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Proceedings of the 2016 International Conference on Industrial Engineering and Operations Management Kuala Lumpur, Malaysia, March 8-10, 2016

Application of Material Flow Cost Accounting (MFCA) and Quality Control Tools in Wooden Toys Product

Wasawat Nakkiew Advanced Manufacturing Technology Research Center

Department of Industrial Engineering, Faculty of Engineering, Chiang Mai University

[email protected]

Pattarawadee Poolperm Department of Industrial Engineering, Faculty of Engineering,

Chiang Mai University [email protected]

Abstract- Small to medium enterprise (SME) in Thailand contributes significantly to the Thai economy. However, a large portion of the SME companies do not have systematic productivity improvement mechanism inside their organizations. The lack of appropriate productivity improvement tools results in lots of wastes in several kinds of resources such as material, energy, time, and so on throughout the production system. Material Flow Cost Accounting (MFCA) is an international standard tool (ISO 14051, since 2011), described as an internal decision making tool aiming for the reduction of material and resources input coming into the system. In this research a SME company, a wooden toy company, in Chiang Mai, Thailand was used as a case study for the application of MFCA concept. The results from the MFCA analysis alone could only identify the point of major wastes with their associated costs in materials, energy, and labor. In order for a company to fully utilize the results from the MFCA analysis, a further analysis about the root cause and a systematic methodology for obtaining appropriate solutions for the root causes must be conducted. Quality Control tools, usually called 7 QC tools, were used to obtain root cause and possible solution to the problem.

Results from the MFCA analysis for a wooden toy company in this research showed that the wastes accounted from 58.07% of the total cost. Two of the most significant processes are the cutting process and the drilling process which provided most negative costs comparing with other processes: 70,960 Baht per lot and 32,699 Baht per lot for cutting and drilling processes, respectively. After obtaining root causes and their possible solution by the application of 7QC tools, two possible solutions are adopted by the company. For the cutting process, the size of the raw material purchased from vendor was changed and for the drilling process a new jig-fixture was introduced. By changing the size of the raw material from the vendor the company reduced a significant amount of wastes and saved 45,008 Baht per lot. By introducing a new jig-fixture for the drilling process, the time was reduced significantly resulting in labor and energy cost saving of 1,897 Baht per lot.

Keywords- MFCA; quality control tools; productivity improvement

INTRODUCTION

Small to medium enterprise (SME) contributes significantly to domestic and global economy throughout the world. Reducing wastes is one of the strategies for a company to reducing the production cost. Green manufacturing concept where the resource is used conservatively with social concern for environmental impact, have been adopted widely nowadays. Deif [1] explained the current green manufacturing system models and proposed a new system model for green manufacturing paradigm. The author demonstrated a new system model to an industrial wood product manufacturer. Mohanty and Deshmukh [2] gave an overview of applying the green manufacturing concepts to industry as well as the managerial strategies of the green manufacturing. Several green manufacturing strategies involves the

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life cycle assessment (LCA) model in their proposed analysis such as in [3], where the authors proposed general model for environment impact assessment in flooring industry: an industrial case of PVC floor covering manufacturer was demonstrated. Linking green manufacturing concept with international standard in the 14000 series, in 2011 the Material Flow Cost Accounting (MFCA) became an international standard [4]. Before becoming the ISO standard (ISO 14051), the MFCA concept had been applied to hundreds of cases in Japan. The concept demonstrates the associated costs coupled with the mass balancing technique used in the LCA, which can be linked to means to reduce wastes as well as costs. Nakkiew [5]-[6] demonstrated the application of MFCA to SME companies in Thailand. The author used the MFCA technique in determining the most negative (waste) cost process and then several quality control tools were used for obtaining solutions in reducing those wastes. Tang and Takakuwa [7] extended the application of the MFCA technique to the supply chain of a machining product. The result from the MFCA technique usually suggests in reducing the resourcing input; however, the technique itself does not identifying how to reducing the resourcing input or wastes in manufacturing processes. Several tools can be used in determining appropriate solutions for the waste reduction. In this research, quality control tools, usually called 7QC tools, was used for determining root causes of the producing wastes in manufacturing processes where the waste occur the most. After the root causes were identified, possible solutions were proposed to the company.

I. MATERIAL FLOW COST ACCOUNTING (MFCA) METHODOLOGY

Material Flow Cost Accounting (MFCA) has become an international standard (ISO 14051) in 2011. The principles of MFCA can be summarized in four aspects: 1) Understand material flow and energy use2) Link physical and monetary data3) Ensure accuracy, completeness and comparability of physical data4) Estimate and assign cost to material loss

In order to implement the MFCA technique, four major elements that must be identified are the following:

- Quantity centre: set measurement point- Material balance: check balance between products and loss (material loss)- Cost calculation: calculate costs- Material flow model: set up a model that links multiple quantity centers

The implementation steps of MFCA, according to the ISO 14051 standards [8] can be summarized as follows;

- Involvement of management: like many quality standards, management team has to get involve inimplementation by evaluating technique to match environmental and financial goals of thecompany, provides efficient resources, monitoring, reviewing, and doing the improvement.

- Determination of necessary expertise: all involved department experts need to get involves inobtaining necessary information.

- Specification of a boundary and a time period: scope of the implementation need to be addressedwith a specified time frame.

- Determination of quantity centres: one or many manufacturing processes that affect to the material,energy, and system cost need to be identified as quantity centre.

- Identification of inputs and outputs for each quantity centre: clearly identify input of each quantitycentre that could be materials and/or energy and output for each quantity centre.

- Quantification of the material flows in physical units: the unit used can be mass, length, volume,number of pieces, etc.

- Quantification of the material flows in monetary units: convert the input/output to monetary values


Proceedings of the 2016 International CKuala Lumpur, Malaysia, March 8-10,

of material cost (MC), energy- MFCA data summary and in

matrix, graphical representati- Communication of MFCA r

such as graph, tables, etc. Sho- Identification and assessment

for improvement in term of th

Seven quality control tools (7 QC Montgomery [9], the 7 QC tools cgraph, histogram, Pareto diagram,diagram (4M: Man, Material, Manegative products produced in form

II. MFCA

MFCA Demonstration- In wooden toys manufacturer, locatedselected for demonstrating the applthe raw material used is the thicknethicknesses.

The materials used in this proto 24 meters), sandpaper no.150 (1(2,000 pcs.), screws (8,000 pcs.), h(1,520 THB), magnetic (4,000 pcsproducing the wooden toys is shomaterial flow model as shown in thmaterials as well as the wastes in eawas to construct a mass balance tab

Table 1:

Input : material

used

Quantity (kg)

Quantity (W) (

Material 4,600 - 1Labor - - 5Energy - 3746 1

Conference on Industrial Engineering and Operations Ma2016

y cost (EC), system costs (SC), and waste managementerpretation: summary in tables form such as a mion of negative and positive costs, etc. results: results presented in various kinds of commowed and review in managerial team. t of improvement opportunities: investigating the sohe financial and environmental aspects.

tools) are used in process control and improvemeconsist of check sheet, fish-bone diagram (cause an, scatter diagram, and control charts. In this paachine, and Method) was used for investigating p

ming quantity center.

A MODEL OF A WOODEN TOY PRODUCT

this research, the MFCA technique was applied d in Chiang Mai, Thailand. A toy product, shownlication of the technique. The main material is soft ess of 7 inches and width of 3 inches cut to sheet o

Figure 1: A Wooden Toy Product

ocess are soft wood (2,000 sheets/lot), sandpaper no.1 roll, equal to 12 meters), sandpaper no.240 (250

heat shrink film (1,000 sheets), lacquer (1tank/1,900s.), thinner solution (1,600 THB) .The manufacturinow in Figure 2 and some of the processes are grohe dashed-boxes. Material Flow Model, which showach process. After the material flow model was obtale for each process/quantity center (Table 1-11) Mass balance of raw material at cut-to-size process

Cost (Baht)

Output Percent quantity

of positive product

Quantity (kg)

Qua(W

60,000 Material 55.65% 2,560 -599.27 Labor - - -198.19 Energy - - 2,08

anagement

ent cost (WC). material flow cost

municational forms

ources of problems

ent. According to nd effect diagram), aper, the fish-bone possible causes of

to a medium-size n in Figure 1, was wood. The size of

of wood at various

.100 (2 coils, equal 0 sheets/lot), hinge THB), oil coating

ng process used for ouped in the same ws the flow of raw ained, the next step

ntity W)

Cost (Baht)

- 89,040 - 333.5

84.65 110.3



Output Percent quantity of negative product

Quantity (kg) Quantity (W)

Cost (Baht)

Material 44.35% 2,040 - 70,960 Labor - - - 265.77Energy - - 1,661.35 87.89

4,600 kg/lot

Figure 2: Material flow model

Table 2: Mass balance for planing process

Input : material

used

Quantity (kg)

Quantity (W)

Cost (Baht)


of positive product

Quantity (kg)

Quantity (W)

Cost (Baht)

Material 2,560 - 89,040 Material 78.13% 2,000 - 69,566.9

Labor - - 630 Labor - - - 492.22Energy - 1873 88.5 Energy - - 1,463.37 69.15

Soft wood Cut to size Planing Drilling Scrub the wood

Scrub the hole Assembly

Waste timber 2040.1kg

Waste timber 560kg

Waste timber 940kg

Waste timber 40kg

Waste timber 20kg

Hinge &Screws

Sandpaper No.240

Waste timber 1.78kg

Waste timber 34.05kg

negative material cost 3,635.82kg.

positive material cost 1,102kg.

Packing Lock installation Glossy Coating Polished surfaces

Heat shrink film

Magnetic and screw

Coating Lacquer and thinner





Cost (Baht)

Material 21.87% 560 - 19,473.05 Labor - - - 137.78Energy - - 409.62 19.35

Table 3: Mass balance of drilling holes process

Input : material

used

Quantity (kg)

Quantity (W)

Cost (Baht)


of positive product

Quantity (kg)

Quantity (W)

Cost (Baht)

Material 2,000 - 69,566.9 Material 53% 1,060 - 36,870.5

Labor - - 3.887.63 Labor - - - 2,060.44 Energy - 7833 3.805.62 Energy - - 4,151.49 2,016.97



Cost (Baht)

Material 47% 940 - 32,699.45Labor - - - 1,827.19Energy - - 3,681.51 1,788.64

Table 4: The mass balance of scrubbing holes and polished process (combined 2 processes)

Input : material

used

Quantity (kg)

Quantity (W)

Cost (Baht)


of positive product

Quantity (kg)

Quantity (W)

Cost (Baht)

Material 1,060 - 40,933.8 Material 96.23% 1,020 - 39,390.6

Labor - - 6,475.10 Labor - - - 6,231.00

Energy - 2,238 1,363.90 Energy - - 2,153.63 1,312.50





Cost (Baht)

Material 3.77% 40 - 1,543.2Labor - - - 244.12Energy - - 84.37 51.42

Table 5: Mass balance of polishing process

Input : material

used

Quantity (kg)

Quantity (W)

Cost (Baht)


of positive product

Quantity (kg)

Quantity (W)

Cost (Baht)

Material 1,020 - 41,210.6 Material 98.04% 1,000 - 40,402.9Labor - - 5,062.50 Labor - - - 4,963.28Energy - 2,238 1,299.97 Energy - - 2,194.14 1,274.49


Quantity (kg)

Quantity (W) Cost (Baht)

Material 1.96% 20 - 807.7 Labor - - - 99.23Energy - - 43.86 25.48

Table 6: Mass balance of raw materials and assembly processes (from 2 halves)

Input : material

used

Quantity (kg)

Quantity (W)

Cost (Baht)


of positive product

Quantity (kg)

Quantity (W)

Cost (Baht)

Material 1,092 - 46,402.9 Material 100% 1,092 - 46,402.9Labor - - 2,937.38 Labor - - - 2,937.38Energy - 350 78.51 Energy - - 350 78.51

Table 7: Material mass balance of polished surfaces process

Input : material

used

Quantity (kg)

Quantity (W)

Cost (Baht)

Output Percent quantity of

positive product

Quantity (kg)

Quantity (W)

Cost (Baht)

Material 1,092 - 48,902.9 Material 99.08% 1,082 - 48,452.9 Labor - - 6,475.13 Labor - - - 6,415.56Energy - 2,238 1,661.53 Energy - - 2,217 1,646.24





Cost (Baht)

Material 0.92% 10 - 449.9Labor - - - 59.57Energy - - 20.59 15.29

Table 8: Mass balance for coating process

Input : material

used

Quantity (kg)

Quantity (W)

Cost (Baht)


positive product

Quantity (kg)

Quantity (W)

Cost (Baht)

Material 1,134.05 - 51,716.9 Material 97% 1,100 - 50,165.4

Labor - - 1,368.80 Labor - - - 1,327.70

Energy - 373 31.7 Energy - - 361 30.75



Cost (Baht)

Material 3% 34.05 - 1,551.5Labor - - - 41.06Energy - - 12 0.95

Table 9: Mass balance of gloss coating process

Input : material

used

Quantity (kg)

Quantity (W)

Cost (Baht)


positive product

Quantity (kg)

Quantity (W)

Cost (Baht)

Material 1,101.78 - 51,518.2 Material

99.84% 1,100 - 51,435.8

Labor - - 781.13 Labor - - - 779.88Energy - 373 18.1 Energy - - 372.4 18.07


Quantity (kg)

Quantity (W) Cost (Baht)

Material 0.16% 1.78 - 82.43Labor - - - 1.25Energy - - 0.6 0.03



Table 10 Mass balance of installation of lock piece

Input : material

used

Quantity (kg)

Quantity (W)

Cost (Baht)


of positive product

Quantity (kg)

Quantity (W)

Cost (Baht)

Material 1,102 - 55,434.8 Material 100% 1,102 - 55,434.8

Labor - - 2,524.86 Labor - - - 2,524.86

Energy - 373 70.58 Energy - - 373 70.58

Table 11: Mass balance of packaging process

Input :

material used

Quantity (kg)

Quantity (W)

Cost (Baht)


of positive product

Quantity (kg)

Quantity (W)

Cost (Baht)

Material 1,102 - 60,435.8 Material 100% 1,102 - 60,435.8Labor - - 312.37 Labor - - - 312.37 Energy - 2,500 53.16 Energy - - 2,500 53.16

The MFCA results can be summarized in Table 12 and Figure 3-4.

Table 12: The analysis of material flow cost accounting before improvement

Material Labor Energy Total

Positive cost 60,435.8 28,378.23 6,680.77 95,494.8

26.53% 12.46% 2.93% 41.93%

Negative cost 127,567 2,675.97 1,989.05 132,232

56.02% 1.18% 0.87% 58.07%

Total 188,002.8 31,052.2 8,669.82 227,726.82 82.56% 13.64% 3.81% 100%

Results showed that the material cost accounted for 78.98% of the total cost; however, 43.67% of negative material cost was greater than 35.32% positive cost suggested that there were lot of wasted material produced in this product.



Figure 3: The analysis of material flow cost accounting Figure 4: The analysis of MFCA (%)

After the MFCA analysis was carried out, the next step was to find root causes of the two processes

where negative products were produced significantly: cutting process and drilling process. The fish-bone diagram (one of 7QC tools) was used for obtaining possible root causes for producing significant amount of waste of each process. The fish-bone diagrams of the cutting process and drilling process shown in Figure 5 and 6, respectively.

Figure 5: Fish-Bone Diagram for waste cutting quantity center

From Figure 5, root cause analysis of the high waste problem in the cutting quantity center was performed by using the fish-bone diagram. Several influencing factors were collected from the teams of workers and supervisors. It was founded that poor input wood condition was one of the major contributing factors voted by the brainstorming team of workers and supervisors. Then, after identifying the possible root cause for the problem, then the team investigated further in how to solve this problem. The team found that crack of the input material was very critical to the significant amount of wasted occurred in this quantity center. The team also found that crack was always happened for different length of wood used; therefore, a suggestion of using different length of input wood was introduced.

Machine Man

untrained worker from other department

lack of skill Poor personal management

Insufficient number of workers

personal problem lack of

planning on

not fully utilized appearance of

improper operation

no inspection and maintenance

heavy use machine

breakdown

Material

transportation crack

poor wood condition

Bucking

improper training

install of wood wrongly input

no working instructions

technique has never been reviewed

method is not good

no helping accessories

Method

Wood waste from the cutting

process



Figure 6: Fish-Bone Diagram for waste drilling quantity center

In the cutting process where the negative product was 44.35% from cutting cracks and damage part of the raw material after the drying process to specified sizes of about 50 cm., it showed that this process produced a lot of wastes. The root cause analysis by the fish-bone diagram, Figure 5, was conducted. It was found that poor wood condition due to cracks and damages causes the manufacturer to cut away a lot of wood. Then, an experiment of reducing size of input from 100 cm. to other sizes was performed. It was found that at the length of raw material of 65 cm. it could produce the least amount of wastes in this process. By changing the size of wood input from 100 cm. to 65 cm. the negative cost was reduced from 132,232 Baht to 87,012.39 baht or a reduction of 45,219.61 Baht per lot. The improved material flow cost accounting matrix was showed in Table 13.

Table 13: Analysis of material flow cost accounting after improvement on cutting process Material Labor Energy Total

Positive cost 66,804.21 35.32%

28,555.45 15.10%

6,740.03 3.56%

102,099.69 53.99%

Negative cost 82,585.88 43.67%

2,496.73 1.32%

1,929.78 1.02%

87,012.39 46.01%

Total 14,9363.09 78.98%

31,052.18 16.42%

8,669.81 4.58%

189,112.08 100%

In drilling process, the negative cost accounted for 47% which was relatively high. It suggested that a lot of waste was produced in this step. Considering the drilling process in general, it is a material removal process, so it removes a significant amount of the materials. However, the method of drilling process can be improved by using a new jig-fixture which can reduce drilling time. After designing and implementing a new jig-fixture design as showed in Figure 7, the process can be saved from 132.232 Baht/lot in Table 12 to 130.335 Baht/lot in Table 14, or about 1,897 Baht per lot.

Man Machine

Material Method

not fully utilized

Worker doesn’t follow rules

lack of planning work many of the steps work

the machine is not full performance

use of machinery unnecessary

poor wood

transportation

wood

machine breakdown

heavy use

no inspection and maintenance

Wood waste from the drilling

process

Management system

no plan design

characteristics of the piece



Figure 7: A new jig-fixture guided for drilling process

After the new jig-fixture was introduced the material flow cost accounting matrix was recalculated and the result was shown in Table 14.

Table 14: Analysis of material flow cost accounting after improvement on drilling process process Material Labor Energy Total

Positive cost 60,435.8 27.01%

27,324.79 12.21%

5,595.82 2.50%

93,356.41 41.73%

Negative cost 127,567 57.03%

1,741.78 0.78%

1,026.92 0.46%

130,335 58.27%

Total 188,002.8 84.04%

29,066.57 12.99%

6,622.74 2.96%

223,692.11 100%

III. SUMMARY

The application of MFCA technique in making one lot of wooden toy for a medium-size wooden toys manufacturer in Chiang Mai, Thailand had been successfully demonstrated. The technique is beneficial for any manufacturer who seeks for point or location for improvement. The results showed the negative costs and positive costs of each process, that the company can investigate further for suitable and economically sound solutions. In this paper, the MFCA was used with quality control tools for obtaining reducing waste solution as well as methods for productivity improvement. The results from cost saving showed in the case study, suggested that the methodology used in this research was beneficial and could be applied to other similar industrial cases.

ACKNOWLEDGEMENTS The authors gratefully acknowledge support from National Science and Technology Development Agency.

REFERENCES

[1] Ahmed M. Deif 2011, "A system model for green manufacturing, "Advances in ProductionEngineering & Management 6 (2011) 1, 27-36.

[2] R. P. MOHANTY., and S. G. DESHMUKH., "Managing green productivity: some strategicdirections, " Production planning & control, 1998, vol. 9, no. 7, pp. 624-633.



[3] Suncica Vjestica., Igor Budak., Milan Kljajin., Djordje Vukelic., Branislav Milanovic., DarkoMilankovic., and Janko Hodolic ,"Model for analysis of environmental impacts of productionprocesses in flooring industry based on LCA, " Model for analysis of environmental impacts ofproduction processes in flooring industry based on LCA,Tehnički vjesnik 21, 3(2014), pp.457-466.

[4] Katsuhiko Kokubu., Marcelo Kos Silveira Campos., Yoshikuni Furukawa., and HiroshiTachikawa, "Material flow cost accounting with ISO 14051," ISO Management Systems –January-February 2009.

[5] Wasawat Nakkiew, Application of Material Flow Cost Accounting (MFCA) in Dried LonganManufacturer: A Case Study of Small-to-Medium Enterprise Company in Thailand, Proceedingof EMAN-EU 2013 Conference on Material Flow Cost Accounting, 2013, Dresden, Germany,pp. 34-37.

[6] Wasawat Nakkiew, Application of Material Flow Cost Accounting (MFCA) in CeramicKitchenware Manufacturer: A Case Study of Small-to-Medium Enterprise Company in Thailand,Proceeding of EMAN-EU 2013 Conference on Material Flow Cost Accounting, 2013, Dresden,Germany, pp. 76-79.

[7] Xuzhong Tang., and Soemon Takakuwa .,2012, " MFCA-BASED simulation analysis forenvironment-oriented SCM optimization conducted by SMES, " Graduate School of Economicsand Business Administration Nagoya University Furo-cho, Chikusa-ku, Nagoya, Aichi 464-8601, Japan.

[8] ISO 14051:2011 (E)[9] D.C. Montgomery, Introduction to Statistical Quality Control, 5th edition, John Wiley & Sons,

New Jersey, 2005

BIOGRAPHY

Wasawat Nakkiew is a lecturer in the department of Industrial Engineering, Faculty of Engineering, Chiang Mai Univesity. He earned a B.S. in Industrial Engineering and Management from Rensselaer Polytechnic Institute, USA, a Master degree and a Ph.D. degree in Industrial Engineering from Purdue University, USA. His research interest includes material processing simulation, material process improvement, and mechanical surface treatment.

Pattarawadee Poolperm is currently a graduate student in Industrial Engineering at the department of Industrial Engineering, Faculty of Engineering, Chiang Mai University. She earned her B.Eng. in Industrial Engineering from the department of Industrial Engineering, Chiang Mai University.


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