What are the key metrics you should track to ensure effective cost reduction in production?

The cost per unit, C/P, formula is simple:?total production costs divided by the number of units produced. The total production cost is found by adding up the total fixed cost and the total variable cost. This formula can be utilized to find the cost per unit for any given product. Suppose a business produces 1,000 pairs of ice skates for a total production cost of $20,000. Dividing the total production cost by the number of units produced provides a cost per unit of $20 per unit. Understanding C/U can help brands make better decision. -Setting the right selling price -Evaluate business strategy Reducing C/U by: Optimizeing Logistic Reducing dead stock Lowering R/M cost Reducing overheads like utilities, manpower.

The key metrics to track for effective cost reduction in production include labor productivity, material waste, energy consumption, equipment downtime, and production cycle times.

One of the ways to reduce C/U is overheads like less but efficient manpower. Increasing efficiency is a great method of reducing labor costs. The idea is to?reduce the number of steps a product has to go through before it is finished. You also want to make sure that each step takes as little time as possible. Don't make the mistake of hiring unskilled labor at lower hourly rates. Replacing skilled workers with unskilled labor reduces the efficiency with which the work is completed and often increases the number of people you need to hire. A well-trained workforce increases productivity and reduces re-work. To improve labor efficiency, -Introduce incentive programs. -Lean methodology -5s -Technology n software -part-time employees

Energy consumption is?the total amount of energy required for a given process?and is measured in kilowatt or G-joule/hr. This includes the use of electricity, gas, diesel, oil, and biomass. Reducing energy use in your home?saves you money, increases our energy security, and reduces the pollution that is emitted from non-renewable sources of energy. Moreover, reducing energy costs can lead to?cost-saving measures in other areas of the business, allowing companies to offer competitive prices for their products or services without compromising on quality. This competitive advantage can result in increased market share and improved brand recognition. I was awarded for savings of approx 1.3 million usd/year (recurring) by energy optimization.

Production Downtime is a manufacturing term that refers to any period of time when a machine or work-station is not in production, which can result in a delay to production. The total amount of downtime a factory experiences includes any stops during production that cause a loss of revenue for the company. Availability = Uptime ÷ (Uptime + downtime) For an example, an asset also had two hours of unplanned downtime because of a breakdown, and eight hours of downtime for weekly PMs. That equals 10 hours of total downtime. To calculate downtime as a percentage of the shift or prodiction line. For instance, if you measured downtime over a week (168 hours), and your equipment was down for 20 hours, your downtime percentage would be 11.9%.

Contractual Agreements negotiated with suppliers to strategically lock in a committed volume and a favorable pricing over a period of time is paramount to achieve effective cost reduction for production. Without such contractual agreements in place, it is difficult to ensure effective cost reduction in production due to global supply chain uncertainty. The stability and diversification of supply sources would also be necessary to be in place in order to ensure the best price is provided and at the same time should one supplier fail to deliver there would be a back up plan. This will alllow businesses to focus on scaling up orders and not worry if taking on more orders might lead to losses due to price uncertainty.