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IN THIS ARTICLE
→ What is rework?
→ Why does tracking rework matter?
→ What are the risks of not tracking rework?
→ 7 problems with not tracking rework
→ How to measure rework?
→ What is rework rate?
→ How do you calculate your rework rate?
→ How can businesses reduce their volume of rework?
Understanding Rework
What is rework?
Rework is the process of redoing work that wasn't done properly the first time.
Specifically, rework is the additional labour, materials and time required for a product or service that doesn't meet initial standards of quality or functioning that, when completed, does meet its requirements.
Why does tracking rework matter?
When businesses track their rework, it helps them understand the financial and operational impacts of errors and inefficiencies. By addressing and reducing mistakes, this improves team efficiency, morale, and performance.
Tracking rework also allows businesses to set benchmarks and compare their performance over time, making it easier to identify areas for improvement and monitor progress.
Ultimately this practice provides valuable insights that drive better decision-making, leading to increased efficiency and profitability.
What are the risks of not tracking rework?
Without quantifying how or why mistakes are being made, as a business owner or leader you risk increased costs, wasted materials, missed opportunities and poorer decision-making.
In your team, it can lead to frustrated employees and low morale, risking retention and turnover rates.
7 problems with not tracking rework
Here are the key problems businesses face when they don't track rework:
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Increased costs: Without tracking rework, businesses are unaware of the additional costs incurred from fixing errors, which can significantly impact their bottom line.
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Wasted resources: Time and materials used to correct mistakes are not accounted for, leading to inefficient use of resources.
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Lost opportunities: Time spent on rework could be better spent on growth and new projects, resulting in missed opportunities.
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Poor team morale: Constantly redoing work can be frustrating for employees, leading to decreased morale and productivity.
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Lack of data for improvement: Without data on the frequency and causes of rework, businesses can't identify patterns or areas that need improvement, hindering their ability to make informed decisions.
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Hidden problems: Rework often reveals deeper issues within processes or systems that remain unnoticed without proper tracking, allowing problems to persist and potentially worsen.
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Inconsistent quality: Not tracking rework can result in inconsistencies in the quality of products or services, affecting customer satisfaction and the business’s reputation.
How to measure rework?
As with all KPIs, measuring rework shouldn't be more difficult than the value you derive from the metric itself. The goal is simply to have a reference point of the resources that go into the production of items that can’t be sold or transferred into revenue, such as labour and materials.
That said, as a starting point there are two metrics that businesses can use as a starting point to track their rate of rework.
What is rework rate?
Rework rate is expressed as a percentage, and refers to the rate of work that must be redone due to errors or product defects.
How to calculate rework rate?
Rework rate in hours
The first rework rate formula is calculated by dividing the number of hours spent on rework by the number of hours spent on productive activities.
Rework rate (%) = (Rework hours ÷ Productive labour hours) × 100
Where:
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Rework hours = The time required to correct errors in work or defects in your product. Some of the jobs that may be required during rework hours include repairing, repackaging, re-sorting and further inspection.
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Productive labour hours = The total number of hours worked by your direct production team.
For example, if your team takes 100 hours to complete a project, but they have to redo 20 hours of work due to mistakes, your rework rate would be 20%.
Rework rate in product units
The second rework rate formula is calculated by dividing the total number of reworked (repaired) goods by the total number of products manufactured.
Rework rate = (Total quantity of reworked products ÷ Total quantity produced) × 100
For example, if your automotive manufacturing business produces 50 aluminum trays but 5 don't meet quality control standards and need to be remade, your rework rate would be 10%.
How can businesses reduce rework?
Business owners and leaders can influence the amount of rework for the better by:
- Implementing quality control processes
- Ensuring staff are trained correctly
- Using better materials
- Regularly reviewing KPIs
- Communicating effectively with their team about rework tracking.
Tracking Rework: What It Is & How to Quantify It
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“If you’ve got rework within your business, you must quantify what that is.
Why is that so important?
Well, firstly, what’s the cost? So if your gross profit as a business is 40%, but there’s another 2% that you lose as a result of rework, do you know that? And that cost can become quite significant over the course of a year.
But bigger, what is the opportunity cost of lost opportunity, and also the morale and impact on the team? There’s nothing worse than thinking you’ve finished something when in reality you haven’t, because it comes back to you only for it to need to be done again.
So the simple KPI that we are really pushing on people now is, are you tracking your rework?
It doesn’t need to be perfect. I always say I never want a KPI or number we track to be more difficult than actually the value we derive from getting that piece of information.
If it’s simple, if it’s crass, whatever it is, I don’t mind.
So long as you’ve got a reference point of the hours and the materials that go into the production of items that can’t be sold and can’t be transferred to revenue in your business.
What’s going to happen?
Well, firstly, you’re going to find people in the factory, on the warehouse, wherever you are, you’re going to become a little bit awkward when there’s a realisation that those numbers are being tracked.
So it’s important or crucial that the way this has communicated to the team is done in a way that it’s like, "Hey, we’re not here to crack the whip. We just need to understand what the quantity is and what we need to do to reduce the impact of it."
That’s going to have two things.
Firstly, your business might not be suffering as much from rework as what you realise. And what can happen is when stuff ups occur, they can be highly emotive and you go, gosh, happens all the time. But when you quantify it, it might be fractions of a percent in reality of how that’s impacting your business.
Conversely, there might be a relaxed attitude to things where you go, "Gosh, this is costing my business 5% a year, in terms of time and materials..." And you go, "This is actually huge. I need to do something about this now, and I can’t be so relaxed around it."
You might find out that you are one or the other, but the key thing is then, and then you can take the appropriate steps thereafter to improve your business.
So there you go. Focus on rework. Confront the awkwardness of what rework is. To use my daughter’s phrase, “It’s totes awks”. But it’s going to be worth it for you financially in your business.”
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