for effective results based on loss characteristics.

 

Loss improvement does not require strict adherence to a predetermined process; overly focusing on steps can lead to unnecessary attention on procedural correctness, resulting in wasted time. However, when the aim is to enhance understanding of various improvement methods and practices to boost capabilities, applying structured steps can be beneficial.

For further insights and specific improvement tips, please do not hesitate to contact JMAC through our inquiry form at Contact JMAC!.

1-1 The Foundation of Improvement: Factual Verification

The basis of improvement lies in verifying facts. This refers to assessing issues in the actual workplace or the physical items involved. By continuously validating facts, the causes and necessary actions become clear, enabling issue resolution. The distinction between effective and ineffective improvements largely stems from the method of fact verification. Although it might sound extreme, "improvement steps encourage step-wise verification of facts."

A critical point in factual verification involves understanding losses. In the general improvement process, understanding losses is referred to as "identifying the current situation," which is a necessary step to clarify the magnitude of losses, severity of improvement themes, and the overall need for improvement. Effective identification of losses in daily production management serves as an important metric for assessing factory management levels. In higher-tier factories, losses are typically analyzed by production line or equipment, whereas lower-tier factories may only manage metrics such as production volume, input hours, or defect counts at a basic level.

However, it is not necessarily accurate to equate lower management levels with problematic factories; management levels need to align with the specific demands and contexts of the operation.

1-2 Understanding Losses that Constrain Cost Reduction

How much loss occurs in your factories or production lines? Let's delve into the concept of losses.

Losses come in various forms, including inefficiencies, quality or profit impediments, and non-value-adding activities. Additionally, there are organizational or decision-related losses at the management level. While various perspectives can be used to categorize losses, JMAC will first focus on losses occurring at the production site as below.

What is Loss?
Loss in production refers to anything that limits cost reduction. In essence, improving losses must yield cost savings. Directly speaking, cost reduction entails lowering manufacturing costs. However, the need for total cost reduction extends beyond manufacturing to include head office, management, design, sales, research, and subsidiaries. In this context, the primary focus is on manufacturing cost reduction.

A straightforward approach to quantifying loss is to assess "Current Costs - Target Costs." It is natural for factories to evaluate the gap between target (planned) costs and current costs.

What needs to be done?

To understand this, it is essential to identify and define the losses. The key is to view losses (cost gaps) clearly, breaking them down into recognizable components. This is akin to understanding the overall cost structure and establishes the relationship between cost reduction and losses.

Example Breakdown of Costs:

The following figure is an example based on the cost concept of MFCA (Material Flow Cost Accounting). Variations in methods and terminology exist across different companies and factories, yet they generally adhere to a standard conceptual classification of cost items.

Cost Reduction and Loss Analysis

Material Costs:

 A significant portion of costs is derived from material expenses (though processing costs may dominate in some factories). Strategies to reduce material costs include reviewing materials (adjusting conditions), lowering purchase prices through bulk buying, and streamlining trial processes. Short-term challenges may arise when revising processing methods to reduce material costs. Yield loss is a major factor that constrains material cost reductions, along with defect losses, startup losses, and volume losses.

Processing Costs: Options for reducing processing costs include eliminating unnecessary tasks, enhancing workflows through line balancing, and exploring outsourcing. Constraints on processing cost reductions often arise from operational and setup losses, with operational losses comprising management losses and action-related losses.

Management Costs:

These costs encompass expenses from administrative indirect departments and sales management. Logistics losses and inventory losses serve as common examples.

Energy Costs:

Involves fuel, electricity, and water expenses, alongside relevant losses such as startup and overload losses.

For further information, please refer to our article on the 16 Major Losses here. JMAC will also provide detailed explanations of these losses in the near future.

If you would like to engage in a discussion with JMAC consultants, please reach out through our inquiry form at Contact JMAC!.

●Author profile

Nobuhiro Otsuka, Chief TPM Consultant

After joining the Japan Institute of Plant Maintenance (JIPM), Nobuhiro has been working on projects to improve productivity, reduce costs, and improve quality in the metal products, electrical and electronic parts, automotive, food and beverage, pharmaceutical and medical products, and paper industries. Nobuhiro provides consulting support from both a Gemba (shopfloor) perspective and a management perspective. Supports many companies both domestically and overseas. Currently works on a wide range of projects including TPM, cost management/cost reduction, quality improvement, industrial engineering, factory layout planning, purchasing/procurement, etc.

 

Katsunori Kanegae, Chief TPM Consultant, Director of TPM Consulting Business

After working as a production engineer at an electrical manufacturer, Katsunori became a consultant. As an expert in production strategy, production methods, and equipment management, he has been supporting domestic and international manufacturing companies in productivity improvement, cost management, defect reduction, inventory reduction, and lead time improvement projects. His expertise extends to researching advanced equipment maintenance technology and working on digital transformation in equipment maintenance. He also has authored numerous articles on digital transformation.