Spoilage Incentive: Raising the Bar on Lowering Spoilage Rates
by Jeff Peterson, editor-in-chief
This section of PostPress examines common challenges readers may have on the shop floor and in day-to-day business operations. Professionals from leading print finishing and bindery companies share ideas and discuss solutions to those common challenges, demonstrating how specific companies work through these issues to improve throughput and the bottom line.
Spoilage Reduction Incentive Program
Anyone who has been involved with any type of lean manufacturing program (see article in this issue on page 60) probably knows the eight sources of waste. One of those eight sources is defects, more commonly referred to as spoilage.
For companies like Trade Print Finishing, Salt Lake City, Utah, spoilage had become a large problem. Owner and President Brad Van Leeuwen began to notice an increase in spoilage and re-runs for many of the jobs running through his print finishing plant. As a result, Van Leeuwen began looking for ways to combat increasing spoilage that also would encourage all employees to get involved. He started by looking at areas that were accumulating the most defects, including the following areas:
- Products coming unglued on the folder-gluer
- Registration/positioning issues
- Missing or “plugged” areas of foil or coating
- Creasing matrix falling out during diecutting
- UV coating adhesion problems
- Wrong die/foil used
- Setup sheets mixed with good sheets
To help reduce costly errors and decrease the overall spoilage rate, Van Leeuwen decided to implement a Spoilage Reduction Bonus Program. “I was seeing a continued increase in mistakes and spoilage on a variety of the jobs running through the plant and decided it was time to try something different,” stated Van Leeuwen. “Even a small reduction in defects could make a large impact on our bottom line.”
Trade Print Finishing started by creating a bulletin board that included educational information on such things as “what spoilage really is” and “common causes of spoilage.” The bulletin board also was used to explain how the Spoilage Reduction Bonus Program worked and included monthly reporting of how overall spoilage was increasing or decreasing each month using actual numbers and graphs.
Van Leeuwen calculated that, historically, the company’s spoilage rate had averaged about two percent of gross sales per year. So, he set up the program to pay out bonuses on the money saved due to reduced spoilage to those responsible for reducing it. “We track spoilage on a monthly basis and provide small, on-going monthly incentives when spoilage is less than two percent of sales,” stated Van Leeuwen. “At the end of the year, if the annual spoilage is under two percent of sales, then the difference is paid out as year-end bonuses.”
Van Leewen went on to say that regular short-term rewards are critical in making the program work. “To celebrate a low-spoilage month, we provide incentives, such as a free lunch for the employees where we raffle off some type of gift certificate,” he explained.
For Trade Print Finishing, the Spoilage Reduction Incentive Program has proven to have many benefits. This includes forcing the action of measuring performance, creating awareness of what spoilage costs, as well as the seriousness of reducing it, and showing employees that management is willing to reward them for improved performance. “The program has really helped encourage our employees to learn from their mistakes,” stated Van Leeuwen. “It has created a type of ‘peer-review’ that has helped weed out incompetency.”
However, this type of program does create unique challenges. First, even one or two bad months can blow a year-end bonus, so if this happens early in the year, a “why even try” attitude can set in. Companies also must be conscious of animosity among employees or departments, especially if they perceive that others are reducing their bonus money. Additionally, it is important to monitor the program and be careful of unreported spoilage. This can be difficult because some of the reporting is “on your honor.”
It also should be pointed out that recording all the data and keeping it up-to-date takes dedicated time by someone within the company. According to Van Leeuwen, if finishers or binders are considering implementing a spoilage reduction incentive program of some type, they must be sure that it is being accurately recorded and kept current at all times. “If there is not a dedicated person or persons assigned to keep the data legitimate and current, employees will simply not buy in or stay motivated,” he asserted. “That is a huge key to the success of the program.”
Since starting the program in 2014, Trade Print Finishing has seen it continue to be successful. “The first year was kind of a ‘fine-tuning’ process with some trial-and-error experimentation,” concluded Van Leeuwen. “In 2015, we became more defined and consistent, and the program has now reduced our spoilage rates by about 50 percent and put more money in our employees’ pockets.” The program has proven to be a win-win for both the company and the employees.