1. Estimation  – Before executing the work, the Time and Cost of manufacturing to be predicted closer to the actual in Scientific way of calculation using Appropriate Formulas.

2. Costing – After processing by adding all the cost involved in manufacturing

3. Profit working – By subtracting the Manufacturing Cost from the Selling Cost. Result should have +ve value. This should be done for every product.

4. If possible, Process cost / Product Cost / Operational Cost to be monitored on daily basis

5. Last but not least, Break even Cost of Machine per Hour should be known. Otherwise it will definitely lead to LOSS in the Balance Sheet and end up with Heavy impact even to leave the business once for all.

Operational Cost includes Raw Material Cost, Process Cost, Inspection Cost and all cost involved in manufacturing

Machine cost, Interest Rate, Life of Mc in Years/Hours, Current Age of Mc, Reselling Cost of Mc, No of Operating Hrs/day

Factory Area in Sq.Ft, Space Cost/Sq.Ft, Mc Space including utilities, No of Machine in factory, Common Space

Oil consumption/Month, Oil Price/Lit, Waste consumption/Month, waste Price/kg, Monthly, Annual Maintenance Cost, Other Consumables/Month

Machine Power, Effective Running of Motors, No of Fans /Consumption, No of Lights /Power consumption, Compressor Power, Effective Running time of Compressor, No of Mc connected with Compressor, EB Unit Rate

Average Tool cost/Month, Operator Salary, No of Mc handled by Operator, Helper Salary, No of Mc handled by Helper, QC inspector Salary, No of Mc handled by QC Inspector,

Production Supervisor Salary, No of Mc handled by Production Sup, QA Supervisor Salary, No of Mc handled by QA Sup, Engineer Salary, No of Mc handled by Engineer, Admin Staff & Manager Salary, Other Overheads, Profit.

1. Orders

2. Profit

3. Right Man Power

Most of the (more than 95%) Industries do not calculate the Manufacturing Cost in Scientific way. They calculate based on experience, Assumption, Referral Methods. In some Industries the quote is made based on the estimation given by the operators+buffer for safety (Operator himself gives the estimate with a better buffer for his safety) Example: Operator’s Working 15 + His Buffer 5 = 20 + Estimator Buffer 5 = 25 + Profit 5 = 30 + Negotiation Buffer 5 = 35 becomes the Quote.

Actual Estimate 15 + profit 5 = 20. But the Quote value = 35.

Even if the customer offers 20-30, ignore the Order assumes that it would be loss, since not knowing the Break-even Cost.

So, in this competitive market, High Quotes get rejected and lead to loss the Orders. Rarely 1 or 2 out of 10 quotes is the conversion ratio.

Reasons

1. Not Estimating Scientifically

2. Missing many processes on over look when Estimating, but doing all the processes when manufacturing in order to complete the Order.

3. Accepting Order for the price fixed by the customers just without knowing the Break-even cost

4. Over confidence and Over Smartness

Right Man Power – The Person doing a work with required knowledge about the work he does.  (Without much of Training, Guidance, Directions and Instructions)

But unfortunately, in India we are not able to find and recruit Right Man Power. We compromise and forced to recruit the person somewhat better tin the group (Best among the Worst). Or otherwise need to pay high to have a really Right Person.

Corporate, MNC recruit Right people since they are affordable. But Nowadays, even MNC and Corporate companies are also struggling to find and to retain Right people.

Very rarely, some management having LUCK, get and have and retain Right people.

Solution

1. Recruit candidate somewhat ok Candidate, EMPOWER them by training for your purpose by External Training Sources.

Consider the Cost of Training from their CTC for the First year. If the candidate sustain with you for the next year, Reimburse the Cost of Training to him back.