When a manufacturer does that occasional bit of bottom-line soul searching, the most fundamental determination to consider is which parts, products, customers, projects, and/or jobs are profitable. To this end, Activity-Based Costing (ABC) is used to identify, assign costs to, and report on manufacturing operations.

 To a large degree, ABC is a more accurate cost management system than standard cost accounting in that it is able to identify places where the manufacturing process can be made more effective, essentially by determining the “true cost” of producing a product.

Shop floor work centers are particularly suitable for ABC because they produce identifiable and measurable units of output. With ABC, management can define processes, identify the cost drivers of those processes, and determine the unit costs of products for performance based budgets that (more…)

It should be the case that, in manufacturing, having an abundance of work is a good thing. Labor and machinery are running at full capacity, finished goods are moving through the plant as fast as new work orders are being generated, and production efficiencies are enhancing the bottom line.

However, when abundance turns to overloading, labor and machinery often have a hard time keeping up. Sure, fresh work orders are coming in fast, but the ability to produce product is exceeded by the time available to actually manufacture the goods and adhere to quality standards.

There is only so much time available in the day, and if machines are running full capacity all the time, then there will inevitably be (more…)

Procurement in manufacturing involves many processes. From the generation of a sales order, a whole host of processes kick in to begin the production movement through the plant in, hopefully, the most efficient way possible.

Along with vast improvements in shop floor machinery efficiency and automation over the past decades, highly efficient enterprise resource planning (ERP) software systems have been introduced to help automatically control system flow—particularly requisitions. This is the new reality in manufacturing, despite the reluctance of some to change and profit from the movement found from being online and on time through ERP.

Streamlining requisitions through automated ERP applications satisfies the most necessary of manufacturing operational goals—the need to be convenient. In the more robust ERP software systems, the complete supply chain is at the fingertips of the purchasing manager. Critical real-time and historical information for raw materials and parts needed for (more…)

Why take ten steps to do something, when you can do the same thing in two? It seems such simple logic, yet in manufacturing today there are still some companies that insist on maintaining the old, anachronistic, handwritten ways of purchasing material for the shop.

However, to overcome deficiencies found in the old paper-based ways of purchasing, manufacturers are now utilizing enterprise resource planning (ERP) software systems that employ autopurchasing modules that meet the needs for speed (and savings) in the manufacturing operation.

Such autopurchasing modules read the inventory system, scanning the inventory master for every part and looks for opportunities to both refresh inventory and take advantage of quantity discounts.

Many manufacturers have taken to heart the notion of demand driven purchasing whereby raw material/parts acquisition is a result of orders pulled from the client. That is to say, in lean enterprises requisitions are made not from forecasting models, but immediately as a result of (more…)

When it comes to the direct- versus in-direct costs associated with manufacturing labor, the question must always be asked, “Who’s in the plant, and what’re they doing?”. That is to say, when it comes to questions concerning the valuable, yet limited, resource of time, the tracking of personnel and their activities through any part of the day is absolutely necessary to eliminate waste, enhance productivity, and increase the bottom-line.

In the past, the accounting of personnel time was simply a matter of marking time-in and time-out as indicated on a manually punched timecard. The “in-between” time of an employee was lost to managers and only measured by the amount of finished goods delivered at the end of the day. That it took a shop floor machine operator a half an hour to search for a tool before returning to the pending job on his machine was shrugged off as unreportable data.

With trending in manufacturing toward totally integrated enterprise resource planning (ERP), software technology advancements have now evolved to the point where (more…)

If you’ve ever owned a car, you know the importance that maintenance has in keeping things rolling. With any machinery such as a car, it is a sort of “pay me now or pay me later” mentality where the idea of regular upkeep, ahead of any breakdowns, means that costly and time consuming downtime for repairs is hopefully prevented from occurring.

In other words, preventive maintenance is designed to: 1) predict the onset of machine or component failures; 2) detect failures before they have any significant impact on manufacturing operations; and 3) repair (or replace) the machine(s) or component(s) before the failure occurs.

Indeed, by scheduling the preventive maintenance of machinery on our terms and in our schedule, we can plan in advance for a short term downtime during the most convenient time available to us; that is, for a day or time when, perhaps, the asset is (more…)

Where do we in manufacturing find the “edges” that make or break our profit margins? Where do we make the changes in process, the tweaking, that maximize returns on investments (ROI)?

More often than not the edges that reach both output and quality goals are found in the efficiencies we make in the manufacturing technique. Today, in many job shops, make-to-order, or mixed mode manufacturers, those efficiencies in production are found in the elimination of waste—a technique commonly referred to as lean.

In a lean system the manufacturer seeks maximized ROI by attempting to eliminate the waste of resources commonly found in physical production processes. In effect, the greatest and most fixed resource available to any manufacturer is that of (more…)