How factory costs affect you and what to do about it

There are many different ways in which your factory can face waste, and costs are one of them.

If you want your factory to be profitable, you need to keep your costs consistent and avoid waste as much as you possibly can.

The best way to do this is by using digital tools that help you manage your factory following lean and continuous improvement practices.

Today, we’ll take a look at how factory costs can impact your bottom line and what to do about it.

In this blog, we’ll cover:

What are factory costs? 

If you want to run your factory successfully, you need to have a firm grip on your outgoings. These come in different shapes and sizes and can’t always be predicted.

You should always monitor and control costs, and you should be able to reduce them if you need to. And even if you can’t, you can still improve cost-effectiveness.

So let’s look at some of your most common factory costs.

Across your production chain, you’ll always have a mix of fixed and variable costs

Labour, materials and overheads are predictable expenses. You’ve probably got them on more spreadsheets than you can count.

Variable costs like machine maintenance and repairs, accidents, and all other forms of ad-hoc expenses can be prepared for but never accurately predicted.

Add them all up, and you get your outgoings —this is how we traditionally look at factory costs. And for some factories, this is where the analysis ends.

However, this is only part of the picture and misses a crucial detail.

A factory’s single greatest cost is lost revenue from inefficiencies and sub-optimal production.

How common is it for factories to be less cost-effective than they could be? 

More common than you’d think. In fact, waste in global manufacturing accounts for 20% of spend, adding up to $8 trillion lost every year. 

That’s about the total size of Japan and Germany’s GDPs combined.

How does this compare to your factory?

Cost inefficiency is baked into the worldwide production chain. So don’t feel too bad if you know you’re running below full steam.

In fact, in some industries, waste is unavoidable. 

The food industry, for example, naturally produces plenty of waste, as raw materials aren’t always uniform.

It’s important, therefore, to understand exactly where you can make an impact on cost-effectiveness, reducing waste to a minimum and ensuring the highest quality and velocity.

Continuous improvement is designed to help you here. Its philosophy of an ever-evolving production line, with constant minor improvements, is hugely effective in improving efficiency.

By making incremental changes to your factory’s operations, you cut costs significantly.

But to do that, you need both an awareness of what to monitor and a workforce bought into the concept.

Because, as we’ll now explain, your workforce is critical to saving costs.

How important is your workforce when it comes to factory costs 

A bird’s eye view of your factory’s operations will only tell you so much. Learning from the front is how you really make a difference to your bottom line.

Every plant manager understands the importance of quality training and work standards. Without them, your workers risk regular accidents, waste and inefficiencies.

But workers across the factory floor also have highly valuable information, not least because they understand the difference between how something works in theory and how it works in practice.

For example, adjustments directed from the office to improve one area of production may have secondary effects that impact workers elsewhere. Without talking to your workers, this may go unnoticed.

From the use of tools to communication across lines, properly managed workers are the source of long-term efficiency. Making use of their insights and acting on them is key.

Empowering them with the right tools for the job is essential, and this includes technology designed specifically for continuous improvement.

What software is there to keep factory costs down?

There is a lot of software out there you can use to manage your industrial operations, empower your workforce, and minimise waste.

However, you need to choose the right software for your factory’s needs, or you risk being stuck with a tool you won’t use and that doesn’t integrate with the rest of your processes.

Let’s take a look at the tools you need to keep your factory costs stable and predictable.

Standardisation

Standardised processes are key to keeping costs down.

When you set a standard, you keep your process and results consistent over time, which means less waste, accidents, and nasty surprises.

Any software that deals with standardisation is a good place to start, but we’ve divided our standardisation solution into specific modules to help you set, maintain, and improve your standards.

The best modules from our Standardisation solution to help you here are:

  • Visual Standard —when you give your employees instant access to video instructions, not only do you cut their training time by half (which means a significant cost reduction), but you can also deploy your managers elsewhere to be more effective, which saves you hiring more people to train your employees
  • Skills Matrix —having visibility into what skills each worker has and when they need to be retrained is crucial to avoid wasting resources. With Skills Matrix, you’ll see what your worker is best suited for, how much training they need, and whether their certifications need renewal
  • Standardisation work audit —setting standards and following them isn’t enough if there isn’t consistency over time. Standardisation work audits can tell you whether your processes are working or not and how to improve them even further to avoid waste
  • iKaizen —actively looking for any processes that aren’t optimised can save you a lot of time, money, and resources. Our iKaizen constantly looks for improvement opportunities so your processes are optimised to the max

Maintenance

To keep your processes working as they should, you need maintenance software. 

We offer a TPM (Total Productive Maintenance) module to make sure you’re always up-to-scratch across your organisation, no matter the issue or the line.

Shop floor management

Managing the shop floor is hard work, and it’s one of the main places resources get lost.

Any shop floor management software that integrates with standardisation and maintenance software is going to be an enormous help in minimising waste on your shop floor.

We developed 3 modules for shop floor management:

  • Routines —you can set routines around your shop floor to ensure everyone knows what’s happening and when. Fewer surprises mean fewer accidents and less waste
  • Gemba Walk —going where the action saves you a lot of money and headaches. Our Gemba Walk module is a comprehensive tool that connects you to the processes and people you need to be connected to whenever you need to
  • SFM Board —when you have all your relevant info displayed correctly (KPIs, accidents, relevant %, etc.), you have a clear idea of how everything’s going. This module helps you reduce a range of costs, from those related to employees to energy consumption and stock levels. When you can check your shop floor management numbers in real-time from a screen, your waste goes down at all levels

Start of production

For effective preventative maintenance, you need software that ensures what you’re manufacturing is right from the start.

Otherwise, you risk manufacturing parts that aren’t up to standard. This means quality issues, customer complaints, and profitability loss.

We developed Ok1stPart to help with this.

This module helps you ensure the first part you manufacture is up to standard and ready to go so you can keep consistency throughout the entire production chain.

Audits

Finally, no matter what processes you have in place for lean manufacturing and continuous improvement, you need to audit them.

All our audits integrate with our modules, so you don’t need to input the same data twice.

Auditing means fewer errors, more opportunities for improvement, less waste, and better-optimised processes.

mlean & factory costs

At the end of the day, there are many different tools that can help you run your factory.

However, when you’re dealing with different providers, you risk a lack of consistency, integration, and visibility.

Our mlean Production System (mPS) has all the tools you need to standardise, maintain, and manage your shop floor, ensure your start of production, and audit your processes across your whole organisation.

And because it’s modular, you can pick and choose whatever is best for you.

Something we developed as well is the improvement drivers.

These connective tools make your modules work extra hard for you. Our improvement drivers include:

  • Action plans (included with any mPS subscription) —know what your next steps are to optimise your processes, reducing guesswork and downtime
  • Improvement ideas —brainstorming made even better. Get specific improvement ideas based on the data already input in the system (no generic advice ever)
  • Production alerts —avoid any unforeseen cost-associated scares with our production alerts
  • Problem-solving —from short loop to 8D, A3, QRQC, you name, we’ve included it in there to help you choose the best tool to solve your issues quickly and effectively
  • HSE risks —health and safety policies at the tips of everyone’s fingertips means fewer accidents, a safer environment, and a more productive workforce

Truth is, running a factory is costly, and there always seems to be some sort of waste of resources coming from somewhere.

Our software can unify all your software under one roof, helping you manage your factory better, reducing waste, empowering your workforce, and keeping you competitive.

We helped Signify become the first factory in their group to reach Phase 5 of lean maturity, and there’s nothing to say we can’t do the same for you.

Book a free demo today and check us out!

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