The Hidden Cost Of Mislabeling

By Ricard Lou, Group Data Solutions Director, and Bob Muir, Director of Training Services TRIGO Americas

In the dynamic world of automotive manufacturing, mislabeling of parts has emerged as a critical issue, often resulting in costly production downtimes. A significant case study revealed that mislabeled containers can lead to severe disruptions, costing millions of dollars annually. For instance, a highly reputed Tier 1 automotive supplier faced a shutdown due to a simple labeling error despite their otherwise impeccable quality standards.

Real-World Impact: A Case Study

To illustrate the magnitude of this issue, consider the following real-world example:

• Total Cost: 652.000 EUR (equivalent to 2.000 EUR per day)
• Cost Breakdown:
  • Supplier Internal Inspection (CS1): 39%
  • Dock Audit (3rd Party Containment): 23%
  • In-process inspections (3rd Party Containment): 33%
  • Premium Freights &Corrective Action Equipment: 5%

These figures underscore the significant financial impact of mislabelling, highlighting the need for robust preventive measures.

Understanding Mislabeling

Mislabeling encompasses various scenarios, such as incorrect part numbers, wrong destinations, and unreadable labels. These errors not only cause logistical nightmares but also pose serious risks in industries where precision is paramount, like aerospace. The automotive industry, with its lean manufacturing practices and just-in-time inventory systems, is particularly vulnerable. An assembly plant producing a thousand vehicles daily cannot afford even a fraction of its 60,000 incoming containers to be mislabeled.

Preventing Mislabeling

A comprehensive approach to preventing mislabeling involves understanding its root causes and implementing robust error-proofing mechanisms:

1. Advanced Product Quality Planning (APQP): Address mislabeling during the APQP process. Ensure that labeling steps are integrated into the process flow diagram and analyzed in the Process Failure Mode and Effects Analysis (PFMEA).
2. Standardization and Audits: Standardize work instructions and conduct layered audits to enhance compliance.
3. Training: Conduct regular training and retraining of employees on the importance of correct labeling and its impact on production.
4. Technology Utilization: Implement print-on-demand labels linked to manufacturing equipment, ensuring that labels are printed correctly and on time.
5. Partial Container Management: Clearly mark and store partial containers of finished goods in designated areas to prevent mix-ups. Establish a formal process for reintroducing partial containers into the next production run.
6. Effective Changeover Processes: Document changeover procedures and ensure they include labeling steps to prevent errors during production shifts.
7. Dependent Labels: Use labels that are directly tied to the parts to reduce the chances of mislabeling.

Conclusion

The case study presented here demonstrates the substantial financial impact of mislabeling, with costs exceeding half a million euros over a 12-month period for a single supplier. By implementing a rigorous labeling process, combined with thorough training, advanced error-proofing techniques, and continuous audits, the industry can drastically reduce the incidence of mislabeling. These measures not only safeguard production lines and enhance efficiency but also prevent costly disruptions that can affect multiple OEM plants across different locations.