Costing improvement of remanufacturing crankshaft by integrating Mahalanobis-Taguchi System and Activity based Costing

Integration between quality and costing system is very crucial in order to achieve an accurate product cost and profit. Current practice by most of remanufacturers, there are still lacking on optimization during the remanufacturing process which contributed to incorrect variables consideration to the costing system. Meanwhile, traditional costing accounting being practice has distortion in the cost unit which lead to inaccurate cost of product. The aim of this work is to identify the critical and non-critical variables during remanufacturing process using Mahalanobis-Taguchi System and simultaneously estimate the cost using Activity Based Costing method. The orthogonal array was applied to indicate the contribution of variables in the factorial effect graph and the critical variables were considered with overhead costs that are actually demanding the activities. This work improved the quality inspection together with costing system to produce an accurate profitability information. As a result, the cost per unit of remanufactured crankshaft of MAN engine model with 5 critical crankpins is MYR609.50 while Detroit engine model with 4 critical crankpins is MYR1254.80. The significant of output demonstrated through promoting green by reducing re-melting process of damaged parts to ensure consistent benefit of return cores.


Introduction
In the early 20th century, remanufacturing has been proven by industry and it expended by the need to reuse military machinery and vehicles during and after the Second World War [1].In China, Volkswagen established a remanufacturing plant for modern engine at Shanghai [2] which offered an inferior market price and same quality of new products, in addition remanufactures existing product into a new product with same warranty [3].Remanufacturing is a chain of manufacturing phases which performed on the transformation industrial process that refurbished and recycled of a product in order to return it to an exceptional performance and it was not worse compare to the original product [4].Economic and environmental potential, both are importance in remanufacturing industry which provides cost savings up to 90% of raw materials, ratio range of six to one for original production and remanufacturing in energy consumption, high efficiency and able to process high quality cores [5].In fact, the manufacturing process of large and expensive engine parts are energy intensive and generate large amounts of environmental emissions especially during the critical steps in remanufacturing [6], 1234567890''"" iCITES 2018 IOP Publishing IOP Conf.Series: Materials Science and Engineering 342 (2018) 012006 doi:10.1088/1757-899X/342/1/012006because there is no available method to decide which critical crankshaft are eligible to that process forward it will generate a lot of waste with respect to the energy, material, time and cost [7].
Mahalanobis distance (MD) and principle of Taguchi method, both is used in Mahalanobis-Taguchi System (MTS) approach by constructing a measurement of abnormality of patterns and make accurate prediction [8], where the interdependence between the variables is influential in pattern analysis.Hence, the class imbalance problem will be resolved and the data distribution is not affected.A vector analysis such as orthogonal arrays (OA) and signal-to-noise ratios (SN) is used to consolidate data from many parameters of a system into a single group or dimension [9].By integrating the MTS, it has provided profit worth considering in many various applications [10].Work by [11] applied MTS to present a multi-criteria evaluation framework and ranking candidates for MBA program by considering several criteria.[12] presented the MTS to designate the health condition of cooling fan and induction motor based on vibration signal by anomaly detection wherein the different unbalanced electrical faults of induction motor can be classified with a higher accuracy.[13] implemented the Gompertz binary particle swarm optimization algorithm to solve the problem of combinatorial optimization from variable selection which detected by MTS in the manufacturing process of automotive pedals components.[14] solved the combinatorial optimization problem of variable selection with applied the binary ant colony optimization algorithm in the application of the MTS.
In recent year, common approaches to service and product costing have been focus to continue and diverse condemnation.Nevertheless, the level of change in management accounting system has created to stimulate and several improvements have created as much attentiveness as activity based costing (ABC) which has developed during the last span as one means of addressing the flaws of the traditional cost accounting (TCA) method [15] which only assigns costs to product based on an average overhead rate.Therefore, ABC are introduced as allocates the costs of manufacturing a product according to the activities needed to produce the item.The application of ABC has been reported in organizational, hospital, supply chain, cellular manufacturing, farm management, transportation, decision making, radiotherapy and in numerous energy and environmental issues.Work by [16] performed the 0-1 mixed integer programming using ABC system and life cycle assessment (LCA) which assign resources and funding for energy saving activities to each green building through appropriate cost drivers.[17] proposed a cost estimation of safety by using activity of risk assessment for the initial stages of construction bidding phase since the fatal construction accidents are major problem in construction industry and construction project scheduling by focusing on construction activities.Furthermore, [18] resolved the strategic decision making under resource constraints and the carbon footprint factor which is the perspective of sustainable transport and the criterion of decreasing traffic energy consumption are the most significant evaluation factors by the connection with ABC evaluation and LCA.[19] proved that the ABC models for inter-firm cost accounting are appropriate in the context of supply chain environment by developing the conceptual framework.Therefore, it is hard to find any previous works that integrating the MTS and ABC to improve simultaneously quality and costing system.This work identifies critical variables in the remanufacturing process in order to improve the quality inspection.Factorial effect graph has been developed to observe which variables were critical to the remanufacturing process.Meanwhile, the structure of costing system has been improved to obtain accurate cost of product and to gain accurate profitability.

Methodology
This work selected crankpin of crankshafts as a subject matter and the number of sample is shown in table 1.The data were collected from a remanufacturing industry which located at Rawang, Malaysia.Subsequently, this work need to develop a clustering between both engine model to indicate their Mahalanobis Distance (MD) value.Higher the MD value indicated that the off-target sample have a distinctive pattern from the target sample while, smaller value of MD indicated that the off-target sample have closer pattern to the target sample.MAN engine model have been selected as the target sample due to the pattern was closer to the original crankshaft while Detroit engine model as the off-target sample.The calculation of MD as shown in equation ( 1) whereby Y represented the normalized Y1 and Y2, A represented the inverse matrix, Y T represented transposition of Y and k represented number of variables.

Mahalanobis distance
The MD for each sample of both engine model was then used as response to evaluate the criticality of variables.The diameters of crankpin were used as input and the MDs were used as output.The data should be normal or densely populated in the medium range to apply this method by creating a histogram.The target data is the highest sample while off-target data is the remaining samples number.Normalization process is required in order to develop a dimensionless condition of the off target data.The normalization is used to make the data more flexible by diminishing their redundancy.Equation ( 2) and equation ( 3) are used to calculate the normalization.
Proportional coefficient, β1= Positive value of SN ratio η indicated that the variable was significant for the first filtration and it will be considered for the second filtration.Proportional coefficient, β represented the steepness of the line in a scatter diagram.The integrated estimate value is then calculated as shown in equation ( 6) by using the critical variable which have been evaluated during first evaluation.In addition, the calculation also based on the orthogonal array which have been assigned from number of original parameters consideration.
As a result, equation (7) contributed to the criticality of variables for the second filtration.However, it can be observed from factorial effect graph.
Integrated estimate SN ratio, η= 10 log When the parameters were used by the SN ratio is larger and when the parameter is not used with the SN ratio is smaller, so the level of contribution to be positive and is classified as a critical variable.In other words, on factorial effect graph, descending the line indicated that the variable is significant.The critical variables were considered into the costing using ABC.To perform the method, this work need to identify centres with their activities that give a major contribution to the production process.Then, resources cost is assigned to activity centres.This is actually done by estimating an amount of overhead for that year to be apportioned in percentage to those activity centres.The costs of the resources are already recorded in the existing accounting system.Then, activity centre cost is assigned to activities.The cost just apportioned in the second stage should be apportioned to the different types of product in terms of percentages based on their activity load.Similarly, overhead also would be apportioned by using percentage for such categories as wages, depreciation, consumables, energy, building cost and other costs.Fourthly, the cost per unit of activity driver is estimated.An activity driver is a cost driver used to estimate the cost of an activity consumed by the cost object.The activity driver should be proportional to the activity cost or activities that consume costs.Finally, is preparing a bill of activities for a unit of crankshaft.A cost object is any product for which management wants a separate measure of the cost.Cost per unit of activity driver would multiply with annual quantity of cost driver consumed to obtain the total of annual cost.The outcome is a total cost for each product that consists of a list of the activities used by the product and their costs.

Result and discussion
At this stage, this work was developed MD value for each sample of both engine model.According to the figure 1 (a) which specifically for MAN engine model, the distribution of samples inside the scatter diagram is quite fair because the sample numbers of remanufacturable (40) and repairable (44) of crankpin diameter are approximately equal.Obviously, there was no sample distribution belonging to the rejected group.Consequently, the MD value for Man engine model with 84 samples is between 0.092534 to 7.446333 with an average of 1.0, which is the unit data in this crankshaft classification.According to the figure 1 (b), since the sample numbers of remanufacturable (29) of crankpin diameter are greater than the rejected ( 16) and the repairable ( 14), the distribution of samples inside the scatter diagram is dense on the right side.Then, the threshold of MD for Detroit engine model with 59 samples is between 153277.39 to 164993.55 with an average of 160844.42,which is closer to the target sample.The overall classification can be seen as shown in figure 1 (c) which combined for both engine model.This explained that the pattern of Detroit engine model was obviously distinctive.The parameter evaluation was started with the result of first filtration for MAN engine model based on the value of proportional coefficient β and SN ratio η as shown in figure 2. Ascending the line to the right indicates that the parameter has positive value of proportional coefficient β.However, their steepness is increasing from diameters 6, 4 and 5.Then, SN ratio η indicates the relationship between the parameter and output: the larger the SN ratio η is, the stronger the relationship.The relationships get stronger starting from diameters 2, 6, 4, 5, 1 and 3. Therefore, these crankpin diameters are well suited for the purpose of integrated estimate value.With respect to the figure 3 of Detroit engine model, the steepness is increasing from diameter 3, 6, 4, 2, 5 and 1 while their relationship gets stronger starting from diameter 5, 4, 2 and 1.Therefore, those crankpin diameters are well suited to the purpose of integrated estimate value except for diameter 3 and 6 because both values are -6.20 db and -3.02 db respectively.When SN ratio η turned negative due to the Sβ ≤ Ve, the value will be treated as zero and not considered into integrated estimate value.By considering the figure 4 for MAN engine model, among the 6 crankpin diameters of 84 remanufacturable and hybrid crankshafts, only 83% are critical and 17% are non-critical.Furthermore, some improvements can be made on the inspection quality and savings with respect to the cost, time and energy expended can be made.In addition, this work can increasingly rank their criticality according to their contribution from diameters 4, 5, 6, 1 and finally 3.With respect to Detroit engine model, among those 6 crankpins diameter of 29 remanufacturable crankshafts, only 67% are critical while 33% are non-critical as shown in figure 5. Furthermore, some improvements can be made on the quality of inspection including savings with respect to the cost, time and energy expended.In addition, this research is able to increasingly rank their criticality according to their contributions from diameters 5, 4, 2 and finally 1. Subsequently, those significant variables were considered into the costing using ABC.There were six departments which really affected to the industry's business such as administration, corporate management, factory management, quality control, remanufacturing, and sales and dispatch.Activity driver is a cost driver used to estimate the costs of an activity consumed by the cost objects.In selecting an activity driver, there must be a linear relationship between the activity costs and the activity drivers, otherwise the costs of the object will be distorted.Activity drivers can be more than one per activity.Estimation of the quantity of activity driver is obtained for each activity for the year so that the cost per unit of activity driver may be calculated as shown in table 2. The longer the machine and setup hours are, the larger the costs of the grinding activity.Continuous usage of the grinding machines to remove excess metal on the surface of crankpins indicates that maintenance or depreciation costs would increase.Similarly, the protective personal equipment being used such as coveralls, safety shoes and goggles would also increase the consumable costs.The longer the machine and setup hours, the larger the costs of polishing.Similarly, continuous usage of the polishing machines to remove excess metal on the surface of crankpins indicates that maintenance or depreciation costs would increase.The coveralls, safety shoes and goggles used tend to increase consumable costs.

Figure 1 .
Figure 1.Scatter diagram of (a) MAN, (b) Detroit and (c) combination of both engine model.

Figure 4 .
Figure 4. Evaluation importance through factorial effect graph of MAN engine model.

Figure 5 .
Figure 5. Evaluation importance through factorial effect graph of Detroit engine model.

Table 2 .
Activities and activity cost per unit of activity drivers.bills of activity is prepared for the MAN engine model as shown in Table3.The crankshafts have an estimated cost of MYR609.05 per unit after considering 84 units of crankshaft with 5 critical crankpins.This research maintains the similar number of annual operating IT hour (2112 hour) based on the assumption of work of 8 hours per day and 22 days per month.This explained that, ABC is able to estimate the cost of product accurately based on the number of activities used. A