Question

Imagine that you have been hired as the production manager of a manufacturing company and must determine the best inventory costing system to implement. Discuss the key factors that must be considered before making the determination. Provide specific details and a rationale for your decision.

As a production manager, one of your key tasks is to improve efficiencies by either increasing productivity or reducing cost. Determine whether the responsibility reports needed to track performance should be created by department, function, or manager, using a costing method of your choice. Based on the costing method you selected, determine the type of data needed to track and evaluate performance to control costs such as cost per unit, cost per hour, etc. Be specific with your examples.

Answer 1

Manufacturing more efficiently can help cut costs, improve throughput and reduce environmental impact.

1. Control on material waste

Keep control on material waste in the production cycle. Prepare the report that include material wastage happened during the production cycle. Also track the average man hours taken to produce 1 unit. Prepare a report that contains following parameter for 1 unit:

a. Average Material used

b. Average Man hours taken

c. Average Machine hours

Compare this report on monthly basis & check whether any variance can be viewed. Benchmark the production report with the other manufacturing unit in the same industry.

2. Quantify Everything

Assign a point value, or better yet, a dollar value, to every aspect of your manufacturing process. Material costs are obvious, but take into account man-hours, equipment wear and tear, and planned obsolescence to further quantify production. By assigning numbers to every aspect of manufacturing, you’ll make it a lot easier to see which areas need immediate attention.

3. Standardize Work

The simplest tasks should be standardized to maximize efficiency.

Start by making a checklist, and placing it in each workspace. Then, make sure that every employee who does a job in that workspace follows the checklist. This simple act can reduce downtime and improve overall product quality.

4. Strengthen Your Supply Base

When quantifying your manufacturing process, be sure to take a close look at your suppliers. If you notice that some are consistently providing you with better materials, parts or tools, reward them by giving them more of your business. This is another place where quantifying comes in handy: sticker price is hardly ever an accurate indication of the true cost of an input.

9. Engage Your Employees

If your process is plagued by downtime, look to your employees for answers. It’s only logical that the person responsible for carrying out a job might have a few ideas to make the process more efficient. On the other hand, it’s easy for executives and managerial staff, who are used to looking at the bigger picture, to miss smaller opportunities for improvement. It's important to open channels of communication so that employees can effectively communicate up the chain, whenever they have suggestions, comments or complaints.