How To Control Costs From The Production Process

We all know that in the production process, the quality of materials is very important. So how can we control our production costs from the material quality condition, and not waste the production costs. Although we do not cut corners, we must have ways to control unnecessary waste.

The specific methods to control costs from the production process are as follows:

The quota plan for material consumption is issued, and the quota system is applied.

No materials that do not meet the quality requirements shall be used, so as to avoid waste and defective products due to poor material quality.

We should strengthen product quality control in the production process, improve the rate of qualified products and high grade products, control the reject rate within a reasonable range, and improve the utilization ratio of raw materials.

The way of cost control is to analyze the difference between material actual cost and target cost, and focus on controlling the difference. We should identify the causes, distinguish responsibilities, and reward rewards and penalties. We should constantly sum up the experience and lessons in material cost control and constantly improve the cost control of materials.

Financial management case: ALTEC material report abolished the production process, but also in other links: because ALTEC company is based on the orders produced by American companies, ALTEC company developed the prototype according to the requirements of these orders.

According to the delivery date of the customer order, 40 days before delivery, the order will be sent to the material supplier.

Shortly afterwards, some customers' orders will be modified in terms of appearance and function due to customers' reasons. If we want to produce products according to the new requirements, we will inevitably need suppliers to produce materials according to the new requirements.

The order must be cancelled, and the material scrap caused by cancelling the order to the supplier will be borne by ALTEC company.

ALTEC, by consulting with suppliers, shorten the order time from 40 days to 29 days. At the same time, the speed of product development and the implementation of the timely production system are improved.

The resulting scrap was significantly reduced.

By adopting the above measures, the material rejection rate of ALTEC company has been reduced from 2.2% to 1.75%, reducing the consumption of materials for single speakers.

The material scrap cost of a single speaker is reduced as follows: the cost reduction of 12 speakers, computer speakers, 10 speakers and 5 speakers of computer speakers is US$8.66 yuan, US$7.43 yuan and US$6.55 yuan respectively.

Through value engineering, procurement management and production management, the total cost of direct materials is reduced to $18 million 600 thousand.

Among them:

The cost of material reduction for 12 speakers and computer speakers is 3 million 580 thousand US ${6200 * (US$81.94+US$486.84+US$8.66)}.

The cost of material reduction for 10 speakers and computer speakers is 8 million 910 thousand US ${18000 * (US$79.7+US$408.03+US$7.43)}.

The cost of material reduction for 5 speakers and computer speakers is 6 million 110 thousand US ${14000 (US$77.13+US$353.03+US$6.55)}.