Discrepancies: Reducing them to increase profit

CW guest columnist Steve R. Rodgers, the principal at EmergenTek LLC (Jordan, UT, US), asks, Must we simply live with Discrepancy Reports? Rodgers says, "No," and strongly suggests that every composites manufacturer ought to be considering this question: What is the actual cost of failure?


Facebook Share Icon LinkedIn Share Icon Twitter Share Icon Share by EMail icon Print Icon

This is your worst nightmare . . . .

You have pulled out all the stops to complete a major composite assembly. Your customer has told you that there is serious impact if you fail to meet the delivery schedule. Your quality rating might hang in the balance. Then you get the phone call: This all-important assembly had just been issued a Discrepancy Report (DR) by the quality department. You rush to the shop floor to view the problem first hand and experience that sinking feeling in your stomach. This is not a minor anomaly that can be used “as is.” It’s a showstopper. You make a phone call to cancel whatever plans you had for the evening, and you dig in for the long night ahead. If only there were a way to have avoided this problem, you think. But then you remind yourself that unforeseen problems are part of the job in the composites industry. 

But are they? Must we simply live with DRs? In October 2014, CompositesWorld’s Web site published a CW Blog titled “Turning data into gold” (short.compositesworld.com/DataGold) in which there were examples of how collecting and interpreting Big Data can help avoid the writing of DRs. What was not covered is the actual impact of a DR on profitability. My company has interviewed a number of composites manufacturers and uncovered information about the true extent of the costs involved in writing a DR. It is our belief that every composites manufacturer needs to ask and answer a critical question: What is the actual cost of failure?

Every discrepant part requires a significant investment, whether the part is shipped or scrapped. However, it is easy to overlook the total cost associated with bad parts. The initial investment begins with the cost of producing the part. This includes the cost of planning, toolmaking, materials and process consumables, labor, machine time and overhead built into that part. Once a part is declared nonconforming, a DR must be issued, compounding those costs.

The initial cost is associated with DR paperwork, which varies depending on the size, complexity and overhead structure of each organization. For second- and third-tier suppliers the cost of initiating a DR may be relatively low (US$500-US$1,000 or €385-€770). Estimates by Tier I suppliers and OEMs, however, can range as high as $4,000 (€3,080) per DR. One Tier II supplier recently estimated that as much as 4-5% of the company’s gross revenues were consumed by initiating DRs to cover discrepant hardware. This only includes writing the DR, not the cost of its disposition. 

The expense of initiating a DR has a significant negative impact on profit but, in fact, it’s just the tip of the iceberg. When DR paperwork is complete, the company confronts a complex decision tree. If the discrepancy doesn’t affect form, fit or function it might be dispositioned to “use as-is” and be reinserted into the manufacturing flow. If not, there are two options: A less expensive part might be scrapped and a replacement built from scratch, retracing the entire manufacturing process. For more expensive parts, it might be more cost-effective to pursue a repair option. But this typically triggers a Material Review Board (MRB) action, likely to include most if not all of the following:

  • Formation of an investigative team
  • Involvement of the customer
  • Collection of information
  • Research
  • Conduct of a design of experiment
  • Design and analysis of a corrective action
  • Investigation of root cause and development of a corrective action 
  • Issuance of shop repair paperwork
  • Performance of the repair

The time, materials and overhead cost involved in the final item are obvious and don’t escape consideration. But each of the eight items that precede the actual repair also add time, money and complexity to the cost of business. MRB actions can remain open and active from one to six months. During this entire time, out-of-sequence replacement parts must be manufactured to meet rate production and the customer’s needs. The manufacturing schedule has been permanently disrupted.

When we discuss the complexity and total cost of discrepant parts, then, another thing that is often overlooked is the aggregate impact on manufacturing. When a high-rate part or assembly is removed from the shop workflow, it must be replaced by another piece. Even when this is considered, it is often oversimplified by simply adding the direct cost of replacing the part. However, the impact of replacement goes far beyond that. Other indirect costs are associated with the following works in progress (WIP):

  • Writing new shop paperwork, which takes a technician or manufacturing engineer away from other work.
  • Shop loading — that is, inserting the replacement part into the workflow — delays completion of other parts that are processed on the same equipment.
  • If the process includes a production bottleneck, all programs will be negatively impacted to an even greater degree. 
  • Inventory Control must stock, issue and reorder new materials for the replacement part.

The added WIP can increase overall cost by as much as 130%.

My company is attempting to address the impact of these often ignored but very real cost categories that erode profitability. We would like to ask CW readers to participate in a short survey. The survey’s goal is to build a database of more detailed information that will enable the industry to recognize and begin to reduce the costs of advanced composites. In return for giving us 7 minutes of their time, we will send each participant the results of the survey after they are compiled, and we will provide an in-depth report on how 3D Predictive Data Analysis might impact your MRB.  

Editor’s Note: To participate in the survey and then receive an in-depth report on how 3D Predictive Data Analysis might impact MRB action, please visit: