Maximizing Your Profits: How to Calculate the Cost of Inefficiencies in Your Manufacturing Business
Key Highlights
- With manufacturing scheduling software, you can view your entire operation holistically and generate an optimal plan, schedule, or sequence. You can balance labor, operations, machines, auxiliary resources, and more, all in one view.
- A client in the Aerospace industry was able to eliminate inefficiencies and improve the production process, and as a result increased profits and remain competitive in their industry.
- A client in the Automotive industry was able to forecast inventory utilization over a specified horizon, allowing them to order raw materials well in advance of any potential depletion or machine downtime. This helped them to reduce freight costs and eliminate the need for expedited shipping.
- Manufacturers can get visibility into the production schedule. With the ability to look far ahead, if a new supplier is needed to meet demand, procurement teams can plan ahead and ensure compliance standards are met, even before engaging them.
- A good software provider will work with the company to uncover the underlying issues and find solutions together. This collaborative approach ensures that the operation runs smoothly and efficiently from the ground up.
How can manufacturing scheduling software help businesses identify inefficiencies in their operations?
Manufacturing scheduling software solves operational inefficiencies quickly when implemented correctly. Even software that uses greedy heuristics can extract benefits for organizations by identifying inefficiencies in resource utilization such as labor, machines, trades, and inventory. The software can also identify gaps in the supply network, such as delays in restock levels and depleted inventories.
With manufacturing scheduling software, you can view your entire operation holistically and generate an optimal plan, schedule, or sequence. You can balance labor, operations, machines, auxiliary resources, and more, all in one view. This enables you to address multiple inefficiencies simultaneously. For instance, if you know that inventory will be delayed by two weeks, you can reallocate resources, move up or back customer delivery dates, and prioritize customer satisfaction.
By using the right software, you can identify at least one inefficiency, and with the proper application, you can address multiple inefficiencies in your operation.
Can provide a real-life example of how manufacturing scheduling software helped a business reduce inefficiencies and increase profits?
Aerospace Case Study
When it comes to running an operation, optimizing the utilization of skilled labor can make a huge difference in efficiency and profitability. This was a lesson learned by one of our clients in the Aerospace industry who experienced firsthand the cost of failing to properly schedule and allocate skilled labor.
The client had a skilled trade scheduled to work for two weeks on three different projects. However, due to delays in project completion, the skilled labor ended up being idle for two weeks. Unfortunately, our client didn’t reschedule the skilled labor and resulted in them paying double – for both the idle two weeks and the two weeks when the work was actually completed.
This is where Optessa’s manufacturing scheduling software solution comes in. By optimizing business processes and ensuring that work is completed in the correct sequence, our solution was able to prevent additional costly mistakes like this one. The software can provide a better date of when the work will happen, and if the work isn’t going to happen, which allows for proper cancellation and notice to ensure alignment across the operation.
By implementing Optessa’s manufacturing scheduling software solution, our clients can now make sure that metal fabrication and welding are complete before bringing in an electrician, for example. This kind of optimization can save time and money, and ultimately increase profitability. In fact, some of our clients have reported savings in the thousands of dollars per month by using our production scheduling software to reduce inefficiencies and streamline their operations.
Food & Beverage Manufacturing Case Study
A second real-life example of how production scheduling software helped a business reduce inefficiencies and increase profits comes from a food and beverage manufacturing company that struggled with inventory fluctuations and the need for safety stock.
Before implementing the software, the company waited until they had nothing left on the line before rushing to order new supplies, incurring expedited costs and long lead times. Additionally, they struggled with scheduling skilled labor and trades, often paying them for idle time or double the amount due to delays.
However, after implementing the production scheduling software, the company was able to forecast inventory utilization over a specified horizon, allowing them to order raw materials well in advance of any potential depletion or machine downtime. This helped them to reduce freight costs and eliminate the need for expedited shipping.
The software also helped with scheduling skilled labor and trades more efficiently, ensuring that they were only brought in when needed and avoiding paying for idle time or double the amount due to delays. This helped to optimize the company’s production process and increase profitability.
In fact, the software saved the company thousands of dollars per month, and the savings grew over time. By eliminating inefficiencies and improving the production process, the company was able to increase profits and remain competitive in their industry.
What is the impact of manufacturing scheduling software on supply chain management?
Manufacturing scheduling software has a significant impact on supply chain management, especially in today’s unpredictable and constantly changing environment. Many manufacturers are facing the same problem, sourcing the same materials from the same suppliers, who are stretched thin. This means manufacturers can’t rely on their normal supply lines. Instead, they have to take risks by going to other suppliers who they are unfamiliar with.
Issues like suppliers going out of business or facing issues with raw materials and too many requests are also becoming more common. These problems not only hurt the day-to-day operations but also lead to problems downstream in procurement. They would then have to go outside their normal supplier networks to get what’s needed.
This is where a manufacturing scheduling software solution can help. The software can mitigate these risks and get ahead of them as much as possible. By utilizing the right software, manufacturers can optimize their production schedules, plan ahead for potential supply chain disruptions, and ensure that the right materials are available at the right time.
How does a manufacturing scheduling software address procurement compliance standards?
Different industries have their own unique compliance guidelines, which procurement teams must strictly adhere to when selecting suppliers. It’s a critical aspect to supply chain management that is often overlooked. Oftentimes manufacturers can’t just turn on or off vendors and supplier networks. It takes years of careful planning, which can make it challenging to pivot when issues arise in the supply chain.
With manufacturing scheduling software, manufacturers can get visibility into the production schedule. With the ability to look far ahead, if a new supplier is needed to meet demand, procurement teams can plan ahead and ensure compliance standards are met, even before engaging them.
What are some common inefficiencies that can be identified and addressed through the use of manufacturing scheduling software?
In manufacturing, there are many common inefficiencies, but they can all be summed up and related to inventory management, resource allocation, and machine capacity.
These issues can all be addressed through the manufacturing scheduling software. By the proper software, manufacturers can gain visibility into their production schedule, allowing them to plan ahead and avoid inventory depletion during a production run. Additionally, software can help to ensure that there is enough labor on hand to run the machines and perform necessary tasks.
Managing machine capacity can be another complex challenge. With the right manufacturing scheduling software, businesses can allocate the necessary resources, including raw materials, labor, and machine time, to ensure that production runs smoothly. Resulting in less machine idle time, which can be costly.
At a bare minimum, the inefficiencies related to inventory, labor, and machines can all be addressed through manufacturing scheduling software.
What are the steps to calculate the cost of inefficiencies in a business?
Step 1: Identify the Inefficiencies
Calculating the cost of inefficiencies is an important step for any business looking to optimize its operations. To get started, it’s important to identify the areas of inefficiency, such as overtime expenses or expediting orders.
When manufacturers work with Optessa, the partnership often begins by working backwards with customers. For example, if a manufacturer has the end result of how much they are losing, Optessa works to understand why they are experiencing those losses in the first place. This often involves identifying inefficiencies in the manufacturing process that can be addressed through the use of Optessa’s manufacturing scheduling software.
Step 2: Calculate the Costs
Once these areas have been identified, it’s time to calculate the costs associated with them. For example, if a business is spending $1,000 per hour on overtime and incurring $5,000 in expedited shipping costs for every order, these costs can quickly add up. By tracking the frequency and duration of these inefficiencies, the total cost per day can be calculated.
Step 3: Look at the Bigger Picture
Next, it’s important to look at the bigger picture. If a business operates 20 days a month and spends an additional $7,000 per day on inefficiencies, that amounts to $140,000 per month. These costs can quickly spiral out of control, especially when factoring in multiple types of raw materials and a staff of varying sizes and positions.
To truly understand the root causes of inefficiencies, it’s important to have a clear understanding of demand analysis and customer orders. By identifying gaps in these areas, it’s possible to gain a better understanding of why inefficiencies are occurring in the first place.
Uncovering the root causes of inefficiencies will also lead to better conversations among business leaders and an improved approach to addressing these issues. By addressing inefficiencies and optimizing operations, businesses can reduce costs and improve overall performance.
How does Optessa help a manufacturer uncover the cost of their inefficiencies?
In our approach, Optessa aims to uncover the root cause of inefficiencies as early as possible, whether it be during the discovery phase or during implementation. We understand that the root cause is key to finding a solution that is tailored to the company’s specific needs.
At Optessa, we prioritize ensuring that our clients are aligned with their key performance indicators (KPIs) and understand their pain points, as this ultimately leads to the success of the project.
We work together with the client to identify areas that need improvement in their business processes and operations. This transparency and collaboration happens at various stages of the project, from initial conversations with the implementation team to user acceptance testing (UAT).
To maximize profits, one key piece of advice for manufacturers is to understand their losses.
It’s important to identify where the inefficiencies are in order to improve operations and increase efficiency. It’s not enough to simply rely on a software provider to fix everything without addressing the root cause of the problem. A good software provider will work with the company to uncover the underlying issues and find solutions together. This collaborative approach ensures that the operation runs smoothly and efficiently from the ground up.
If you need help regarding manufacturing scheduling software, contact us at 1-800-918-3597. You can also send an email to marketing@optessa.com. You can also access the latest news and tips in our resources.
