Article | December 21, 2021
When it comes to developing a budget for the following financial year of your manufacturing business, many operations managers start with direct labor and material expenditures. But, what about manufacturing overhead costs?
Manufacturing overhead is any expense not directly tied to a factory's production. Therefore, the indirect costs in manufacturing overhead can also be called factory overhead or production overhead.
Outsourcing and globalization of manufacturing allows companies to reduce costs, benefits consumers with lower-cost goods and services, and causes economic expansion that reduces unemployment and increases productivity and job creation.
– Larry Elder
So, this article focuses on some highly effective overhead cost reduction methods that would help you build a healthy budget for the following year.
Manufacturing Overhead Costs: What Is Included?
Everything or everyone within the factory that isn't actively producing items should be considered overhead.
The following are some of the variables that are considered overhead costs:
Depreciation of equipment and productionfacilities
Taxes, insurance, and utilities
Supervisors, maintenance, quality control, and other on-site personnel who aren't producing signs
Indirect supply from light bulbs to toilet paper is also included in the overhead cost.
Manufacturing Overhead Costs: What Is Excluded?
Everything or everyone within or outside the factory that is actively producing items should be excluded from the overhead costs.
Factory overhead does not include the following:
Employee costs for those making the goods daily
External administrative overhead, such as a satellite office or human resources
Costs associated with C-suite employees
Expenses associated with sales and marketing - include pay, travel, and advertising
How to Calculate Overhead Costs in Manufacturing
To know the manufacturing overhead requires calculating the manufacturing overhead rate. The formula to calculate the manufacturing overhead rate i.e. MOR is basic yet vital.
To begin, determine your overall manufacturing overhead expenses. Then, add up all the monthly indirect expenditures that keep manufacturing running smoothly.
Then you can calculate the Manufacturing Overhead Rate (MOR). This statistic shows you your monthly overhead costs as a percentage.
To find this value, divide Total Manufacturing Overhead Cost (TMOC) by Total Monthly Sales (TMS) and multiply it by 100. The final formula will be:
Assume your manufacturing overhead expensesare $50,000 and your monthly sales are $300,000. You get.167 when you divide $50,000 by $300,000. Then increase that by 100 to get your monthly overhead rate of 16.7%.
This means your monthly overhead expenditures will be 16.7% of your monthly income. Being able to forecast and develop better solutions to decrease production overhead.
Five Ways to Reduce Manufacturing Overhead Costs
A variety of strategies may be used by manufacturing organizations to reduce their overhead costs. Here is a summary of some of the most important methods for reducing your manufacturing overhead costs.
Value Stream Mapping – A Production Plant Process Layout
A value stream map depicts the entire manufacturing process of your plant. Everything from raw material purchase through client delivery is detailed here. The value stream map provides you with a complete picture of the profit-making process. This overhead cost-cuttingmethod is listed first for a reason because every effort to reduce manufacturing overhead costsstarts with a value stream map.
Lean manufacturingis also one of the techniques of eliminating unnecessary time, staff, and work that is not necessary for profit and has gained undue favor in the manufacturing process. You must first create a value stream map of the whole manufacturing process for this technique to work. Once the lean manufacturing precept is established, the following strategies for decreasingmanufacturing overhead expenses can be examined.
Do Not Forget Your Back Office Management
Before focusing on factory floor cost reduction techniques, remember that your back offices, where payment processing and customer contacts occur, may also be simplified and increase profitability. Fortunately, automation can achieve this profitability at a cheap cost.
Manufacturers increasingly use robotic process automation (RPA) to sell directly to customers rather than rely on complex supply networks. This automation eliminates costly human mistakes in data input and payment processing by automatically filling forms with consumer data. Moreover, the time saved from manual data input (and rectifying inevitable human errors) equates to decreased labor expenses and downtime.
Automating Your Manufacturing Plant
For a long time, manufacturers saw factory automation as a game-changer. As a result, several plant owners make radical changes in their operations using cutting-edge technologydespite knowing it realistically. Over-investing in technologies unfamiliar to present industrial personnel might be deemed a technology blunder. Investing in new technology that doesn't generate value or is too hard for current staff to use might be a mistake.
It's usually best to start small when implementing newtechnology in manufacturing. Using collaborative robots in production is one way to get started with automation. They are inexpensive, need little software and hardware, and may help employees with mundane, repeated chores that gobble up bandwidth. It is a low-cost entry point into automation that saves labor expenses and opens the door for further automation investments when opportunities are available.
Reuse Other Factory Equipment and Supplies
Check with other factories to see if they have any unused equipment or supplies that may be "redeployed" to your manufacturing plant. Redeployment would save you time and money by eliminating the need to look for and install new equipment while lowering your overhead costs.
Outsourcing a fully equipped factory, equipment, or even staff can also assist in lowering overhead costssince you will only pay for what you utilize. As such, it is a viable method to incorporate into your production process.
Employ an In-house Maintenance Expert
An in-house repair technician can service your equipment for routine inspections, preventive maintenance, and minor repairs. This hiring decision might save money on unforeseen repair expenses or work fees for an outside repair provider. Having someone on-site who can do emergency repairs may save you money if your equipment breaks after business hours.
Manufacturing overhead costis an essential aspect of every manufacturing company's budget to consider. Smart manufacturingis intended to be productive, efficient, and cost-effective while effectively managing production expenditures. Calculating the manufacturing overheadcan provide you with a better understanding of your company's costs and how to minimize them. Depending on the conditions or geographical needs, each manufacturing plant's overhead expensesmay vary. As a result, identify your production overhead costsand concentrate on reducing and improving them.
What are manufacturing overheads?
Manufacturing overhead cost is a sum of all indirect expenses incurred during production. Manufacturing overhead expenses usually include depreciation of equipment, employee salaries, and power utilized to run the equipment.
What is a decent overhead percentage?
When a business is functioning successfully, an overhead ratio of less than 35 % is considered favorable.
How can I calculate the cost of manufacturing per unit?
The overall manufacturing cost per unit is determined by dividing the total production expenses by the total number of units produced for a particular time.
Article | November 20, 2021
Advanced manufacturing enables the concept of industry 4.0 and represents a significant milestone in the manufacturing industry. Additive manufacturing is a critical component of the industry 4.0 concept, propelling the industry to new heights of innovation.
In various fields that are not immediately related to industry 4.0 or manufacturing, additive manufacturing has alternatively been referred to as 3D printing. The numerous advantages of additive manufacturing, such as reduced cost and time, are boosting its popularity and use in manufacturing and other industries.
“Digital technology is so empowering on so many fronts, but for it to be empowering, it must be for everyone.”
– Michael Walton, Director, Industry Executive (Manufacturing) at Microsoft.
The global market of additive manufacturing is anticipated to increase at a 14.42 percent compound annual growth rate from USD 9.52 billion in 2020 to USD 27.91 billion in 2025. According to this market research, the future of 3D printing or additive manufacturing is quite bright in the coming years, and we will see widespread application across industries.
First, let us understand the idea of additive manufacturing and its benefits to various industries.
Concept of Additive Manufacturing
Additive manufacturing is building a real thing from a three-dimensional computer model, often by successively layering a material. This technique utilizes computer-aided design (CAD) software or 3D object scanners to command devices to deposit material in exact geometric shapes layer by layer. As the name implies, additive manufacturing involves the addition of material to produce an object.
Additive Manufacturing Benefits
Produces Fewer Scraps and Trash
When we compare additive manufacturing to traditional manufacturing techniques such as milling or turning, additive manufacturing adds only the amount of material required to build a product. As a result, it generates less waste and conserves scarce resources.
Reduces the Time and Cost of Prototyping
Making a product prototype is now faster, easier, and cheaper. Other production processes, like milling, have high setup and material costs. Prototyping is less expensive and takes less time, so you can quickly produce, test, and modify. It also shows practically instant verification of progress done.
It Encourages the Digitalization of Businesses
Continuous and effective communication between devices, machines, and robots is required for additive manufacturing. However, this is only achievable with effective digitization of production processes. As a result, businesses invest more in digital and IoT, a prerequisite for Industry 4.0.
It Simplifies the Assembling Process by Condensing it into a Single Component
Additive manufacturing in Industry 4.0 also simplifies the production process, especially product assembly. A traditional component requires numerous manufacturing procedures. This increases material and labor expenses as well as production time. However, additive manufacturing allows you to print the group in one piece.
The Top Three Industries That Make the Most Use of Additive Manufacturing
Additive manufacturing is presently used in a variety of industries. However, specific sectors make the best use of it. Thus, we will examine the industries embracing additive manufacturing technology and emerging with new life easing solutions.
In the healthcare industry, dentistry is the critical application of additive manufacturing. Technology helps it create bridges, crowns, braces, and dentures, always in high demand.
Additive manufacturing has also been used to create tissues and organs, surgical tools, patient-specific surgical models, and personalized prosthetics. For example, many medical equipment companies employ 3D printing to build patient-specific organ replicas that surgeons can practice before completing complex surgeries.
Additive manufacturing is utilized to fabricate metal brackets that serve as structural components within airplanes. Prototypes are increasingly being printed in three dimensions, allowing designers to fine-tune the shape and fit of finished parts. In addition, interior airplane components such as cockpit dashboards and door handles are manufactured using 3D printing services.
3D printing can manufacture molds and thermoforming tools, grips, jigs, and fixtures for the automotive industry. Automakers utilize additive printing to customize parts for specific vehicles or drivers (e.g., seats for racing cars).
An appealing colored dashboard, efficient fuel systems, and complicated braking mechanisms are all possible with 3D printing in the automotive industry. Therefore, it is best suited for pre-production, manufacture, and modification of automotive parts.
How Does NASA use additive manufacturing in its space projects?
The space environment has always been unpredictable, and scientists must be adequately prepared before embarking on any space mission. They must consider the durability and weight of all the objects they propose to transport into space. To land any object on a planet that does not have a flat surface or similar weather conditions to earth, scientists must design each object with these considerations in mind.
“You always want it to be as light as possible, but you also want it to be strong enough.”
-Chris Chapman, NASA Test Engineer
It is not conceivable to make items capable of dealing with all the changes on other planets and achieving these project objectives using conventional materials and production processes. However, scientists do require a technique that will enable them to manufacture lighter and stronger objects for their space missions.
3D printing has played a significant part in meeting this demand and has provided space projects to manufacture objects that would withstand any unexpected events during space missions. For example, NASA employed 3D-printed metal components in their Mars project.
NASA's specialized engineers are utilizing additive manufacturing to create rocket engines and possible Moon and Mars outposts. NASA used the 11 3D printed metal components on its Mars mission as well. It employed 3D printed components for the first time in the Curiosity rover, which landed on Mars in 2012. It was a successful project, and NASA has since begun employing 3D printed parts in its space missions to make machines lighter while remaining robust and functional.
Additive manufacturing technology is making a real difference in the manufacturing process, and it is becoming the trending technology in the manufacturing industry. The benefits of additive manufacturing make the manufacturing process more advanced, easy, and customer-oriented. Additive manufacturing is the major transformation in the manufacturing industry and will take it to new heights of precision.
Why is additive manufacturing critical?
Additive manufacturing reduces the time and cost of prototyping and reduces the scraps amount during the manufacturing process of any object. In addition, it simplifies multiple processes from various industries.
Are additive manufacturing and 3D printing the same?
Yes, additive manufacturing and 3D printing are the same processes with different names as per the choice of the different industries. For example, in some industries such as space missions, It is also referred to as Fused Deposition Modelling (FDM).
Which is the most applied sector for additive manufacturing?
Healthcare is the industry that utilizes additive manufacturing technology the most. It also helps medical practitioners practice surgery on any critical body part with its 3D printed model from human tissues.
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"name": "Are additive manufacturing and 3D printing the same?",
"text": "Yes, additive manufacturing and 3D printing are the same processes with different names as per the choice of the different industries. For example, in some industries such as space missions, It is also referred to as Fused Deposition Modelling (FDM)."
"name": "Which is the most applied sector for additive manufacturing?",
"text": "Healthcare is the industry that utilizes additive manufacturing technology the most. It also helps medical practitioners practice surgery on any critical body part with its 3D printed model from human tissues."
Article | December 10, 2021
IoT in the manufacturing industry introduces a superior technology that is coming up as a blessing for the industry. Manufacturers are enjoying one-of-a-kind benefits and returns on their reinvestments in IoT. Benefits such as enhanced productivity, work safety, reduced downtime, cost-effective operations, and more such benefits of IoT in manufacturing make it more and more popular with each passing day.
The global IoT market is estimated to reach a value of USD 1,386.06 billion by 2026 from USD 761.4 billion in 2020 at a CAGR of 10.53 percent over the forecast period of 2021-2026. So the whole worldwide market of IoT has a bright future in the following years.
“As technology takes over and enhances many of the processes we used to handle with manual labor, we are freed up to use our minds creatively, which leads to bigger and better leaps in innovation and productivity.”
– Matt Mong, VP Market Innovation and Project Business Evangelist at Adeaca
Let’s check out below some exciting facts about IoT in manufacturing and see how IoT makes a difference in the manufacturing industry.
IoT in Manufacturing: Some Interesting Facts
According to PwC, 91% of industrial/manufacturing enterprises in Germany invest in "digital factories" that use IoT solutions.
According to the International Federation of Robotics (IFR), China employs more industrial robots than any other country (many of which are connected to the internet in some way).
According to IoT Analytics, the industrial sector spent more than $64 billion on IoT in 2018 and expects investment in Industry 4.0 to reach $310 billion by 2023.
According to the Eclipse Foundation, most IoT developers are focused on developing smart agriculture systems (26%), while industrial automation is another big focus area (26%). However, home automation is dwindling in popularity, accounting for just 19% of projects.
How Does IoT Work for the Manufacturing Industry?
The Internet of Things (IoT) is a network of interconnected devices that communicate with one another and with other networks. While IoT-enabled devices are capable of various tasks, they are primarily employed to collect data and carry out specific tasks. The implementation of the Internet of Things in manufacturing is often referred to as the IIoT, or Industrial Internet of Things.
IoT makes use of 'smart' devices to collect, process, and act on data. These intelligent devices are equipped with sensors and other software that enable them to communicate and exchange data inside the network.
IoT-enabled equipment gives crucial real-time data that enables manufacturers or machine operators to make informed decisions. So, how does it function in practice?
Sensors capture data from the system and transfer it to the cloud, where it can be analyzed.
The data is transferred to the quality assurance system.
The data that has been analyzed is forwarded to the end-user.
How the IoT is Improving Manufacturing Business Operations
The Internet of Things (IoT) has numerous benefits for the manufacturing industry. We'll go over some of the significant benefits that the Internet of Things brings to the manufacturing business.
Energy Efficiency Solutions
Energy is a high cost in manufacturing. Unfortunately, the current industrial energy infrastructure can only track excessive energy consumption.
The utility bills include the factory's energy consumption records. But, unfortunately, nobody can break down energy consumption to the device level and find out the underperforming pieces. Some energy usage monitoring tools exist, but they only provide partial data, making system analysis difficult.
IoT can help by giving device-level energy data. The sensors will detect any underperforming devices in the network and alert you so you can take action. As a result, the technology can help you reduce energy waste and find other ways to save it.
Data is required to determine trends and quality of production at a manufacturing facility. It also helps manufacturers plan and anticipates changes. These forecasts can help with inventory management, employment, cost control, and other operational procedures. Thus, IoT technology makes it easier to foresee and optimize customer requirements.
The Internet of Things (IoT) uses sensors to gather data about assets' health and productivity. In addition, it uses advanced analytics to give actionable information. These are presented on an appealing dashboard connected to your smart device. This allows for predictive maintenance to be used in the manufacturing industry.
Superior Product Quality
Every manufacturer is determined to produce a high-quality product at a low cost. Therefore, a minor quality modification can have a significant influence on the manufacturing firm.
Customer happiness, waste reduction, sales, and profit can all benefit from high-quality products. But making high-quality products isn't easy.
The Internet of Things (IoT) can assist you in this endeavor. Poorly set, calibrated, and maintained equipment are some of the main reasons for low-quality products. Worst of all, many small things sometimes go ignored as the final product seems perfect. Quality tests show the product is fine, but your consumers start having problems after a couple of months.
Imagine the resources needed to identify and correct the problem. Sensors in an IoT network detect even minimal tweaks in setup and alert operators. The team might momentarily stop production to address the issue before the production cycle gets complete.
Rapid and Informed Decision-Making
The IoT can dramatically improve organizational decision-making. It unlocks vital data about network equipment performance and delivers it to the right person.
Managers and field operators can use this data to improve plant processes and overall production.
In addition to these significant benefits, IoT in manufacturing can help manufacturers improve their manufacturing operations and construct a unit that meets the vision of the smart factory of 2040. The future beyond IoT would be the icing on the cake for all of us, as technology has always amazed us.
Imagine the day when IoT and AI merge, and the virtual gadgets controlled by IoT are the next major milestone. Then, the ideal combination of robotics, AI, and VR may reduce the manufacturing plant size and cost while increasing the output to a level that is unimaginable and unattainable as of now.
Airbus Improved Production Efficiency with Its Factory of the Future Concept
It's a massive task for a commercial airliner to be assembled. The expense of making a mistake throughout making such a craft can be significant, as there are millions of parts and thousands of assembly phases. Airbus has established a digital manufacturing effort called Factory of the Future to optimize operations and increase production capacity. The company has installed sensors on factory floor tools and machinery and supplied workers with wearable technologies, such as industrial smart glasses, to reduce errors and improve workplace safety. The wearable allowed for a 500% increase in efficiency while eliminating nearly all mistakes in one process named cabin seat marking.
While the benefits of IoT devices have long been a topic of discussion among technology enthusiasts, the incorporation of IoT in manufacturing is creating a new buzz in the industry. The benefits of IoT in manufacturing, such as remote analysis of operations, processes, and products, are assisting manufacturers in establishing a more productive manufacturing unit. As a result of these benefits, IoT use in manufacturing is accelerating. Recognize the IoT's potential and take a step toward incorporating it into your manufacturing operation in 2022.
What is the Industrial Internet of Things (IIoT)?
IIoT stands for Industrial Internet of Things. It uses data to improve industrial efficiency. To enhance industrial performance, it uses embedded sensors, cloud data, and connected devices.
Why is the IoT changing manufacturing?
Real-time monitoring of machines and accurate reporting for better decisions are possible through IoT. This improves business strategies and project control. Thus, the Internet of Things has a significant impact on the profitability of any manufacturing company.
How does the IoT transform the way we do business?
We can use data collected by IoT devices to improve efficiency and help organizations make better decisions. They tell organizations the truth, not what they hope or believe.
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"text": "IIoT stands for Industrial Internet of Things. It uses data to improve industrial efficiency. To enhance industrial performance, it uses embedded sensors, cloud data, and connected devices."
"name": "Why is the IoT changing manufacturing?",
"text": "Real-time monitoring of machines and accurate reporting for better decisions are possible through IoT. This improves business strategies and project control. Thus, the Internet of Things has a significant impact on the profitability of any manufacturing company."
"name": "How does the IoT transform the way we do business?",
"text": "We can use data collected by IoT devices to improve efficiency and help organizations make better decisions. They tell organizations the truth, not what they hope or believe."
Article | July 13, 2021
The start of the new year is a great time to critically take a look at your processes and see how you can improve. Here at FANUC, we have identified four key strategies manufacturers can use to boost their efficiency!
Automation can increase production and efficiency no matter the type or complexity of the manufactured products. With space at a premium in most production facilities, many job shops look for machine tending robots that are easy to integrate and have a small footprint. FANUC's robots and software make it easy to connect the equipment and improve throughput as well as overall equipment effectiveness. Quick and Simple Startup of Robotization (QSSR) allows up to four machine tools to be connected with a robot using just one Ethernet cable.
Use the Latest and Greatest Machining Practices and Technology
Many manufacturers leave performance on the table due to outdated processes and programming. Are you getting the most out of your machining? Now’s the time to look at the advantages in new CNC technology. Because new controls have greater processing speed and can implement advanced algorithms, they can do a lot more for your operations. Moreover, the interfaces have become simpler and more intuitive, so they are easier to use than ever before.
Digitize Your Process
New digital tools are breathing innovation and life into increasingly more areas of manufacturing, including the application of digital twins in the machining industry. Digital twins provide virtualization of the machine, control and manufacturing process. Digitalizing traditional manufacturing processes have the potential to make operations more efficient by proving out production processes in the virtual world. That means less waste, more efficiency and a more equipped workforce.
Upgrade Your Shop with a CNC Retrofit
Do you have legacy equipment? Running older machinery can have hidden costs, such as taking the time to source and find older replacement controls leading to significantly longer total downtime and production losses. However, scrapping old equipment and starting new, might be too expensive, especially when factoring in tooling, fixturing, rigging and foundation. Plus, new machines may require more training for staff. A CNC retrofit, with new FANUC CNCs, industrial PCs, servos and cabling, can speed up processing and reduce cycle time by as much as 50 percent.