Manufacturing process cost reduction in a lady shoe factory

Abstract

The objective of this research is to find the approaches to reduce the manufacturing costs in the lady shoe factory and create the standard costing method to measure the results of manufacturing process cost reduction by comparing the manufacturing costs before and after improvements. The problems in the lady shoe factory are categorized into three main groups: data collection and documentation, manufacturing process costing, and loss in manufacturing process. To solve these problems, the effective data collection methods and documents that are necessary for the manufacturing cost analysis are created. The manufacturing costs are calculated in term of the direct material costs, direct labor costs, factory overhead costs for each product type (short and long heel shoes) based on the equivalent units in each manufacturing process. Fish bone diagrams in two main terms: quality and quantity term of problem was used to analyzed losses in manufacturing processes. Losses based on the worker problem are reduced by introducing the training and orientation program, creating job description documents, and setting the motivation systems. Losses based on the material problem cannot be reduced because they are the uncontrollable losses for the sample factory. Losses due to the problem in method are reduced by using multi-skilled labors, creating production time schedule, and using documents to help controlling inventories and productions. Results of these cost reductions indicate that the total manufacturing costs per unit of producing short heel shoes are reduced from 161.43 Baht to 157.09 Baht and the total manufacturing costs per unit of producing long heel shoes are reduced from 169.45 Baht to 164.35 Baht.