It is necessary to establish a factory operating system to reduce production costs. You can check the following images to learn detailed information about Cormind‘s new generation factory operating system product, Sepex.
Production Cost Calculation
The most important consideration when determining the sale price of a product is the production cost. The production cost must be calculated exactly to reduce the production cost. Production cost calculation is not only calculating raw material costs, but it must also be calculated comprehensively. It is handled in 4 main items as fixed production expenses, variable production expenses, raw material, and material expenses, and labor expenses. Making these calculations in excel or manually will be a waste of time and they are not the ideal choice for detailed calculations. Data must be entered manually, and major expenses are written here. On the other hand, it is possible to obtain much more detailed reports with software such as Sepex.
The margin of error will be minimized while calculating the production cost with the help of automation software such as the Sepex system. You will receive notifications immediately about malfunctioning machines and these machines can turn themselves off in any failure once the necessary configurations are made. In this way, the machine will not work idle and deform itself while you save electricity and most importantly, not waste raw materials.
You can be aware of what is going on in each band in the production thanks to these software, which instantly monitors different variables such as electrical leakage, overcurrent, etc. Thanks to automation systems, it is even possible to access all this data remotely without being present in the factory.
Production Cost Expenses
These can be classified as:
- Raw Material and Material Expenses
- Employee Salaries and Expenses
- Outsourced Services
- Taxes and Fees
- Financing Expenses
- Supply Expenses
- R&D Expenses
- Marketing Expenses
- Logistics Expenses
- Management Expenses
The costs that need to be met by the companies differ according to the fields in which they operate. In a business (factories), which engages in production, production costs such as expenses in the purchase of raw materials, expenses of auxiliary substances and materials used during production, labor costs to be used in the production phase of this product, basic as well as general scope production expenses such as electricity, water, heating, etc., used for the facility to fulfill its basic activities among the costs incurred before the product is in inventory.
What Are the Factors that Increase the Cost?
Some non-essential expenses and periodic expenses that start and end in a certain date range increase the cost. In addition to this, the budgets that some companies allocate for R&D, which they have to allocate, also affect the increase in costs within the scope of research and development expenses. Expenses such as advertisements, promotions, visits, gifts, donations, and sponsorships made for the purpose of selling the product, which its R&D and production have been completed, in the domestic or foreign market make the sales and distribution expenses as a part of marketing strategy.
Bank loans, leasing expenses, participation in fairs and organizations, travel and accommodation costs of these participations, and labor (insurance, salary, social opportunities, etc.), which will be used from production to sales and marketing, increase the cost per unit of the product. These expenses are also regarded as the general administrative expenses and financial expenses of the business.
The fact that not intervening in the general disruptions in production immediately is among the factors that increase the cost.
How Can You Reduce the Production Cost?
The most efficient way is not reducing the quality of the product or service to reduce costs but perceiving the value of the product as a plus and increasing the demand for the product to ensure profitability depending on the stock turnover rate. In businesses, where certain reports are not prepared and there is no production plan, the thing that is generally preferred to reduce costs is to use poor-quality products. As you can make a profit in the short run, this will accelerate the end of the business in the long run. Therefore, you should definitely seek professional assistance and obtain production monitoring and management system software. Our Sepex product has no setup fee. Please contact us for more detailed information: