How can you reduce your manufacturing costs and increase profits? According to Managing Director of MESTEC, Jeremy Harford, the answer could lie in the way that you measure the cost of production.
He explains how more effective data capture can help manufacturers to drive greater productivity and profits by improving the accuracy of their ‘standard’ and ‘actual’ production times.
The pricing of your products directly influences your profits, so it’s in your interests to make sure that your products are priced correctly in respect to the production time and material costs. Material costs are usually easily measured, but due to the human element, production time is much more difficult to define and control.
Your standard production time is calculated by averaging every worker’s productivity. You can calculate the average production time across your workforce, but this is no good if the times recorded by your workforce are inaccurate. The problem is often the inaccuracy of the data used – many companies rely on high-level indicators such as wage bills and labour content, with no real visibility of where time and money is spent and where efficiency issues are located in the production process. Some rely on manual time sheets to measure productivity, which not only ties resource up in admin, but can be unreliable and inaccurate.
Production time influences price; if an item is slightly faster to make and uses less resource time, you can drop the product price and improve that product’s market competitiveness – potentially increasing market share and achieving a good margin. Equally, if an item takes longer to make, you can raise the price to maintain profit. If the standard price is calculated incorrectly, the benchmark for your workers is faulty and will distort product worth and potentially negatively impact performance. Without visibility of actual production cost, it’s impossible to set pricing for maximum profit opportunity.
Using data to improve labour productivity and drive profit
One way to estimate the standard production time and costs more accurately is to increase your control and accuracy of measurement of your workforce’s productivity. Greater visibility of individual times will provide you with a more accurate cost production average, and also enable you to pinpoint any loss-making products and performance issues.
The first step is to improve your measurement. MESTEC’s solution measures exactly how long operators spend on each task within a process, giving you enhanced insights so that you can compare actual versus standard times and make moves to address any discrepancies.
Our touch screen factory-floor terminals (equipped with barcode scanners) provide an easy method for operators to record their progress during jobs, capturing productivity data and best practice processes that other operators can adopt. We record the approach that your best workers take so that you can ensure that everyone else follows that same process – every time they perform the task. This improves your workforce’s overall productivity, enabling you to reduce your production costs.
Our technology is designed to time-keep those manual processes that are vulnerable to human error and variable productivity. We provide your staff with detailed step-by-step tailored task instructions in the form of sequential text, drawings, photos and video clips. Instructions take into account the product/variant, process step and operator skill profile. You can even set up alerts to ensure that staff are notified of any new changes, such as a modified work instruction, customer-specific configuration or a recipe/BOM engineering change.
With its easy in-built analytics and dashboards, MESTEC’s touch screens help you to:
- Pinpoint under‑performing operatives, machines and processes
- Capture the approach that the best workers take, and emulate this across the entire workforce
- Reduce variability in operator productivity
- Introduce more feedback and accountability for operators
- Identify errors in standard times and costs
- Prioritise remedial actions and engineering improvements
- Pinpoint opportunities for training and redeployment
- Drive labour productivity higher
Our production cost measurements help clients to review and adjust their prices for greater profitability. With insufficiently accurate measurements to identify standard production times, clients often find that they are loss making on certain orders. Our touch screens help staff to clock their times quickly and efficiently, enabling them to take control over labour times and adjust prices to give more weight to certain orders, increasing profitability. Take a look at our case studies to find out more about how we’ve transformed our clients’ production cost visibilities.
If you’re ready to maximise your profits with a more accurate production cost, contact us today.
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- How to turn small batch manufacturing from problem to opportunity
- Five reasons why your manufacturing KPIs fail
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