Want to Save Millions? Watch Your Milliliters.

In today’s fast-paced world, corporations cannot stress enough on quality. With increased globalization and the advent of the Internet and social media, people not only have more choices but they are also aware of those choices.

With the clutter of marketing messages consumers are exposed to on a daily basis, brand loyalty is becoming harder to build and maintain. If a customer today has a bad experience with a particular product, he or she is not only likely to switch to a competing brand, but can also be expected to share that unsatisfactory experience with friends, family and others on social networking sites.

Soft Drink Manufacturing Facility

Operations management plays a significant role in the maintenance of quality in an organization’s products and processes. One of the most popular methods for quality control is Statistical Process Control (SPC), an analytical decision-making tool that facilitates the monitoring and control of processes. It allows one to examine a process in order to detect any variation in it that might require correction.

For instance, at a soft drink manufacturing plant, SPC may be used in the production process in which the finished product is filled into PET bottles. The cola filled into a 500mL is hardly ever exactly 500 milliliters; it could be 500.04mL, 499.98mL, 499.93mL, etc. Statistical process control will use a sample of bottles filled at a particular plant to determine the variation in the average volume filled.

I came across a practical application of SPC during an internship at a global manufacturer of consumer goods. A Statistical Process Control analysis at a shampoo-manufacturing facility revealed that the liquid volume filled in 400mL-shampoo bottles was consistently ranging between 400.4mL and 400.9mL. Although this is even less than half a milliliter, a large company could have suffered significant unnecessary costs if consumers were constantly given more than 400mL shampoo in the long run.

Stages of Statistical Process Control

The management suspected that the volume irregularity was not due to a natural or common cause. Control charts constructed for the bottle-filling process confirmed this notion. The variation lay outside the control limits and was therefore due to an assignable cause not part of the original process design. It turned out that one of the levers in the filling machinery was not functioning correctly and allowed more liquid to enter the shampoo bottles than it was designed to fill. The SPC analysis consequently allowed us to identify this problem fairly early and re-calibrate the equipment before much money was lost.

An article by Manus Rungtusanatham in the Journal of Operations Management states that the benefits of SPC are much more than just improved quality and cost cutting. Research has shown that the implementation of statistical process control in production environments works to motivate process operators. As these front-line workers become more satisfied with their jobs, they are more motivated towards continuous improvement and high quality.

With all its advantages, SPC does have some limitations. When performed regularly, continuous inspection can be quite expensive. While the cost may be justified for a large manufacturer such as P&G, is Statistical Process Control as relevant for smaller companies too?

16 thoughts on “Want to Save Millions? Watch Your Milliliters.

  1. Your article reminds me about one article I have read it about U.S.A airways when they have decided to remove a lettuce from there sandwich in there meal. Do you imagine that removing of lettuce form their meal saves for them a million of dollars? So SPC is an important method to manage the quality in the product and I can see these process as a vital role in pharmaceutical industry where they have really to be accurate about their process since they are dealing with medicine, and in case if there is any error in the process it will lead to a serious problem .

    1. I wish I understood why they care about milliliters while they promote liters in their marketing campaign. Everyone, I think is practicing this with many well-known companies i.e. Pepsi, Coca Cola and others. I do agree that SPC could work in large companies and specifically for those big value items.

  2. Very interesting post luqman, SPC is no doubt a useful tool and is relevant to big and small companies, but as you mentioned it is an expensive process and may not be affordable for the smaller companies.

  3. Very good post lugman, when reading the post I linked it directly to one of friends who has a restaurant and saved a lot just by cutting costs without changing the final product. In fact by changing the sauce he used he managed to save almost up to %8 of his monthly revenue, he also targeted other areas and managed to maximize his revenue without changing the final product. On the other hand I think that it is important that the final product does not get affected by these changes.

  4. A very interesting post Luqman. I never thought that SPC had an impact on motivating the process workers! 
    I think SPC should be used for small or big business, but the frequency of the usage might differ.
    Another factor to be considered is the cost of SPC process compared to the cost of losses due to current operation process.

  5. Thank you, everyone. I felt that statistical process control is not always feasible (at least on a regular basis) for smaller-scale companies, especially for all their production processes. The value of using the technique can easily be determined by a cost-benefit analysis to calculate if the potential benefits drawn from the tool can weigh out the costs of implementing it.

  6. Well in the smaller companies it’s a different situation now, the managers should weight the costs and benefits before choosing to use SPC. However SPC is no doubt an important tool to use with larger companies.

  7. I agree that utilizing SPC systems for large organizations could be really beneficial and might result in saving huge amounts that were not really noticeable by the management.
    I do remember reading an article about South West Airlines which is considered as one of the most successful budget airlines and in their efforts to save cost, they have looked into many areas where they can save some money and one of these was minimizing the time between flights where planes are setting idle in the ground and they have benched marked their maintenance time against Formula 1 pit stops. By doing so, they have managed to shorten the maintenance time by few minutes but that have saved them a huge amount of money and increased their profitability. However, adopting SPC systems for small organizations could be very costly and takes lots of time and therefore it could have a negative impact on such companies by incurring additional costs instead of saving cost.

  8. For large companies it is a huge hit but their controls on how much they spend depends on the profit margin of milliters. It might not be bad on small business becuase they would have been charging at a higher rate and set price but can catch the problem easy compared to a company producing milklions of bottles that would have a million dollars lost before they even knew to fix the problem. Depends merely on the size of the company and how much funding they can spend. Sometimes the funding for a SPC is not wort it becuase in the end it would cost as much as losing the milliliters and they can just tune the system to pump oput less and cut cost and volume like many companies do today.

  9. SPC is a necessary component of any company because it is vital to revenue optimization. Without ensuring consistency, especially in manufacturing, as you stated a large company like P&G is loosing out on small amounts of revenue from every bottle filled, due to the extra costs that are being incurred. Therefore by just taking a short amount of time to clean or replace a machine, they company could be saving them selves millions per year increasing their bottom line.

  10. This blog shows a crucial analysis for the competitiveness of modern enterprises in a globalized world that is at the point of no return. This means that globalization is a phenomenon that has been dispersed among the nations of the world, and it can’t isolate us. Instead, we must build on its strength and cope with their threats. To this end, the savings made by enterprises in production processes are essential to survive in this world of high levels of competitiveness, which cost structures that generate savings in the amounts of raw material used, and improve efficieny; labor can compete effectively in the productive sector to which they belong. This blog guve us a significant conclusion, which is related to the detail it should be used to verify the exact use of productive factors, avoiding the waste to a minimun. This way, you get a culture of savings and efficiency that is the rationaliztion of resources used in production processes.

  11. From this article, you can clearly see that SPC can be a vital component to any company, large or small. It may be necessary, however, for smaller companies to use the process more sparingly than larger companies. As you stated, SPC method can be very expensive when performed regularly. Smaller companies should still take advantage of the quality control method when possible, but it may be necessary for them to use the method more sparingly than larger companies due to cost.

  12. I loved reading this! I don’t think it’s relevant for smaller companies to do this often, but should be done at least once to see where they are actually at versus where they think they are. This raises questions for me when it comes to large companies, such as P&G: most (if not just about all) customers don’t check to see if the content of a product is the same as what the label reads, do you think companies take advantage of this and put less of the product to save money? I’ve also always wondered when eating candy bars like Kit Kat, where the name is engraved into the candy bar, is this done to save chocolate/product?

  13. This is a fantastic article for showing how operations managers can always be making improvments. When a corporation mass produces like soda companies, even less then a milliliter can be costly. I had the sam thought with my job as a barista. Milk for lattees, blended drinks, ect. is the companies largest expense. The pitchers we use to steam milk have measurement markings on the inside for various sizes of drinks. This is the perfect measurement for regular lattees but drinks that come with whipped cream, cappucinos, and tea lattees require significantly less milk. Regardless we are trained to measure per size not per type of drink so countless gallons go down the drain everyday costing the company milions nation wide, easy. My suggestion is that training include how to correctly measure per drink.

    1. p.s. I also have noticed that every new hire uses significantly more milk which is another reason to attempt to reduce turnover.

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