MFG Costs, Budgets & Integration ROI

mfg costs mfg budget mfg integratorManufacturing costs are a pain.

When you are thinking of investments to help with production, you have to keep in mind your MFG costs and your budget. While it would be great if all of your costs were predictable, they are not.

There are four variables of expenses when running a manufacturing company, and we have done our best to break it down for you with a driving analogy:

Fixed Costs: You get in your car, you set up your GPS and map out the trip. You know how much time it will take to get there and how many miles. You set the path to avoid toll roads, so you know it will take a little extra time, but you’ve accounted for it. Fixed costs are part of the routine in manufacturing. These cover your utility bills, taxes, property costs, salaries for executives or administrative workers, and general facility maintenance. You can even account for a budget of office supplies and basic salaries for sales people and machinists in this category, too.

Variable Costs: When you plan to take your trip, you account for normal traffic patterns that will add a likely delay to get to your destination. 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 with production. For example – when you produce more, you ultimately need more raw materials. These patterns are predictable and prescribe to 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, and let’s face it, most people don’t plan for these events to happen. Semi-variable costs account for costs that can vary, such as commissions for sales people or production-based bonuses. Step-variable costs are costs that remain fixed for a period of time, and can suddenly spike up. Let’s say a machine is producing consistently for a long period of time, but then, it goes down – this downtime is not only costly to production, but hiring a specialist to come out and look at it, or replacing it with another machine, will be expensive.

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.

If you are interested in Shop Floor Automations helping you combat production issues head on, we invite you to contact us! You can fill out a form here, or call us at (877) 611-5825 to utilize our decades of experience.