Why are Supply Chain Planning system leaders looking to PlanetTogether?
Supply chain management is a complex task these days, requiring consideration of many different elements and the links that connect them. At the same time, it is an extremely important task that has a huge impact on gaining a competitive advantage. What role do APS-class systems play in successfully managing this area? And how does PlanetTogether help global SCP system leaders develop modern tools to optimize processes and build flexible, integrated supply networks for the 21st century?
Which IT systems are worth implementing in a manufacturing company? How do they work, what are their functions and how can they help our business grow? In what order to implement them? Read and organize your knowledge of ERP, MES and APS systems.
Is Planning Production in Excel an Optimal Solution?
The well-known Excel has been used in companies, institutions, and even our households for decades. Simple yet versatile, it has played a key role in the success of many businesses. Using Excel for manufacturing management has streamlined daily operations in numerous factories and helped take significant steps toward improving processes. But in today’s world, are spreadsheets still fit for the 21st century?
Production scheduling can significantly impact not only a company’s daily operations but, more importantly, its financial performance. Success or failure in this area often hinges on the proper arrangement of individual tasks. So, how to plan efficiently? Can it be done using spreadsheets, or is it better to turn to more modern solutions?
During the Q&A session on a webinar focusing on Total Manufacturing Costs, a question arose regarding whether the costs of machine downtime during failures can be included in Total Manufacturing Cost (TMC). The consultants’ go-to response was, “it depends.”
So, what does it depend on? It hinges on how we intend to use the calculated cost. If the aim is to determine the value of a specific batch manufactured during a failure, we can certainly do so. This information becomes internal evidence of disruption caused by the failure, revealing a deviation from the assumed cost efficiency of the manufacturing process concerning that particular batch or order. However, if we intend to incorporate this calculation into accounting, it must align with the Accounting Act in force.
In Poland, it’s infeasible, as the Act explicitly states: “A justified portion of indirect costs, relevant to the period of manufacture of a finished product, includes variable indirect production costs and this portion of fixed, indirect production costs which represent the level of these costs at the normal utilization of production capacity. The normal level of utilization of production capacity is defined as average, expected in typical circumstances, production output for a given number of periods or seasons, taking into account planned repairs.”
Clearly, a failure does not fall within the category of normal utilization of production capacity. Hence, such a cost cannot be included in TMC. Determining normal utilization can be facilitated by a Manufacturing Execution System (MES) or an Overall Equipment Effectiveness (OEE), topics covered in our other materials.
As an extension of the webinar discussion, the following is a comprehensive list of what does not constitute a manufacturing cost according to the Polish Accounting Act. Regarding the cost classification presented during the webinar, it is evident that the listed items belong to general and administrative costs or selling costs.
For more insights on this topic and other subjects related to enterprise management and digitalization, explore our ImFactory Knowledge Zone, where you will find a wealth of informative articles.
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What is Not Considered a Manufacturing Cost?
Unjustified indirect costs of production resulting from unused capacity, including:
Costs of wages for unplanned downtime,
Costs related to inoperative production equipment,
Costs of maintaining unused production space,
Other fixed indirect costs unassigned to products,
Production losses exceeding normal production risk, including those resulting from unrecoverable deficiencies and the cost of repairing deficiencies,
Selling costs, including expenses for promotion, advertising, marketing, completion and packaging, dispatch, and delivery,
License fees dependent on the sales volume,
Costs of warranty and guarantee repairs,
Costs of overall management, such as remuneration of board members and supervisory authorities, maintenance costs of offices, company cars for the board, IT system, accounting, taxes, fees, and other expenses related to the enterprise as a whole,
Costs of product storage; however, if storage is necessary to bring products to saleable condition (e.g. maturing of cheeses manufactured by the company or aging of alcoholic beverages), it belongs to production costs.
Board Member, Head of Product and Digital Consulting
At ImFactory, he also acts as a Project Manager and consultant. He is responsible for shaping the vision for the development of IT systems in production environments. He supports companies in assessing their digital maturity and helps them plan their digital transformation.
A graduate of the Gdańsk University of Technology, he completed a degree in Automation and Robotics and completed postgraduate Lean Six Sigma Black Belt studies. He is the author of numerous publications under the #EffectiveDigitization banner. He shares his knowledge on production efficiency, digital transformation, MES/MOM systems, and digitalization roadmaps.
He combines technical knowledge with an understanding of business processes, effectively supporting companies on their journey to the Digital Factory.
Michał Zieliński’s articles and webinars are available in the ImFactory Knowledge Base.
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