Cost Analysis Process in Manufacturing Industry
In the common conflict of interest, there exists between daily operations/manufacturing, sales/marketing, and cost and finance. These conflicts can contend to be as healthy; however it cannot be avoided in a manufacturing environment. Even though these facts may be right, but for last 35 years I have experienced a different opinion that I would like to share with you all, today.
Within the mid-size manufacturing sector, and the limitations of its size, it is not necessary to have most of the state of art technology or technical expertise. Rather in general these mid size manufacturing companies will grow up with years of struggles and experiences that will lead these companies to change course and follow the best practices for the company.
Mid size manufacturing companies mostly either markets their product directly to the consumers or they produce and process raw material, parts and components for the large manufacturing facilities.
In our manufacturing life we have within past the decades of 50’s as reconstructions and builds, to the 60’s as mass production, and the 70’s (after oil crisis) as retooling and miniaturization. Then in the 80’s significant changes had improved in that there were quality and improvements, which continued into the 90’s in where new technology was developed and dot.com boom expanded these new found technologies. Then the year 2000’s was the decade of outsourcing services, manufacturing and technologies’. Now the current decade 2010 will be era of cost reduction and competitiveness and next 2020 decade will be for those who can survive with the cost competitiveness in the global market.
In these days with the slogan of “Globalization and the World is flat” the future of Mid-size companies in USA are experiencing the steep competitions on cost competitiveness especially in the area of high labor and overhead cost.
In my present and past association with a number of manufacturing companies where I worked as Cost Man and have confront rated the problems in the process flow and have tried to overcome the problems. To ease the burden of such cost problems; my main tools have been utilizing discussions with related departments, analyzing basic issues, with some changes in process. Furthermore, you need to constantly monitor such problems and record the data, and then finally train the personnel so that these issues are resolved.
• Learn from the basics
How it works
Know your product strength and weakness
• Optimize the scheduling Human life is an art.
Manufacturing is science and its logistics work like war field
• Procurement policy
Analyze past present and future
Explore substitute items
• Process control management.
Good process write up and instructions
Process should be true result oriented
Learn from the mistake
Automatons always help
Good reporting and documentations
• Labor management
Know your labor and their capability
Labor efficiency depends on specific machine vs. man
Train labor on process, product and machines’ capability
• Wastage control
The biggest offender is due to lack of training
Lack of initiative and the presence of ignorance
Where possible recycle all waste products
Some ones waste could be other business’ raw material
Treat any wastage and inefficiency as – throwing money from pocket
Conclusion: No cost is good cost if the real data and information is not there. Just changing BOMs and Routers – means change over of cost. Rather increase of efficiency and reducing the waste makes a real big difference in the profitability. Cost accountant needs to be innovative in collecting data and facts of manufacturing process
Mostain Dara Billah
Jain Irrigation Inc
Dara is a certified Cost Analyst and Estimator who graduated from the prestigious Rajshahi University of Bangladesh in Accounting, and holds double MBA in Accounting and International Finance from California.
(1968-1975): He worked for major multi-national corporations including the ICRC and the UNICEF before coming to the United Stated in 1975.
(1980-1986): Dara went back to Bangladesh to work with a Chartered Accountant Firm and worked on cost and accounts
management consulting for various major industries and British overseas development projects.
(1986-Present): For 14 years, Dara was involved with the plastics industries in Boston, and since 2001 has been involved in cost
management for irrigation and agricultural industries in southern California.
(Current Position): Working with the world leader of micro-irrigation parts and components manufacturers, Jains Irrigation
Incorporated as a Senior Cost Controller.
Elected Secretary, Treasurer and member of the Board of Directors for several terms of the New England SCEA Chapter. He has two publications: one “Bangladesh a country of progress with poverty” and “Cost Cut is not cutting the costs, but changes of business decisions and policies”
Dara is married to Gulshan for the last 36 years (whom he met for the first time during their wedding which was pre-arranged by their parents). They are blessed with, a daughter Sudipa, a graduate from Villanova University and hold PE license in Civil engineering, and their son Sudipta, a graduate of Bucknell University currently attending law school.