How to Lower Excessive Process Cost

Raghuraman Ramamurthy May 4, 2015

excessive_process_costFor the greatest results in cost optimization, companies should evaluate not only the materials and labor practices required for production, but also how well they use those resources. While you can lower floor-level costs by standardizing parts and using inexpensive materials, you’ll never truly optimize costs if your teams and facilities don’t work in cohesion.

Process costs, which are attributed to communication throughout the product lifecycle, data systems and enterprise-wide collaboration, often go overlooked in the scope of manufacturing. However, giving these elements the proper attention can help companies see huge reductions in cost, and grant the following process benefits:

  • Limited product scrap and waste material
  • Mitigated defect risk
  • Improved profitability due to lower process cost
  • Standardized data and consistency
  • Universally defined product specifications between all teams, sites and vendors

Miscommunication and other process inefficiencies can result in expensive remedial tasks later on. To fully optimize cost and streamline operations, companies must consider their process efficiency in addition to floor-level manufacturing practices. The following are crucial steps in lowering excess process costs, as part of a full cost optimization strategy.

Step 1: Identify Your Company’s Process Weaknesses

The first step in process optimization requires an in-depth self-evaluation; you can’t implement better processing strategies if you don’t know the high cost elements within your current configuration. Consider any of the following, and measure how your process capabilities match up with leaders in your industry:

  • Efficient and reliable data exchange between all parties involved in product development
  • How synchronized your software systems are when it comes to performing day-to-day tasks
  • Collaborative efforts across plants and engineering teams
  • Frequency of product defects, overproduction and other process-related inefficiencies
  • Your current spending on waste and material scrap

Once you’ve identified the largest contributors to processing cost within your business, you can begin to implement the right practices to counter that excess spending.

Step 2: Standardize the Most Efficient Process Solutions

A large portion of processing costs can be traced back to inefficient or inconsistent processing practices; this includes the data systems and tools you use to communicate throughout the product lifecycle. To avoid processing errors and expensive material waste, you should standardize the most reliable data solutions across your entire enterprise.

When your various engineering teams, plants and personnel are all operating with the same data software, and referring to the same universally-set product definitions, risks decreases. More consistent, repeatable production in turn generates a lower processing cost. 

Standardized processing systems can help your company avoid things like overproduction and manufacturing down-time, which add up to put a sizeable dent in your processing budget. 

These systems, when universally implemented, also aid in part and resource ordering; your engineering teams will always know exactly how much of a certain material they need (as well as when they need it), and thus avoid overspending on excess product.

Step 3: Keep Your Team in the Know (With Each Other)

By this, we mean facilitating a collaborative engineering environment for your ground-level teams, and implementing practices that make free-flowing communication possible. 

Miscommunication, complex management and scheduling inconsistencies all directly translate into higher processing cost; the best way to deal with these problems is by implementing a strategic collaboration platform, intended to simplify all manufacturing and processing tasks throughout your product’s lifecycle.

Overly complicated production environments are minefields for manufacturing error. To simplify your operations and avoid these high cost errors, full collaboration is essential. 

Much like the data systems you integrate throughout your enterprise, your entire engineering staff should work together fluidly. Pair the two together, and you’ve built a framework for process optimization that can keep your company’s profitability high.

Excessive process costs can put a cap on profitability, and take away from your company’s ability to address price sensitivity. Lowering these costs with the strategies mentioned here will give your company the advantage it needs to sustain your portion of the market.

PCO_Through_Process_Optimization

Topics Product Development Solutions