Machine utilization/ usage in an assembly plant

A simple log sheet must be kept for each machine.

The sheet must contain

Job reference for accounting purposes.

Setup time. Rate a.

Production time Rate b

Step down time at rate c

Quantity made in the run.

If a machine is reserved for a job you may also need to charge for.

Statistics could be used to estimate cost in advance by working on the "standard" production rate.

Activity based costing. Resources used for each type of product assembled.

Machine hour cost driver allocation is a blunt instrument. Different products use machine resources differently.

Machine cost may actually be better seen as a customer level cost driver or a product level cost driver. Treating it as a unit level overhead or averaging on basis of hours of operation divided by all products over or under assigns actual costs. so your customers will balk at unfairly (over assessed ) costs, while leaping at your apparent bargains (under assessed) costs.

Using it (machine time) as an undifferentiated cost driver by itself may result in your over allocating or under allocating costs to specific jobs, customers will cause you to lose jobs.

http://www.productionmachining.com/columns/0507pmpa2.html

en.wikipedia.org/wiki/Activity-based_costing

Record data from operations over a period of time and break into proper buckets.

I can assure you that pepsi doesn't do a machine cost on each can of soda. they allocate using finer resolution than unit or overhead. Product level is likely best approach.

(dividing by gazillions of units just trivializes the truth)

milo

You must bid each job on its own merits. Time, processes (heat treat, weld etc.), materials, tooling development, tool sharpening after a specific no. of widgets are produced. I have never planned a job where the actual machine time was provided to the customer. This is an internal thing where you estimate all aspects of your production expenses and submit your bid. Tooling development (assuming that tooling is required) and maintenance is far more costly than any of your machine time.

Bid your job to win.

Even Pepsi will require the maximum capacity of a production machine when planning to increase production.

I believe the Assembly plant in question produces different products for different customers with a range of different machines or centres. The work is done in batches(not single items)

In order to make a profit all costs including capital, maintenance, production, labour, quality control, packing etc must be charged for. The sweet spot for charges must be found.

Full records about costs etc must be kept.

I prefer to use a relational database for the purpose.

For new products/quotes the following is done:

A production route is created

-Material order

-receive material

-step by step process

-ie drill hole

-cut to length

-whatever

-inspection cleaning and packing

-delivery

With all the information available

- a cost quote is produced.

- a delivery date is promised (based on current workload)

- Production can be planned.

with repeat orders the same data is used.

It is always safe to allow for slack time - this can usually provide time for the unexpected without having to beg the customer for the extension. The customer is mostly satisfied if the product is delivered quicker.

The production must be loged to the customer and the centre.

Just another tip - It is sometime cheaper to outsource some of the operations.

I am a DIY person and like to do things myself (the system was designed in 1985 and some detail was forgotten).

Inform us of the type of work and problems - More ideas and tips can be supplied.

What you want to figure out is the OEE overall equipment efficiency. A lot of company's I have worked with used spread sheets for this. If you search on the net you will find a plethora of information on this.

Cheers

Yup, that's it...

Thank you guys for all your inputs... They are of great help for me who is new to this kind of work...

Actually we have a spreadsheet here which is from Spain, and the terms are in Spanish, I just want to know also the logic behind all the fomulas and figures on it than just encoding numbers and the spreadsheet will generate results...

I want to understand the concept and everything about it...

Thank you guys...

Take care...