MFG Costs, Budgets & Integration ROI

Manufacturing costs are a pain.

MFG costs and budget comes into play whenever productivity improvements are considered. Costs are sadly not predictable.

There are four variables of expenses when running a manufacturing company. We have broken it down into a driving analogy for our readers:

Fixed Costs: You get in your car, you set up your GPS and map out the trip to avoid tolls. You know how much time it will take to get there and how many miles.

Fixed costs are part of the routine in manufacturing. These cover utility bills, taxes, property costs, and salaries (not counting commission). This also includes office supplies, too.

Variable Costs: When you plan to take your trip, you account for normal traffic patterns that will add a likely delay. It’s an annoyance we have come to both accept and expect for road trips.

Variable costs can best be described as costs directly in relation to production. For example – when you produce more, you ultimately need more raw materials. These patterns are predictable –  remember the old saying “you gotta spend money to make money”?

Semi-Variable & Step-Variable Costs: When you’re on your trip, let’s say a horrific accident happens, or you hit an unexpected detour. These unforeseen but likely scenarios can add time to your trip.

Semi-variable costs account for costs that can vary. This includes commissions for salespeople or production-based bonuses.

Step-variable costs, however, are costs that remain fixed for a period of time, and can suddenly spike up. Unexpected machine downtime, for example, costs money due to stopped production. You may even have to hire a specialist to come out or replace it with another machine.

What is the common factor in all of these examples, though?

If you invested in the GPS, it will reroute you, or add time to your route when you hit traffic or unexpected snags in the road. It is monitoring conditions for you to give you expectations and suggestions on how to improve your route.

How does this relate to manufacturing integration solutions & ROI?

Investing in manufacturing integration solutions is the best ROI when taking into account situations that lead to step-variable costs in your production. It’s essentially giving yourself a GPS to help meet and exceed production goals.

If your machines are consistently having communication errors that cause thousands of dollars in stopped production time, then DNC software or hardware is a drop in the bucket to help prevent this from happening. If there are other issues with machines causing downtime that are not relative to CNC communication failures, then machine monitoring can help for better OEE and for machinists to better communicate issues for proper solutions.

Get in touch with Shop Floor Automations for more insight! You can fill out a form here, or call us at (877) 611-5825.