SECTION III Service Systems
7.6 How Do You Determine the Full Cost of an Injury?
7-6 Occupational Ergonomics: Design and Management of Work Systems
This is a sound investment as the benefits exceed the costs by 20%.
The return on investment can also be calculated using the present values of the benefits and costs.
The calculations are shown below:
assuming that a family of jobs has experienced only one injury recently and that methods training has been suggested to avoid a similar injury in the future. The injury was a carpal tunnel surgery, and it was a serious compensation claim. The full cost of the injury was $20,000. It is estimated that another injury would occur approximately every five years.
The methods training that has been recommended is relatively short and will only require each worker to spend one hour per year for the training. Since the training is done on the job, a trainer will also be required for each hour of training. The full cost of the training then will be 40 hours total for the 40 workers plus an additional 40 hours for a trainer. The average cost of a worker’s time is $6.50; and there is an additional cost for employee benefits of 25%. The cost of the trainer is $8.00 per hour plus the employee benefit cost of 25%.
The annual cost of the training is:
Item Costs
Workers: 40 workers × 1 h./worker × $6.50/hour × 1.25 $325.00 Trainer: 40 hours × 8.00/hr. × 1.25 $400.00
Annual Training Costs $725.00
The present value of the recurring costs for 5 years at 8% interest is the same as that calculated above.
For a five-year period, it is 3.993 times the annual cost for a total of $725 × 3.993 = $2,894.93.
We assume, for simplicity, that the future benefit of avoiding a carpal tunnel case is a sum that will be realized five years from now. Looking in our reference, we find that the appropriate multiplier for the present value of a future sum (P/F) at 8% interest for five years is 0.6805. Multiplying the future value of $20,000 by 0.6805 we obtain the present value of the benefit.
The cost to benefit ratio is:
This is a sound investment.
are made; yet the overhead cost remains the same. This overhead may consist of the cost of production equipment, supplies purchased and on hand, heat and light, etc., as well as continuing employee benefits.
The result is less product available for sale to defray overhead costs.
It is very likely that the worker covering for the injured individual is less familiar with the job and is more likely to make mistakes. This increased likelihood of error has associated costs. At best, it will result in an increase in the amount of rework or salvage operations necessary in order to produce a salable product. The extra labor and material cost of the rework are a result of the ergonomic injury.
At worst, the defective product is beyond salvage. All the value of the previous work done to the product to convert it from raw material to goods in process is then a lost cost attributable to the ergonomic injury.
Increased Supervisory Requirements
A worker unfamiliar with a job will require more supervision or assistance from co-workers in order to perform a job. This may be as simple as not knowing where tools are stored or general unfamiliarity with the production process which leads to more required support time.
In addition, there are supervisory costs associated with the time required in preparing the paperwork necessary to process an injury case such as injury and illness reports, developing staffing schedules to cover for injured workers, etc.
Training
A worker unfamiliar with a job will need to be trained in how to perform it. During this time his production may be lowered, or nonexistent. There is also a cost associated with the time of the person who conducts the training.
Example:
An injury requires employees to work overtime to meet product demands. The ergonomic injury was not a major one, but it did result in lost time for six workdays. What are the costs in addition to the medical costs and lost time costs for the injured worker?
Employees earn an extra 50% for overtime pay. Since the replacement worker is from another depart- ment, he/she produces up to 12 fewer units per day for the six-day period. In addition, there were some quality problems—one reject at a cost of $36 and five pieces which required rework at a cost of $10 each.
A summary of the costs is shown below:
Item Costs
Overtime (0.5 × $8.00/hr. for 6 days) $192.00
Lower productivity (12 units/day × $4.00 profit/unit for 6 days) $288.00
Quality (1 reject) $36.00
Rework (5 units at $10 each) $50.00
Total Additional Costs $566.00
7-8 Occupational Ergonomics: Design and Management of Work Systems
Example:
An assembly task requires a worker to mount a component to a chassis with a single screw using a power driver. The two workers assigned to this area report two issues which have made this assembly operation a problem.
First, the screws frequently stop turning before being fully seated in the chassis. Because the screws are difficult to drive, operators have adjusted the clutches on their power drivers to the maximum torque limit. The power screw driver “kicks” or exerts a powerful torque on operators’ arms when the screw stops turning. This has caused some discomfort and minor injuries, but no lost time. To correct this, the operator reverses the screw out, then redrives it. This happens on every other unit. The second concern is that when the screw stops turning, the power driver often jumps out of the drive slots on the screw head. This happens about once for every five units. Occasionally, it strips out the screw hole in the chassis. This happens about once every 20 units. The standard rate is to expect the worker to finish three complete assemblies each hour during a ten-hour shift. Production is expected to continue indefinitely.
The first case requires the removal of the damaged screw and replacement. The second event requires the operator to redrill the hole and replace the screw with an oversized one. Customers complain of
“rattling” noises during operation if the assembly is not fastened correctly.
It takes approximately 30 seconds to successfully drive a screw, five minutes to remove a damaged screw, and one-half minute to redrive a new screw. Redrilling the screw hole takes an additional five minutes.
Examination of the screws used reveals that they are not self-threading as the specification calls for.
Utilization of the appropriate type of screw takes approximately 20 seconds, 10 seconds less than previ- ously. The problems of improper seating, head stripping, and hole stripping are resolved by utilization of the appropriate screw. Adjusting the clutches on the power drivers eliminates the kickback torque to the workers’ arms. A summary of the costs and benefits is shown below.
Item Cost
1000 screws discarded $18.51
1000 screw purchase $18.51
Total Costs $37.02
Item Cost Savings
Rework time per day Remove and replace
(30 units/day × 0.2 units reworked × 0.092 h × $10.00 h = $5.50/day) Redrill
(30 units/day × 0.05 units reworked × 0.092 h. × $10.00 h = $1.38/day) Time saving per day
Improved drill time
(30 units/day × 0.0027 h saving × $10.00 h = $0.83/day) Production time gained
(30 units day × 0.25 units × 0.092 h × $10.00 h = $6.88/day) Total Cost Savings $14.59/day per worker ×××× 2 workers = $29.18 day
In these examples, by carefully measuring overtime, productivity, and quality, you can capture additional costs, even in the absence of an injury. This means that additional funds are available to offset the injury, regardless of the cost justification technique used.
Often the trend is not as obvious, and predicting future injuries becomes more difficult. To respond to this, one can look at the pattern of less serious injuries, such as first aid visits; if that is stable, then the overall injury pattern is probably stable, as well.
In the data below, the pattern of compensable injuries appears to be inconsistent; the pattern of first aid visits and OSHA 200 log entries, however, is very consistent. Using the stability of these injuries permits a prediction of the more serious injuries.
In general, there is a consistent trend in less severe injuries, with OSHA 200 log entries occurring at a rate of roughly 4 to 5 per year, and nonrecordable first aid visits occurring at a rate of roughly 9 to 10 visits per year. This clarifies the injury pattern, which is not evident by simply maintaining a count of the compensable injuries. It also provides an excellent illustration of the ratio of minor to major injuries.
In this case, there are approximately three compensable injuries for every 21 OSHA 200 log entries and for every 47 first aid visits. Since both OSHA 200 log entries and nonrecordable first aid visits are relatively stable, we would expect a recurring compensable injury once every two years.