For a business, manufacturing costs are like a double-edged sword. If costs are too high, the business will see losses. On the other hand, if costs are too low, the business could suffer from a huge lack of quality and productivity. Therefore, costs are one of the most important factors that need to be monitored closely to stay within budget.

Change is often associated with inbound costs, but the key to implementing a successful change is to find a smart, cost-effective way to do it. Generally, people view production control as an expensive solution, but if done right, it can reduce costs.

Costs and its Types

There are many costs in manufacturing, all of which are necessary for any industry to operate and grow. The main ones are labor, materials, and downtime. But costs can quickly become a loss if not managed properly or monitored closely. Let’s look at why.

Direct Labor Costs: This is the wage that the manufacturer pays to the labor force for the time and production that they give the industry. It is very important because it is directly proportional to the production that takes place. This cost can turn into a loss if the labor is not used for a productive task in relation to their wages.

Material Costs: This is one of the most common manufacturing costs in all industries. A manufacturer’s objective is to obtain the best quality at a reasonable price. It can turn into a loss if there is waste production, causing the final product to not be sold.

Machinery Downtimes: Downtime is one of the most significant costs, as it is an immediate loss if not planned for. It can cause serious losses to manufacturers because, even if machines are not running, other direct costs continue to accrue. Manufacturers need to constantly monitor their machines to avoid unnecessary downtime. This allows them to maintain production and make profits.

Manufacturing costs

The fastest way for a manufacturer to save unnecessary costs is to reduce machine downtimes, reduce scrap production, and use its labor for profitable tasks. The best way to do this is through production monitoring.

Manufacturing Cost reduction by Production monitoring

The two key elements of a real-time production monitoring system that help reduce costs are Real-time data transmission and OEE monitoring. Let’s see how.

Real-Time Data: Production monitoring provides Real-time production data to manufacturers. It uses data analysis to apply preventive improvement solutions to problems, thus mitigating problems before they become major ones. Real-time data transmission and analysis helps manufacturers reduce manufacturing losses in real-time and increase production and efficiency.

It helps workers solve the problem before it gets worse and ensures that production is only interrupted for as long as necessary with instant alerts regarding any problem. It allows manufacturers to achieve maximum production in the current configuration without having to spend on new machines to increase production.

Plus, real-time data means automated data collection and performance reporting, which means labor is used only for productive, cost-effective tasks.

OEE Analysis: Overall equipment Effectiveness includes factors such as downtime, production quality, and machine efficiency. The production monitoring system encompasses all these factors and improves them in real-time.

When OEE is analyzed and improved, machines operate at the desired level, produce quality products and generate more profits for manufacturers.

Manufacturing costs
Machine

OEE analysis allows manufacturers to analyze common causes of downtime, average downtime, and their duration to optimize long-term unplanned downtime and reduce manufacturing costs. It even prepares manufacturers for upcoming downtimes as early as possible to avoid major shutdowns.

In addition, thanks to the machines being continuously monitored, they operate at their maximum potential, generating products of consistent quality with minimum waste. This allows manufacturers to maintain the required level of quality and increase their profit margins.

OEE analysis also helps avoid and eliminate any potential production bottlenecks, optimize production cycle time and efficiency of work order or changeover execution, and machine performance. These factors contribute directly to the overall reduction of manufacturing costs.

Manufacturers need to adopt solutions that impact the costs that are directly related to manufacturing. Production monitoring has a direct effect on manufacturing and the costs/losses associated with it. It allows manufacturers to not only save more money by reducing costs but also increase the revenue generated in the same plant through better return on investment (ROI). Installing a production monitoring system is the best solution to increase profits and reduce manufacturing costs most easily and efficiently.

Clariprod‘s real-time production monitoring is quick and easy to install into your existing structure with minimal or no changes, which means lower costs from the first month and an even faster ROI.

References

  • B. Beers, “Production Costs vs. Manufacturing Costs: What’s the Difference?,” 30 04 2021. [Online]. Available: https://www.investopedia.com/ask/answers/042715/whats-difference-between-production-cost-and-manufacturing-cost.asp.

  • accountingtools, “Manufacturing costs definition,” 09 04 2021. [Online]. Available: https://www.accountingtools.com/articles/2017/5/9/manufacturing-costs
  • V. Technologies, “Production Monitoring: How It Cuts Downtime and Improves Your Production Process,” 02 12 2019. [Online]. Available: https://www.versacall.com/production-monitoring-how-it-cuts-downtime-and-improves-your-production-process/

  • D. bhatt, “Production Monitoring: The Step After Manufacturing Automation,” 27 08 2021. [Online]. Available: https://clariprod.com/production-monitoring-the-step-after-manufacturing-automation/

  • D. Bhatt, “OEE and its Importance,” 06 07 2021. [Online]. Available: https://clariprod.com/oee-and-its-importance/

By Published On: September 29, 2021