Manufacturing cost drivers
Identify and optimize the main cost factors in your production process. They fall roughly into three groups: materials, labor and overhead.
Material costs
- Bulk purchasing advantages
- Alternative materials
- Waste minimization
- Supplier negotiation
Labor costs
- Automation
- Skill development
- Workflow optimization
- Lean manufacturing
Overhead costs
- Energy efficiency
- Facility optimization
- Equipment utilization
- Maintenance planning
Cost analysis framework
For a sound analysis, separate direct costs, which arise per part, from indirect costs, which are spread across the whole production.
Direct costs
- Raw materials
- Direct labor
- Machine operating costs
- Tooling and consumables
Indirect costs
- Facility rent
- Utilities
- Quality control
- Administrative overhead
Optimization strategies
Some measures pay off quickly; others require an investment that only pays back in the longer term.
Quick wins
- Eliminate waste
- Improve setup times
- Optimize batch sizes
- Renegotiate contracts
Long-term strategies
- Invest in automation
- Develop suppliers
- Implement lean systems
- Employee training programs