Day 1 MFCA Overivew 20150722

2015/7/22
Training Course on Management Consultancy

with Special Focus on Green Productivity
Material Flow Cost Accounting - MFCA

Concepts, Practices and Impacts
[MFCA]
Approach for GREEN KAIZEN from Japan
August 2015
Hiroshi Tachikawa
Technical MFCA Expert for Japan
Secretary General of MFCA Forum Japan
Any use of this material without specific permission of Propharm Japan Co., Ltd. is strictly prohibited
Presentation Contents
1. MFCA from Japan
2. What is MFCA
3. Benefit of MFCA
4. Monetize your Green Kaizen benefit through MFCA
5. Overview of MFCA Standardization ISO 14051
6. MFCA Case Example (automobile parts manufacturing)
7. Introduction of MFCA Forum Japan and Our Service
8. Conclusion
2
Propharm Japan Co., Ltd. All Rights reserved.
1
2015/7/22
Our Mission
We provide practical consulting/advisory services with a specific focus
on environmental and social fields mainly in Japan and Asia; aiming to
build momentum toward a sustainable path for the world from Asia.
Build momentum from ASIA toward a sustainable path for the world.
3
Our Service
Our Mission is to Make “ GREEN kaizen” happen in sustainable way, in Asia
Material/energy
Environment, Social efficiency related
Consideration related consulting service
Service
Business
development Environmental,
for overseas One-stop service health and
safety risk
clean for sustainability management
technology
service
companies
Sustainability Health and safety

advisory service training service
4
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Brief profile of Hiroshi Tachikawa
• Japanese technical expert of ISO TC207 WG8 (Material Flow Cost Accounting) (entrusted
by the Japanese government (Ministry of Economy, Trade and Industry)
• Course director for AOTS [the Association for Overseas Technical Scholarship] multiple
training programs on MFCA.
• Steering committee member and director for secretariat office of Material Flow Cost
Accounting Forum Japan
• Conducted a number of MFCA/Green Kaizen trainings, projects in many Asian countries
• Master of Science; Graduate School of Frontier Sciences, The University of Tokyo 2008
• Bachelor of Science in Sustainable Resource Management, Ohio State University 2000
5
Our MFCA-related Activity
6
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MFCA from Japan
Japan’s History - Industry & Pollution

Register a real economic growth rate of 10%, and cause a serious pollution problem from the late 1960s,
became that the measures for pollution control is advanced in a comprehensive manner.
The four major pollution-caused illnesses
1965
NIIGATA Minamata
disease by industrial
mercury pollution
1910
TOYAMA Ouchi-Ouchi disease
by cadmium from industrial
wastes
1956
KUMAMOTO Minamata
disease by industrial mercury
pollution
1960
Yokkaichi asthma
1967 Establishment of the Basic Environment Law by sulfuric acids from air
1968 Establishment of the Pollution Control Law pollution
1973 Establishment of Pollution-Related Health Damage Compensation Act
Propharm Japan Co., Ltd. All Rights reserved. 8
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Production Management
Post-WWII - 1970s:
• “Mass production style” manufacturing
Growth fueled by (IE：Industrial Engineering)
manufacturing
1970s - 1990： • “Optimization style” manufacturing to

Oil Shocks reduce costs (Lean production. Cell
Cost competitiveness production)
2000s:
• “Environmental”manufacturing and
Global warming/
Green Kaizen（MFCA/Energy Saving）
Resource depletion
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What is MFCA?
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Who implements MFCA
A number of large-sized companies implement MFCA around the world
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What is MFCA?
Material Flow Cost Accounting
Material
Product
Product Material loss

Material
loss
3 elements MFC(A) constitutes Material Flow Cost Accounting.
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MFCA – 3 Impacts
For your organization
For Others (environment)
Improvement Improvement
of energy For your organization
For Others of material
efficiency
(environment) efficiency
CO2
Cost reduction

For your organization 13
MFCA complements and accelerates other KAIZEN methods
MFCA & 5S, TPM,IE MFCA & TPS (Lean)
Aim of TPS (Lean)

Provide the best quality, the lowest cost, and
the shortest lead time through the elimination
KAIZEN of waste(Muda).
Machine Man Material
TPM IE MFCA MFCA complements &
accelerates TPS
Work environment
5S
Objective of MFCA
Visualizes material losses to systematically
Time Material make proper & innovative improvement
（TPM・IE）（MFCA） plans from new point of view.
MFCA complements & accelerates
TPM & IE
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Propharm Japan Co., Ltd. (T. . Tomii ) All Rights reserved.
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What is MFCA?
MFCA considers both.

MFCA potentially enables you to gain bigger apple with thinner skin.
– Paradigm change for waste
http://www.acornadvisors.com/Kitchen%20Newsletters/2007-09-20_Apples/Peeling_Apple.jpg
MFCA helps your existing quality and environmental standards
ISO
14001
ISO
14051
MFCA
ISO 9001
ISO/TS 16949
MFCA fulfills gaps between

economic/quality aspects and environmental aspects.
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MFCA Focuses of Reduce

POSITIVE
Environmental
Impacts
High
MFCA Reduce
Reuse
Recycle
Low
Landfill
0
Low High
Impact on costs
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MFCA vs. Conventional Environmental Approach
+
Conventional
environmental
approach
Cost
MFCA
Environmental performance
CSR,
Sustainability
+
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Significance of MFCA
Physical approach
1. Flow
Verification/
visualization
2. Flow Analysis
3. Green kaizen
Monetary approach
MFCA Terms
Input Input Output

Quantity center Product
material
Output
Material loss
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Benefit of MFCA
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Brief Example of Canon
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Impact of MFCA
99% vs 68%
Conventional Production Management and MFCA
Conventional production management

• Yield ratio= number of final products (pieces)/number of total products
Ex: 99 pieces of products/ 100 pieces of total production = 99% (1% loss)
Glass Material Final product

manufacturer Lens-processing Quality control
inventory
Defective product Defective product
(99%)
Defective （1%）
Source: Japanese Ministry of Economy, Trade and Industry (METI) (2011)

Material Flow Cost Accounting: MFCA Case Examples 2011, METI
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Before MFCA
VS
25
Conventional production management and MFCA
MFCA
• Mass-balance ratio = mass of output (kg)/mass of input (kg)
Ex: 68 kg of products/ 100 kg of total input = 68%
kg
kg kg
Source: Japanese Ministry of Economy, Trade and Industry (METI) (2011)

Material Flow Cost Accounting: MFCA Case Examples 2011, METI
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After MFCA
VS
27
Improvement in Material Loss
Material Quantity (kg) Before MFCA After MFCA

Product 46% 70%
Material Loss 54% 30%
Total 100% 100%
Material Cost (USD) Before MFCA After MFCA

Product 40% 75%
Material Loss 60% 25%
Total 100% 100%
Figures included in the slides are assumed values for the purpose of training.
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information Propharm Japan Co., Ltd. All Rights reserved.
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Innovation through MFCA
Before After
29
information Propharm Japan Co., Ltd. All Rights reserved.
MFCA’s Scope for Productivity Management
Benefit of MFCA
=
You can identify and manage hidden loss through MFCA
Visible loss (IE, TPM)
Invisible loss Comprehensive

• Material loss Kaizen
• Main
material
• Energy loss
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Example of loss typically overlooked
1. Typical material loss 1
2. Typical material loss 2
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What is your MFCA-based productivity?
99% vs ?
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Monetize your Kaizen benefit through MFCA
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Approach of MFCA
System cost
Energy cost (Electricity)
Material Product
Input Process Output
(100 ton) (70 ton)
Output
Material loss
(30 ton) Emissions to
Wastewater
air
Carbon
Waste
emissions
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Conventional Management
Processing cost
$350,000
Process
Product (70 ton)
Material Material cost: $650,000
(100 ton) Input QC-1 QC-2 QC-3 Output Processing cost:
$650,000 $350,000
----------------------------
Total $1,000,000
Material loss
(30 ton)
Point of MFCA Evaluation
System cost
Energy cost (Electricity)
Material Process Product

Input Output
(100 ton) (70 ton)
Output
Equivalent cost
evaluation
Material loss
(30 ton)
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Type of Cost in MFCA

• Material cost: cost for a substance that enters and/or leaves a
quantity centre
• Energy cost: cost for electricity, fuels, steam, heat, compressed air
• System cost: cost of labour, cost of depreciation and maintenance,
and cost of transport
• Waste management cost: cost of handling material losses generated
in a quantity centre
Material
Costs
Waste Energy
management cost Costs
System
Costs
Cost will be discussed more in detail.
Cost Calculation based on MFCA - 1
System cost: $250,000

Energy cost: $50,000
(Electricity: 10 kW)
Factory (MFCA boundary)

Product (70 ton)
(100 ton) Input QC-1 QC-2 QC-3 Output System cost: $ 175.000
$650,000 Energy cost: $ 35,000
----------------------------
Total $ 665,000
Output
Material loss (30 ton)

Material cost : $195,000
Energy cost： $15,000
Waste management cost：$50,000
------------------------------------------
Total $335,000
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(Electricity: 10 kW)
Factory (MFCA boundary)

Product (70 ton)
(100 ton) Input QC-1 QC-2 QC-3 Output System cost: $ 175.000
$650,000 Energy cost: $ 35,000
----------------------------
Total $ 665,000
Output
Key for MFCA
Material loss (30 ton) improvement
Energy cost： $15,000 Emissions to
Wastewater
Waste management cost：$50,000 air
------------------------------------------
Total $335,000 Carbon
Waste
emissions
39
Cost calculation- Carryover

Input
Input
Material (120kg)
Material (145kg) Material costs $ 2160
Material costs $ 1450
Output Production process QC2
Production process QC1
Product (120kg) Energy costs $ 100
Energy costs $ 80 System costs $ 1500
System costs $ 1200 Material costs $ 1200 Waste management costs $ 100
Waste management costs $ 120 Energy costs $ 60
System costs $ 900
Initial Final
Initial Final Total costs $ 2160
inventory of inventory of
inventory of inventory of material material
material material
(35 kg) (20 kg)
$350 $ 200 Material loss(40kg)
Material costs $ 400

Energy costs $ 20
System costs $ 300
Waste management costs $ 120
Total costs $ 840
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MFCA and Cost Analysis
Input cost Output cost
Material Product (70 ton)

(100 ton)
Material cost: $455,000

System cost: $ 175.000
Material cost: Energy cost: $ 35,000
----------------------------
$650,000 Total $ 665,000
Waste management cost
$50,000
----------------------------
Total 1,000,000
Material loss (30 ton)

Energy cost： $15,000
Waste management cost：$50,000
------------------------------------------
Total $335,000
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Difference between Conventional Cost Accounting and MFCA
Source : ISO 14051
MFCA highlights costs for material losses to visualize costs that can be reduced for higher profit.
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Key Information Necessary for Effective MFCA Implementation
1. MFCA PROCESS REVIEW

Understanding of input value of
Material Loss and input value
of Product
Updated Material Flow Material Flow Model
Cost Matrix
GREEN KAIZEN
5. REVIEW OF GREEN
KAIZEN OUTCOME 2. CAUSE ANALYSIS
Implement countermeasure to Analysis of cause for Material
reduce Material Loss and Loss at each Quantity Center
monitor progress
Green Kaizen Matrix Material Flow Cost Matrix

4. GREEN KAIZEN
Implement countermeasure to 3. PLANNING OF
reduce Material Loss for GREEN KAIZEN
reduction of environmental Proposal of improvement
impact cost and increase of measures
profit.
Green Kaizen Matrix

All the materials are strictly copyrighted to Propharm Japan Co., Ltd. (Propharm) and is used for the HIDA MFCA training only. Any reproduction of the material without written consent by Propharm is strictly prohibited.
Material Flow Model - 1
<PLAN 6.4> Specification of boundary and quantity centers: Material flow model
MFCA boundary
Inputs
QC: C Products
QC: A QC: B QC: D
(Group of (Finished
(Process) (Process) (Inventory)
processes) products)
Flow towards Material Material Material Material

finished loss loss loss loss
products
Flow towards QC:E QC:F

material losses Material
Waste Waste losses
management management
(Process) (Process)
QC: Quantity
centre
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Material Flow Model - 2
45
HOW will we Implement in Our Organization

S olve nt
Lub rica nt
o il
Hyd rau lic

oil
Pla st ic t ray

W rap p ing for
pla st ic recycl ed
mat erial Pa llet e
Wat er
Wra pp ing
pa llete p last ic fo r
P last ic ba g
recycle d
mat erial Glove / ra g
recy cled Virgin

Pla stic run ne r Virg in
cut t er Wrap pin g mat erial ‐ 2
ba g Vi rgin Virgin Virgin
mat erial‐ 2 mat erial‐ 2
mat erial mat erial mate ri al p last ic
INPUT
M agn et Re cycled
Clo t h t ap e R ecycle d
R ecycle d Re cycled R ecycle d Mag ne t run ner
Virgin R ecycle d (Virgin + Barrel San d run ne r
run ne r Virgin C ut t er mat erial ‐ 2
run ne r ru nn er run ne r recycle d sto ne po we de r
mat erial (Virg in + mate ri al2 mat erial‐ 2
ma te ria l mat erial mate ri al
ma te ria l ru nn er
run ne r
mat erial)
mate ri al)
Visual
In‐process Receiving ‐
PROCESS Reception Crushing Mixing Drying Molding‐1 Demagnet Barrel Blaster appearance Store Crushing 2 Mixing 2 Drying 2
inspection 2
‐1
set up Q A S ample

Virgi n c rush material M oisture product Barrel Sa nd Reject Virg in Crush ma teria l moisture
ma teria l poweder loss loss (recyc led Product s tone poweder product m ateri al 2 poweder loss l oss
reject
runner
material )
OUTPUT
c utter set up NG product

Pla sti c bag produc t (v irgin Cloth tape
Weight loss Weight loss Cutter
(virg in material) Pla sti c bag
ma teria l)
Purg ing NG product

(Recyc led (v irgin
Wra pping runner material)
pla stic ma teria l) Wra ppi ng
pla stic
Purg ing
(Recyc led NG product
vi rg in (v irgin
pall ete ma teria l) material )
pall ete
Glove/ ra g
hydraulic
oil
Lubri cant
oil
Cl ea ning
solv ent
Process flow is identified by Brainstorming with Sticky note For each QC: Input, Output & Waste Are Identified
Outcome: Quantity Centers are recognized.
For each QC: Material Balance Check is conducted &

Cost is assigned for each material flows . Material Loss (Wastes) Are Identified
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Data Collection and MFCA Analysis
Type of Input Category of Type of Loss amount (kg or kJ) Loss amount (USD) Current Status of
material loss material loss Output
Raw materials Theoretical Scrap 300, 262 (94%) 3,500,723 (60%) Scrap is recycled
(steel plate) loss material and provided to
external contractor
for purchase
Normal loss Packing 4,858 (2%) 718 (0%) The waste is often
material
Auxiliary Theoretical Cylinder oil 14,987 (5%) 74,935 (1%) And they've throw it
materials loss away
Energy Normal loss Electricity 105,436 2,297,848 (39%) Energy that is
applied to the
product of a large
negative
Total 425,543 (100%) 5,874,224 (100%)
Numerical information contained in the table is not related to other slides.
MFCA evaluates your loss in physical and monetary terms.

Further, MFCA systematically prioritize which loss should be tackled.
47
Kaizen Summary
Output (kg)
Cost for
Input (kg) material loss
Product Material loss (USD)
Before 1,501,310 1,201,048 300,262 3,500,723
After 1,462,276 1,201,048 261,228 3,045,629
Based on the MFCA analysis, detailed ROI can be calculated.

In addition, material loss reduction was encouraged and outcome of the Kaizen
measures were quantified in physical and monetary units.
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Implementation Steps and

Overview of MFCA Standard ISO 14051
Source: iso.org
49
ISO TC207 WG8

International Standardization Group for MFCA
WG 8 overview
• Convener: Katsuhiko Kokubu (Japan)
Co-Convener: Marcelo Kos (Brazil)
Secretary: Y. Furukawa (Japan)
Assistant Secretary/Expert: H. Tachikawa (Japan)
• Expert: 62 experts from 28 countries
• Participating countries: Argentina, Austria, Belgium, Brazil,

Canada, China, Colombia, Denmark, Finland, France, Germany,
Ghana, Italy, Japan, Malaysia, Mexico, Pakistan, Portugal,
Singapore, South Africa, South Korea, Sri Lanka, Sweden,
Switzerland, Thailand, the Czech Republic, the United
Kingdom, and the United States.
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MFCA now Became Global Standard

- Everyone Can Implement Anywhere -
• MFCA became international standard in September 2011 (ISO 14051). Further

dissemination of MFCA is expected.
• Many industries (e.g., Malaysia, Vietnam, Thailand) start to apply MFCA and gain
significant environmental and cost reduction.
MFCA helps your existing quality and environmental standards
ISO
14001
ISO
14051
MFCA
ISO 9001
ISO/TS 16949
MFCA fulfills gaps between

economic/quality aspects and environmental aspects.
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Structure of ISO14051
Items Contents
Title Environmental management — Material flow cost accounting —
General framework
Content 1. Scope
2. Normative references
3. Terms and definitions
4. Objective and principles of MFCA
5. Fundamental elements of MFCA
6. Implementation steps of MFCA
Annex A (informative): Difference between MFCA and
conventional cost accounting
Annex B (informative): Cost calculation and allocation in MFCA
Annex C (informative): Case examples of MFCA
Scope of the ISO Standard
• ISO 14051 provides:

• general framework
• ISO 14051 (MFCA) can be:

• widely applied regardless of their products, size, etc.
• extended to supply chain
• ISO 14051 is:

• not intended for the purpose of third party
certification
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Terms and Definitions - 1
Item Term
Terms quoted from From IFAC document: Environmental management
other standard/source accounting
From ISO 14040: 2006:process, product, and waste
Terms defined in ISO Cost accounting, cost allocation, energy cost, energy loss,
14051 environmental management accounting, input, inventory,
material, material balance, material distribution percentage,
material cost, material flow, material flow cost accounting,
material loss, output, quantity centre, system cost, waste
management cost
Material Balance
Refers to the comparison of inputs, products and material losses and

inventory changes in a quantity centre over a specified Data Collection
Period.
Material Inventory
Inputs Products
loss Changes
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System Costs
Any other production-related costs except material, energy and waste

management costs. Examples include:
― Depreciation costs
― Labour costs
― Transportation costs
Energy Costs
Energy costs include the following costs:
― electricity,
― fuels,
― heat,
― steam, and
― compressed air
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Objective and Principle of MFCA
Objective of MFCA is:

• to motivate and support organizations’ efforts
• to enhance both environmental and financial
performance through improved material and
energy use practices
Financial
performance
Objective of MFCA is accomplished by:
• increasing the transparency;
• supporting organizational decisions in realms; and
Environmental
• improving coordination and communication on performance
material and energy use practices.
Principles of MFCA
Principles of MFCA
Ensure
accuracy,
Understand
Link physical completeness Estimate and
material flow
and monetary and assign costs to
and energy
data comparability material loss
use
of physical
data
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Fundamental Elements of MFCA - 1
Fundamental elements of
MFCA
1. Quantity 2. Material 3. Cost 4. Material

centre balance calculation flow model
Fundamental Elements of MFCA – 5.1
Fundamental Element 4: Material Flow Model
The material flow model represents the overall flow of materials within the
boundary selected for MFCA analysis, describing all inputs and outputs from each
quantity centre.
Material flow
Input
Quantity Center
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Create a visual model where the quantity centres are linked and also illustrates
production, recycling, and other systems:
1. multiple quantity centres in which materials are stocked, used, or

transformed as well as
2. movements of materials between those quantity centres.
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MFCA Implementation Steps
65
MFCA Implementation Steps
MFCA implementation is not restricted to a specific industry or company size.

To ensure consistent implementation regardless of the type of industry or size
of the organization, it is important to follow the standard implementation steps
as defined by the ISO 14051:2011.
Source: iso.org
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Implementation steps of MFCA-1
ACT PLAN
6.11 Identification and assessment of
6.2 Involvement of management
improvement opportunities
6.3 Determination of necessary expertise
6.4 Specification of a boundary and

a time period
6.5 Determination of quantity centres
CHECK DO
6.10 Communication of MFCA results 6.6 Identification of inputs and outputs

for each quantity centre
6.7 Quantification of the material flows

6.9 MFCA data summary and interpretation
in physical units

in monetary units
Source:ISO14051:2011
Implementation
Implementation steps of MFCA-Plan (1)
steps of MFCA-2
PLAN-Management involvement: Successful implementation of MFCA

requires an aggressive support from the top management who will determine
expertise, followed by a bottom up approach on site.
• Leading the implementation;

Management
• Assigning roles and responsibilities ;
• Providing resources;
Expertise
• Monitoring progress;
• Reviewing the results; and

Working committee
• Deciding improvement measures based on MFCA.
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MFCA Implementation Steps- Plan (2)
Plan -Determination of Target Product-
Material Flow Planning
Applicability to
Product Other Products
Positive Highest
Boundary
Market Waste
Trend Volume
Time Period
Highest
Product Value
Quantity Centres
69
MFCA
Implementation Implementation
Steps of MFCA-4 Steps-Plan (3)
Plan -Boundary and Quantity Centers-
MFCA boundary
Product
Boundary
Time Period
Quantity Centres Single or multiple process?

Whole facility?
Supply chain?
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MFCA Implementation Steps-Plan (4)
Plan-Determine the time period-
Material Flow Planning  Full operation period or production lot
Product  A week
 A month
 3 months
Boundary  A half year
 A year
Time Period
Quantity Centres
71
MFCA Implementation Steps-Plan (4)
Plan-Determine the Material Flow Model/Quantity Centres
MFCA boundary

QC: C
QC: A QC: B QC: D
(Group of
processes)
Product
Flow towards
Boundary finished
products
Flow towards
material losses
Time Period
QC: Quantity
centre
Quantity Centres
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Implementation steps of MFCA
ACT PLAN

a time period
CHECK DO


in physical units

in monetary units
MFCA Implementation Steps-Do
Do- Material Flow Model
Steps to create material flow model:

1. Determine Inputs
2. Quantify Outputs
3. Select a tie compound
4. Prepare a preliminary material balance
5. Evaluate and refine material balance
The Material Balance Is the Core of the Material Flow Cost Accounting
Methodology
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Implementation steps of MFCA-Do (2)
Do
• Quantification of the material flows in physical units
• Quantification of the material flows in monetary units
Material flow in physical units
Identification of inputs and

outputs Flow Analysis
Material flow in monetary units
75
Propharm Japan Co., Ltd All Rights reserved.
Implementation steps of MFCA- Do (3)
Identification of inputs and outputs for each quantity centre
MFCA boundary
Inputs
QC: C Products
QC: A QC: B QC: D
(Group of (Finished
processes) products)
Flow towards Material Material Material Material

finished loss loss loss loss
products
Flow towards QC:E QC:F

material losses Material
Waste Waste losses
management management
(Process) (Process)
QC: Quantity
centre
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Cost Calculation
Cost Allocation Methods
 Energy cost, system costs and disposal costs are

Material costs commonly available for an entire process or
facility.
 Two steps procedure shall be follow:
Energy costs
Step 1 Allocation of process-wide or facility-
wide costs to different quantity centre.
System costs
Step 2 Allocation of quantity-centre costs to
Waste management products and material losses.
costs
77
Cost Calculation
Cost Allocation Criteria
Cost allocation options:

1. Cost allocation criteria based on material
Material costs
distribution percentage.
2. Cost assigned to positive products and

Energy costs
negative products (materials losses).
 Most appropriate allocation is based on

System costs
organization needs: historical cost, standard
cost, existing cost accounting etc.
Waste management
costs
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Example of material calculation and cost implication
Material calculation Cost implication
(Kg) (US$)
60,000 30,000
50,000
40,000 20,000
US$ 6,000 Cost for
21,638 kg 25%
45% Product product
30,000
48,204 kg US$ 24,000
20,000 100 % 10,000 100 % Cost for
US$ 18,000
26,566 kg Material 75% material
10,000 55%
loss loss
0 0
Input Output Input Output
The unit price of each material is different, the impact of each individual material
loss in physical and monetary units are usually different.
79
ACT PLAN

a time period
CHECK DO


in physical units

in monetary units
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Implementation steps of MFCA-Check
CHECK
• Interpretation of MFCA results and consideration/implementation of

improvement measures
• Communication of results
© Terry Vine/Blend Images/Corbis
Data accuracy, completeness and comparability are one of the principles of ISO 14051. Accurate,
complete, comparable data enable organizations to identify potential noncompliant items in their
ISO 14001 cycle.
81
ACT PLAN

a time period
CHECK DO


in physical units

in monetary units
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Categorization of Material Loss
• Material losses due to human error and machine condition

1. Abnormal
loss
• Material losses due to standard operational procedure, and

2. Normal management policy, program and procedure
loss
• Material losses due to machine design, specification

3. Theoretical • Material losses due to nature of input materials
loss
83

Implementation steps of MFCA-Act
ACT
• Identification and assessment of improvement opportunities. Once MFCA
has been successfully implemented, continuous analysis is recommended to
identify new improvement opportunities.
Source: http://kickrocket.com/services/enterprise‐improvement‐services/
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MFCA Case Example
Automobile-parts Manufacturing/Machining
Information for the case example is adjusted and changed for the purpose of training.
Background
• Company name: Company A
• Capital: 65 million yen
• Annual sales of 572 million yen
• Number of on-site personnel: 100
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Management Briefing
87
Management Briefing
1st internal meeting for creating awareness and understanding of MFCA
• Managing Director
• Plant Manager
• Assistant Manager - Production Engineering
• Assistant Manager – Purchasing
• Engineer – Tools & Die Department
• Engineer- Stamping Department
Topics for discussion
1. MFCA ice-breaking
2. The benefits
3. Setup MFCA team members
4. MFCA master schedule
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Decision from the Management-briefing
Decision made from the management-briefing
i) Definition of MFCA in the context of Company A’s existing production system
ii) MFCA direction within Company A
iii) Area for MFCA implementation
iv) Establishment of MFCA project team members
89
Determination of Necessary Expertise

- Establishment of MFCA Team -
Team Leader
(In-house)
Advisor
(External)
Data Maintenance Stamping Purchasing Costing Engineering

Collector Department Department Department Department Department
(In-house) (In-house) (In-house) (In-house) (In-house) (In-house)
45
2015/7/22
Selection of Target Products
3. Select parts
1. Prepare list of 2. Grouping parts
based on the
all parts by model
volume
As a result of selection process, Company A

decides to select outer cylinder for MFCA analysis.
Outer Cylinder A - Production Process Flow
Coil Blanking process After blanking Trimming
Piercing
92
46
2015/7/22
MFCA Data Collection and Analysis

(Do-phase)
93
Material Flow Model
94
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2015/7/22
Material Flow Model

Input
• Wooden • Cotton • Cylinder oil • Cylinder oil • Cylinder oil • Cylinder oil • Cylinder oil • Cotton
pallet Glove • Cotton • Cotton • Cotton • Cotton • Cotton Glove
• Plastic Glove Glove Glove Glove Glove
wrapper • Poly bag
• Cotton
Glove
• Steel coil
Receiving Storage Blanking Trimming Piercing Storage Inspection Delivery
• Wooden • Cotton • Cylinder oil • Cylinder oil • Cylinder oil • Cylinder oil • Cylinder oil • Cotton
pallet Glove • Cotton • Cotton • Cotton • Cotton • Cotton Glove
• Cotton Glove Glove Glove Glove Glove
glove • Scrap • Scrap • Scrap • Poly bag
• Plastic material material material • Defective
wrapper products
Output (material loss)
Evaluation of the Process in Physical Term
Amount Amount Amount Amount Amount Amount

MATERIAL MATERIAL MATERIAL MATERIAL MATERIAL INPUT
(kg) (kg) (kg) (kg) (kg) (kg)
Raw material 1,000.0 Material from preivious QC 720.0 Material from preivious QC 729.2 Material from preivious QC 656.3 Material from preivious QC 590.7 3,696.1 Initial 1,000.0
Glue 10.0 Package material 10.0 QCs 20.0
total 1,020.0
total 1,000.0 total 730.0 total 729.2 total 656.3 total 600.7 3,716.1
Amount
OUTPUT
(kg)
INPUT 1,000.0 QC1 720.0 QC2 729.2 QC3 656.3 QC4 590.7 QC5 599.7 Product 599.7
Raw material Cutting-1 Gluing Cutting-2 Inspection Packaging
Amount Amount Amount Amount Amount

MATERIAL LOSS MATERIAL LOSS MATERIAL LOSS MATERIAL LOSS MATERIAL LOSS
(kg) (kg) (kg) (kg) (kg)
Raw material 280.0 Glue 0.8 Raw material 72.9 Raw material 65.6 Package material 1.0
total 280.0 total 0.8 total 72.9 total 65.6 total 1.0 420.3 Material loss 420.3
total 1,020.0
MFCA verifies your process through mass balance at each quantity center.
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2015/7/22
Allocation of Energy and System Costs
Cost Elements Allocation Base Allocation Type
Energy （electricity） Consumption B
Energy （fuel） Consumption B
Labor （regular employee） Man-hour A
Labor (part-timer) Man-hour A

Depreciation Operating time B
(straight-line method)
Maintenance Expenditure C
Tools Expenditure C
A ： Allocation on base of real data

B ： Allocation on base of monthly data (correctly as possible)
C ： Assumed Calculation based on monthly data
Y. Furukawa and H. Tachikawa . All Rights reserved. 97
Evaluation of the Process in Monetary Term

MATERIAL MATERIAL MATERIAL MATERIAL MATERIAL
Raw material 1,000 Material from preivious QC 720 Material from preivious QC 729 Material from preivious QC 656 Material from preivious QC 591
- - Glue 10 - - - - Package material 10
- - - - - - - - - -
- - - - - - - - - -
total 1,000 total 730 total 729 total 656 total 601
Input / Input 100.0% Input / Input 100.0% Input / Input 100.0% Input / Input 100.0% Input / Input 100.0%
Amount Amount Amount Amount Amount Amount

Cost Cost Cost Cost Cost INPUT
(US$) (US$) (US$) (US$) (US$) (US$)
Raw Material cost 1,000,000 Material cost from preivious QC 769,680 Material cost from preivious QC 843,414 Material cost from preivious QC 878,941 Material cost from preivious QC 850,981 Initial 1,000,000
Material cost 15,000 Material cost - Material cost - Material cost 10,000 4,343,017 QCs 394,000
Energy cost 4,000 Energy cost - Energy cost - Energy cost - Energy cost - total 1,394,000
System cost 65,000 System cost 60,000 System cost 120,000 System cost 60,000 System cost 60,000
total 1,069,000 total 844,680 total 963,414 total 938,941 total 920,981 4,737,017
Amount
OUTPUT
(US$)
INPUT 1,000,000 QC1 Carry over 769,680 QC2 Carry over 843,414 QC3 Carry over 878,941 QC4 Carry over 850,981 QC5 Carry over 917,882 Product 917,882
Raw
material Cutting-1 Gluing Cutting-2 Inspection Packaging
cost
Carry over (kg) 720 Carry over (kg) 729 Carry over (kg) 656 Carry over (kg) 591 Carry over (kg) 600
Carry over / Input 72.0% Carry over / Input 99.9% Carry over / Input 90.0% Carry over / Input 90.0% Carry over / Input 99.8%

MATERIAL LOSS MATERIAL LOSS MATERIAL LOSS MATERIAL LOSS MATERIAL LOSS
Raw material 280 Glue 1 Raw material 73 Raw material 66 Package material 1
- - - - - - - - - -
- - - - - - - - - -
total 280 total 1 total 73 total 66 total 1
Material loss / Input 28.0% Material loss / Input 0.1% Material loss / Input 10.0% Material loss / Input 10.0% Material loss / Input 0.2%

Cost Cost Cost Cost Cost
(US$) (US$) (US$) (US$) (US$)
Material cost 280,000 Material cost 1,200 Material cost 84,341 Material cost 87,894 Material cost 1,000
Energy cost 1,120 Energy cost - Energy cost - Energy cost - Energy cost -
System cost 18,200 System cost 66 System cost 132 System cost 66 System cost 100
Waste management cost - Waste management cost - Waste management cost - Waste management cost - Waste management cost 2,000
total 299,320 total 1,266 total 84,473 total 87,960 total 3,100 476,118 Material loss 476,118
total 1,394,000

Cost Cost Cost Cost Cost
(US$) (US$) (US$) (US$) (US$)
Material cost 720,000 Material cost 783,480 Material cost 759,073 Material cost 791,047 Material cost 859,981
Energy cost 2,880 Energy cost - Energy cost - Energy cost - Energy cost -
System cost 46,800 System cost 59,934 System cost 119,868 System cost 59,934 System cost 59,900
total 769,680 total 843,414 total 878,941 total 850,981 total 919,882
MFCA further evaluates cost for the material loss at each process.

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Data Collection and MFCA Analysis
Type of Input Category of Type of Loss amount (kg or kJ) Loss amount (USD) Current Status of
material loss material loss Output
Raw materials Theoretical Scrap 300, 262 (94%) 3,500,723 (60%) Scrap is recycled
(steel plate) loss material and provided to
external contractor
for purchase
Normal loss Packing 4,858 (2%) 718 (0%) The waste is often
material
Auxiliary Theoretical Cylinder oil 14,987 (5%) 74,935 (1%) And they've throw it
materials loss away
Energy Normal loss Electricity 105,436 2,297,848 (39%) Energy that is
applied to the
product of a large
negative
Total 425,543 (100%) 5,874,224 (100%)
MFCA evaluates your loss in physical and monetary terms.

Further, MFCA systematically prioritize which loss should be tackled.
Green Kaizen from MFCA Analysis
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Kaizen Suggestion After Team Discussion

Type of Material loss Amount of Amount of Target for Outcome from discussion
material source material loss material loss Improvement
loss (kg) (USD)
1. Gap size 45,400 20,200 i) To reduce gap i) 5mm too small to be
between 2 of 5mm reduced
blanking piece ii) Effect to blanking part
2. Edge part of 650,000 291,992 i) To discuss Prepare the supplier evaluation
the steel with supplier to matrix to check their technical
material control material feasibility to reduce edge part
size
Scrap
3. Width size of 1,203,201 320,392 i) To reduce i) Coil width size hardly to be
material the steel width size reduced due to the slitting
material 155mm process at a supplier.
4. Feed size 5,4302,102 543,000 i) To review i) Feed size been reduced
panel position from 190 mm to 170mm
of blanking die ii) Width coil size been
maximized by reducing
width scrap size from
8mm to 5mm
Based on the site’s feasibility, No.4 Kaizen measures are selected for
implementation (assuming that 13% material loss is reduced through this
reduction).
101
Kaizen Suggestion After Team Discussion

Type of Material loss Amount of Amount of Target for Outcome from discussion
material source material loss (kg) material loss Improvement
loss (USD)
1. Gap size 45,400 20,200 i) To reduce gap of i) 5mm too small to be reduced
between 2 5mm ii) Effect to blanking part
blanking piece
2. Edge part of 650,000 291,992 i) To discuss with Prepare the supplier evaluation
the steel material supplier to control matrix to check their technical
material size feasibility to reduce edge part
3. Width size of 1,203,201 320,392 i) To reduce width i) Coil width size hardly to be
Scrap the steel material size 155mm reduced due to the slitting process at
material a supplier.
4. Feed size 5,4302,102 543,000 i) To review panel i) Feed size been reduced from
position of 190 mm to 170mm
blanking die ii) Width coil size been
maximized by reducing width
scrap size from 8mm to 5mm
Next, other material losses were focused for further improvements.
102
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2015/7/22
Discussion with Supplier
Input from Supplier = 1,030 mm.

(Length)
Material
Loss Material
Loss
Need Input for Input from

the Supplier
manufacturing = $2.00
= $1.6 mm. mm.
Need Input for the (Thickness)
manufacturing = 1,000 mm.
Output Output
$0.11 MM Material $0.11 MM
Loss
Conclusion -1
Conventional target
production level (pieces) Conventional Loss captured by
management MFCA
Actucal operation (pieces)
Material input (kg)
Input-output (MFCA analysis)

(kg)
0 2 4 6 8 10 12
Scope of (material) loss (unit: *10%)
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Conclusion -2
1. MFCA activities are recommended to start with one sample production process or
product.
2. MFCA approach (e.g., Data collection activities) will depend on existing

management activities of each company.
3. MFCA captures losses that are often overlooked by the conventional production
management.
105
Introduction of MFCA Forum
106
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What is MFCA Forum Japan?-1

MFCA Forum Japan (“MFCA Forum”) was established in 2009 with the
following objectives:
 to develop and disseminate MFCA in collaboration with the

government, academia and industries.
 to simultaneously achieve “reduced environmental impacts” and

“improved business efficiency” in the industries as well as sharing
MFCA-related knowledge and experience among various stakeholders.
107
The Activities of MFCA Forum Japan
1. MFCA Workshops/ Forums

2. MFCA Working Group
3. Seminar
4. Dissemination of information through homepage
5. Annual Convention
6. International Standardization of MFCA (ISO 14052)
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2015/7/22
Management Structure of MFCA Forum Japan

No. Position Name Title
1. Chairperson Katsuhiko Kokubu Dean, Professor of Social and Environmental

Accounting, KOBE UNIVERSITY
2. Vice Michiyasu Dean, Professor of Faculty of Commerce

Chairperson Nakajima, Department of Commerce Department of
Accounting, KANSAI UNIVERSIT
3. Vice Yoshikuni General Manager, Sustainable Management,
Chairperson Furukawa NITTO DENKO CORPORATION
4. Secretary Hiroshi Tachikawa Managing Director, PROPHARM JAPAN

General CO.,LTD.
In addition, 11 other members from various sectors are engaged in steering activities
of MFCA Forum Japan.
Our Service
110
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MFCA – Why us ?
• We manage main MFCA related activities at local and international level
(secretariat office of MFCA forum and ISO of MFCA). We always have
the latest and most practical MFCA related information.
• Project/research experience in approximately 50 companies from

various types of industries including automobile, chemical, medical,
electric appliances precision equipment, machinery, transporting
equipment, metal products, steel, non-ferrous metal, textile products,
food, rubber product and other products) to service.
• 1,500 participants for our MFCA training so far.
• We achieved at least more than a total of USD 2,000,000 cost reduction

through MFCA.
Page 111 111

Overview of Our MFCA Service

Duration
Step 2
MFCA consulting (3 months (5 days per month))
15 days
(5 days
per
month)
20
days
Step 1-2 MFCA on-site assessment (3 days)
3 days
Step 1-1 MFCA training and

2 days workshop
(2 days)
Training certificate
Outcome
Training certificate + MFCA assessment result
Training certificate + MFCA assessment result+ follow-up consulting 112

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2015/7/22
MFCA services outline
Step 1-1. MFCA Training and workshop (2 days)

 Knowing and getting interested in MFCA.
 Understanding basic knowledge of MFCA, studying introduction steps.
 Group discussion & presentation about the product of customer.
Step 1-2. MFCA On-site Assessment/diagnosis (3 days)

 On-site assessment of material losses and cost for material losses
 Department-by-department interview for understanding of source of material losses
 Group discussion & presentation on the assessment results
Step 2 Follow-up consulting (5 days every one month for a period of 3 months)
 Identifying “material costs”, “system costs”, “utilities costs” and “waste disposal costs”
and checking the losses on site.
 Follow-up improvement actions through department-by-department activities.
113
MFCA Database Service
First initial analysis of your MFCA productivity
114
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2015/7/22
Conclusion
115
What is MFCA?
Material
Product
Product Material loss

Material
loss
3 elements MFC(A) constitutes Material Flow Cost Accounting.
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2015/7/22
MFCA complements and accelerates other KAIZEN methods
MFCA & 5S, TPM,IE MFCA & TPS (Lean)
Aim of TPS (Lean)

Provide the best quality, the lowest cost, and
the shortest lead time through the elimination
KAIZEN of waste(Muda).
Machine Man Material
TPM IE MFCA MFCA complements &
accelerates TPS
Work environment
5S
Objective of MFCA
Visualizes material losses to make proper &
Time Material innovative improvement plans from new
（TPM・IE）（MFCA） point of view.
MFCA complements & accelerates
T
TPM & IE
117
Propharm Japan Co., Ltd. (T. . Tomii ) All Rights reserved.
What is your MFCA-based productivity?
99% vs ?
118
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2015/7/22
Three Benefits of Green Kaizen
1. Highlights hidden loss not captured by other Kaizen tools

MFCA highlights hidden loss related to material losses.
2. Helps the organization to comprehensively understand their

processes in physical and monetary terms
MFCA visualize your environmental performance in physical and
monetary terms.
3. Integrate environment related information into management

decision-making
MFCA provides useful information for management decision-making
to increase profits and reduce environmental impacts.
119
IF any questions or trainings, please contact below:
Hiroshi Tachikawa
Propharm Japan Co., Ltd.

2-1 Utagawa cho
Shibuya-ku,Tokyo, 150-0042, Japan
TEL: +81-(0)3-6328-3307
FAX: +81-(0)3-6368-5523
E-mail: hiroshi.tachikawa@Propharm.jp
URL: http://www.propharm.co.jp/english
85
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2015/7/22

Training Course on Management Consultancy

Material Flow Cost Accounting - MFCA

Approach for GREEN KAIZEN from Japan

4. Monetize your Green Kaizen benefit through MFCA

5. Overview of MFCA Standardization ISO 14051

6. MFCA Case Example (automobile parts manufacturing)

7. Introduction of MFCA Forum Japan and Our Service

Sustainability Health and safety

Brief profile of Hiroshi Tachikawa

• Conducted a number of MFCA/Green Kaizen trainings, projects in many Asian countries

• Bachelor of Science in Sustainable Resource Management, Ohio State University 2000

Our MFCA-related Activity

MFCA from Japan

Propharm Japan Co., Ltd. All Rights reserved.

Japan’s History - Industry & Pollution

The four major pollution-caused illnesses

Propharm Japan Co., Ltd. All Rights reserved. 8

1970s - 1990： • “Optimization style” manufacturing to

Who implements MFCA

A number of large-sized companies implement MFCA around the world

Material Flow Cost Accounting

Material Flow Cost Accounting

Product Material loss

3 elements MFC(A) constitutes Material Flow Cost Accounting.

Propharm Japan Co., Ltd. All Rights reserved. 12

Propharm Japan Co., Ltd. All Rights reserved.

MFCA complements and accelerates other KAIZEN methods

MFCA & 5S, TPM,IE MFCA & TPS (Lean)

Aim of TPS (Lean)

MFCA considers both.

Propharm Japan Co., Ltd. All Rights reserved. 15

MFCA helps your existing quality and environmental standards

MFCA fulfills gaps between

Propharm Japan Co., Ltd. All Rights reserved. 16

MFCA Focuses of Reduce

MFCA vs. Conventional Environmental Approach

Propharm Japan Co., Ltd. All Rights reserved. 19

Input Input Output

Brief Example of Canon

Conventional Production Management and MFCA

Conventional production management

Glass Material Final product

Source: Japanese Ministry of Economy, Trade and Industry (METI) (2011)

Propharm Japan Co., Ltd. All Rights reserved.

Conventional production management and MFCA

Source: Japanese Ministry of Economy, Trade and Industry (METI) (2011)

Propharm Japan Co., Ltd. All Rights reserved.

Propharm Japan Co., Ltd. All Rights reserved.

Improvement in Material Loss

Material Quantity (kg) Before MFCA After MFCA

Total 100% 100%

Material Cost (USD) Before MFCA After MFCA

Innovation through MFCA

MFCA’s Scope for Productivity Management

You can identify and manage hidden loss through MFCA

Visible loss (IE, TPM)

Invisible loss Comprehensive

Example of loss typically overlooked

1. Typical material loss 1

2. Typical material loss 2

What is your MFCA-based productivity?

Monetize your Kaizen benefit through MFCA

Propharm Japan Co., Ltd. All Rights reserved. 34