One of my first projects was with a small manufacturer who made great products, and had customers who loved them, but had diminished returns on gross profit because the company simply didn’t track all aspects of their manufacturing. They needed to sharpen their pencils when it came to charging the right price. Sure, their customers loved them, but that because their products were that good, or that they were better than the competition’s and at a much lower price?
Well, this company didn’t have an MRP system and had very little ability to capture costs, so we came up with the following excel sheet to capture all their costs – including the set up times in production.This is definitely something to look at!
Capturing Manufacturing Set-Up Times is Critical
As a manufacturer, it is incumbent upon you to capture all your costs when pricing your product. While some companies have systems that can do this, some do not. Most small manufacturers don’t have an established way to capture their set-up times and run times in production all as part of one operation. I’ve included the excel sheet in this post here: Download Manufacturing-pricing-sheet-set-up-times Here is a detailed explanation below.
1. Indirect Costs: Make sure to charge indirect costs on material – these are those surprise costs you don’t often see. I have it set up at 5%.
2. Set-Up and Run Time in Minutes: This is where you input the set-up times for each operation. If you need to analyze the set up times, then do so. The run time section is basically your cycle time for one operation.
3. Overhead Charge: This is your overhead charge – not your mark up or gross profit calculation. Some companies do a “cost +” pricing model, while others do a “gross profit % of sale” pricing model. I’ll leave that up to you. This is a tool to capture set up times and run times in your production if you don’t know how to do it.
4. The rest: The rest of the sheet should be pretty self explanatory. This is a per unit cost analysis sheet. You base each measurement on a per unit cost basis.
If you want to learn about lean manufacturing and the critical steps to setting up a lean work cell, you can just go to: Simplifying Lean Manufacturing: Work Cell Output, Cycle Time Variances & Production Volumes
Comments