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Rework Management & Optimization Implementation Article

Rework Management & Optimization


Learning how to manage the amount of time and money spent on rework can increase profitability and minimize vulnerability that is normally associated with rework.

(as published in SMT Magazine, October 1998)

Rework and repair of PCBs will always be part of the assembly process, regardless of our efforts to eliminate it. Rework shows its face in many forms, such as engineering change orders, product upgrades or revisions, and general process errors. Unfortunately, rework is one of the more unpredictable and variable parts of the assembly process. In fact, no other single function in the process negatively affects profitability more than rework. This is mainly because of its labor-intensive nature, probability of damage/scrap, cost of training and length of time spent on work in progress. This presents a problem. Successful companies are beginning to realize that the high cost of rework can be kept in check by employing proper rework management and optimization. Most of the profitability loss due to rework occurs through costly decisions on a day-to-day basis relating to rework. Unfortunately, most companies view rework as an afterthought and, eventually, find themselves vulnerable to the variability and negative benefits of scale normally associated with rework (operating in the Red Zone, see sidebar). Companies that employ rework management and optimization take control of their rework process, directly attack rework variation and fluctuations, and minimize vulnerability due to the negative benefits of scale normally associated with rework (operating in the Black Zone, see sidebar). This article explains the theory of rework management and optimization, and provides electronic assemblers with a new framework to deal with everyday rework issues that will provide them with the most value for their rework dollar.

Common Questions

Persons who are responsible for rework most likely ask themselves the following questions on a monthly - if not weekly - basis in an effort to address their rework:

  • How many people should I have performing rework tasks?
  • What kind of equipment should I buy?
  • How much training is appropriate?
  • How can I reduce damage/scrap?
  • Why do I seem to spend so much time dealing with rework issues?

Sound familiar? You are certainly not alone. Rework management and optimization helps by providing answers to these questions and allows your company to do what it does BEST -assemble PCBs.

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Calculating Actual Costs of Rework

When determining actual rework costs, it is always a good idea to consult your accounting department. It should have already calculated a "fully burdened overhead" rate per rework associate that can be used as a basis for your calculation. For most companies in the United States, this rate is approximately $25 to $45 per hour. Next, the cost of equipment and training needs to be added. The most overlooked cost associated with rework is damage/scrap, which can sometimes amount to the largest single component of the total cost. After compiling this information, most companies find that it is costing them $25 to $35 per reworked board.

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Effects of Rework Fluctuation and Variation

This is the cornerstone of the rework management and optimization model, and is the basis for determining your BEST optimization line. Most people would assume that rework costs are directly proportional to rework volumes, but this is not the case. For a number of reasons, rework costs do not increase in a linear fashion when volume increases (Figure 1). In fact, rework costs can almost increase at a rate of two to one, as volume increases. The best way to illustrate this phenomenon is through the use of the Red Zone/Black Zone comparison (see sidebar). As companies address rework issues inefficiently, they are wasting resources and creating damage/scrap. Additionally, they are experiencing diminished marginal returns because of the lack of cost control when volume, fluctuations and variability increase in rework. These companies are operating in the Red Zone. Companies that have employed rework management and optimization understand how volume and fluctuations affect costs, have determined a "break-even" point for doing rework, and are comfortably operating in the Black Zone.

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Determining the BEST Optimization Line

This is the single most important step in rework management and optimization, as it is the framework on which the company's day-to-day rework decisions will be based. After calculating rework costs and analyzing fluctuation history, a company can determine a "break-even" point for performing rework tasks. When addressing rework, there are three options: perform the rework internally, outsource the project or scrap the board altogether. By applying these three options to the break-even point of doing rework, you will determine your BEST optimization line. If you r company consistently experiences high volumes of rework, the company needs to have the capability to handle those volumes; thus, your BEST optimization line is higher. Conversely, if rework volumes are normally low (except for occasional fluctuations), your BEST optimization line would be lower. Now the framework is in place to assist in daily decisions dealing with rework. If the rework project is not to be scrapped, it will either be done internally or outsourced for quick return. This will allow your company to minimize the chance of operating in the Red Zone.

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Case for Outsourcing Rework

Many of the reasons for outsourcing rework are similar to the ones used in outsourcing assembly to contract manufacturers. There are certain benefits of scale associated with a specialized company that strictly performs rework tasks that most assembly companies cannot match. There are several companies throughout the country that specialize in rework, and your company should choose one that can meet your specific needs. Some contract manufacturers also offer this service; however, their primary business is still assembly and may not provide the quality and turnaround time that your company is looking for. Choose a company that guarantees less than 1 percent damage/scrap, since that is the most compelling reason for not performing the task internally in the first place. Most companies find that their damage/scrap rate is operating at 7 to 8 percent damaged product during the rework process.

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Implement a Plan for Rework Management and Optimization

This crucial step in the process ties the other rework management and optimization steps together and eliminates the chance of bad decisions. Based on where your company determined its BEST optimization line is, implement a plan to deal with rework as it develops. For example, the company may have determined that there are consistently a large number of QFP 100 packages that require rework at one facility. Since this task falls under the BEST optimization line, your company will need to have the proper staff and equipment on hand to accommodate this rework. Conversely, the company may have determined that BGA rework volumes are low and, therefore, above the BEST optimization line. This is a case where outsourcing may be the best option. For rework that is done internally, it is extremely important to provide adequate training to ensure proper quality.
Now that rework management and optimization has been explained, you may be asking yourself what it really does for your company. Basically, it provides your company with focus and direction when dealing with tough rework issues and allows the company to take control of rework, as opposed to it controlling your company. Rework management and optimization directly attacks the most troublesome aspect of rework - variation and fluctuation. It allows you to minimize your company's vulnerability to these aspects and keeps the rework operation somewhat constant, while transferring the variability to someone with better benefits of scale. Remember those questions that we always seem to ask in rework? We now have the answers to all of them. Since we know exactly what rework tasks we will be performing internally and at what volumes, we know exactly how many associates to staff, what equipment to buy and how much training is appropriate. Your company has managed to increase output and profit while simultaneously decreasing damage and scrap.
Rework management and optimization is a model that each assembler will use differently, as they see fit. The only constant, however, is that each company that uses it will ultimately get the most value for their rework dollar.

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Business Electronics Soldering Technologies, Inc., 3603 Edison Place, Rolling Meadows, IL 60008; 847/797-9250; Fax 847/797-9255

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