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Manufacturing

Information Needed for Manufacturing Cost Estimates

Beginners sometimes go directly to a manufacturer to get a price before consulting an expert in production methodology and strategy. This is a mistake, for three reasons. First, because it ignores the intermediate steps needed to justify investing in the project. Second, because there's a good chance you are approaching a manufacturer that is mismatched to the job you have in mind. And, third, because you may be considering the wrong production process. You could waste a lot of time and money getting tooling quotes for a part that an expert could tell you would be better suited to another method that uses less costly tooling.

Basic Information for Estimates

1. A parts list (often called a bill of materials) with the quantities of each component needed for every unit produced. Organize this list by the product styles and variations you want studied. Don't forget to consider packaging and containers. (Sometimes the box is the most expensive single component.) Group the component parts as follows:

Off-the-shelf: Provide as much detail as you now know—i.e., make and model. Even if you don't know the manufacturer, list the retailers you know.

Custom designed and/or manufactured: Provide a sketch and describe as much as you can about the part, including how you think it might be made and from what materials.

Concepts (anything not completely tested and proven): Describe and sketch how you envision the component or assembly might work. Elaborate regarding any tests that have been done to verify that it will work that way.

2. Production levels ("units per year") to consider for each style. Indicate where common parts may be used between styles and variations. This will increase the production volume for those parts, which will decrease their cost. Describe the intended use for the items made at each level—i.e., non-working models, engineering tests, in-house product tests, market tests, initial sales, and low-level, mid-range, or full production.

3. Peak capacity ("units per day") desired. Will your production be steady and predictable? Or, like some seasonal products, will a large number of units be needed in a short time?

4. Reaction time to changes in demand. How quickly should production increase if demand is greater than capacity? This may be closely related to peak capacity, but there are other considerations. Would you invest more in tooling that can be quickly modified to produce more parts? Or, do you want to gamble that you can obtain new, higher-capacity tooling in time to meet demand and avoid losing market share? Tool delivery time can often be many months.

5. Labor cost. Tools that produce parts that are nearly ready for use cost more than tools that produce parts that need some hand finishing. Also, automated equipment can reduce handling and packing labor. Your consultant will need to know what labor cost to consider to recommend tool cost vs. labor trade-offs.

All of this information will help your expert recommend tooling and production options. It will be hard for any inventor to know the answers with much certainty at the start. However, just knowing that you need to think about these questions will help.
Other factors to consider are the budget and how much should be bet on your market predictions. Do you want the optimum tools and the most expensive options so that you will save money in the long run if you are right about exactly what the market will want? Or do you want to take a less risky approach with conservative options in case you learn that some changes would increase sales and profits?

Ten Ways Going Paperless in Manufacturing Will Reduce Costs Immediately

1. Increased Levels of on-Time and Complete Shipments

Manufacturing execution solutions provide the workflow, visibility, and event notification required to ensure that manufacturing is meeting customer demand. Additionally, these systems reduce non value-added activity, increase data accuracy, and provide ERP and MRP systems with the real-time data needed to maximize processing, planning and scheduling activities. This results in your ability to increase levels of on-time and complete shipments.

Creating a “paperless shop floor” means putting information in the hands of those who actually produce your products. The manufacturing execution solution creates this paperless environment by giving operators instant access to work instructions and CAD drawings, so they always have the direction required to build products that meet customers' demanding specifications. More importantly, having information about events as they occur allows companies to more easily identify and prevent potential problems or bottlenecks. For example, you may already be well aware of the problems created by shortages of key manufacturing materials that halt production, shipments arriving late or incomplete, and backorders. Additionally, a lack of visibility into machines operating outside control limits or processes not meeting appropriate yields can ultimately delay customer shipments. With event management, you have real-time notification of events and exceptions—often before they occur—so you are able to take proactive steps to manage them. This will likely save you the cost of expediting shipments that were unexpectedly completed late. Ultimately, you're able to keep costs in check, production and shipments on schedule, and customers happy. By streamlining data acquisition and execution for operators on the factory floor, companies create efficient processes that consist only of value-added activities. The result is a leaner environment. From mobile data terminals for material handlers to strategically placed WIP stations or touch screens on the factory floor, workers are directed to perform tasks and collect information in real time using intuitive and graphical user interfaces. In addition, new employee training time is significantly reduced, while event-driven notification and workflow via electronic communication provides cross training opportunities for the existing workforce. Manufacturing execution solutions empower companies to easily implement and manage truly paperless manufacturing processes.

2. Strengthened Decision-Making Based on Real-Time Information

Using a leading manufacturing execution solution, key personnel are given the decision-making data necessary to optimize manufacturing performance. From any location, the technology will allow managers to make immediate decisions on staffing, maximize labor efficiencies, control order fulfillment, and monitor machine utilization. Real-time performance reports such as actual vs. plan, production unit cycle time, production efficiency, scrap, and downtime by machine or work cell can all be specifically configured for up-to-the-second review and action by management. When unexpected events occur, a manufacturing execution solution also helps managers and lead operators take proactive steps by utilizing a broad set of alerts and alarms. Using alert/alarm notification mechanisms such as e-mail, reader boards, lights, pagers, and phones, key individuals are notified about potential issues—before they become costly problems. Manufacturing execution solutions do not stop after notifying operators of unexpected events. This type of system pairs event notification with appropriate workflow so operators take suitable resolution steps in real time without affecting operations.

Production order status and work in process are readily accessible via web browser. This empowers managers and other decision-makers to communicate information electronically to customers and other manufacturing locations. Ease of information access also smoothes the daily transition between shift managers and provides updated statistics on key performance indicators (KPI), wellness views, and other important reports.

3. Continuous Improvement: "Adapt or Fail"

Manufacturers have learned that staying competitive means they must continually improve their processes or face the consequences of technological Darwinism—"adapt or fail." Whether the initiative is Six Sigma or kaizen, traditional manufacturing execution solutions are nearly impossible to change when needed because they require expensive, time-consuming custom code-based modifications. Because of this, they become a barrier to operational excellence. This usually means that improvement opportunities are lost or work-arounds are developed to accomplish tasks outside of the system. This results in poor data accuracy.

A new type of adaptable manufacturing execution solution has recently been built on the belief that software should be a catalyst for continuous improvement—not an obstacle. These adaptable manufacturing execution solutions not only provide a detailed view of plant history, but their flexible architecture also allows you to reconfigure processes quickly and cost-effectively as your manufacturing operations change. It also provides metrics needed to make fact-based decisions and adapt as manufacturing operations improve over time.

4. Maximized Supplier Relationships

In today's lean and just-in-time manufacturing environments, collaboration with key suppliers is essential. The best manufacturing execution solutions provide manufacturers with the capability to exchange information among trading partners and enable true collaborative execution up and down the supply chain. A secure web portal replaces time-consuming phone calls and faxes as the basis for real-time information sharing and improved inventory visibility—critical factors in enhancing collaboration and streamlining supply chain operations.

Some manufacturing execution solutions also provide both the communication and visibility necessary to facilitate the effective delivery of goods from supplier to buyer. From the point of purchase order (PO) release at the buyer's location through fulfillment, shipment, and receipt, processes that have historically been performed manually—or in some cases simply not performed—are automated. With improved communication regarding compliance and/or serialized labeling requirements, inventory is received at the dock door with the required bar codes already applied. Functionality can also be provided to allow suppliers to perform other value-added services for their customers, including demand-pull replenishment, advanced shipping notification (ASN), and supplier quality inspections.

5. Rapid Product Recall Decisions

Product safety and quality are paramount concerns for manufacturers. When there are concerns about safety or quality, it is essential for manufacturers to have traceability tools that assist them in making product recall decisions. Manufacturing execution solutions aid in this process by capturing detailed product genealogies. When suppliers communicate a product defect, it is possible to trace exactly which finished goods were manufactured using the supplier's defective component. This traceability can be achieved using lot number, serial number, or other product attribute such as version, revision, or "born-on date."

Product recalls often result in enormous costs for the company issuing the recall. In most cases, companies lack information about the affected products. This results in companies inspecting individual products or being overly cautious and recalling products that have no risk of quality or safety issues.

Manufacturing execution solutions bridge this information gap for many manufacturers. With detailed product and order history information, these systems help companies deal with recalls in a timely, cost-effective manor.

6. Leveraged ERP Investment

Manufacturers that have implemented an ERP system have invested significant effort (and money) creating an enterprise software solution. Despite these investments, manufacturers often find their ERP systems do not provide the results they expected on the shop floor. ERPs often fall short because they are overly complex, difficult for shop floor employees to use, and rooted in traditional MRP batch-based processing. A manufacturing execution solution is designed to leverage an ERP investment, not replace it.

Manufacturing execution solutions address these issues by providing intuitive execution capabilities based on a real-time, lean execution philosophy. This means manufacturers get the best of both worlds—easy-to-use execution tools for the shop floor that also support planning decisions by continuously feeding real-time transaction information to the ERP. Manufacturing execution solutions share information with the ERP in real time, allowing the ERP to have an accurate representation of shop floor activities. With real-time visibility to execution, the ERP makes intelligent decisions about supply/demand matching and order promising.

7. Reduced Cost of Regulatory Compliance

Manufacturing environments are becoming increasing regulated. Whether the compliance requirement is for the FDA or Sarbanes-Oxley, the costs associated with achieving compliant processes can be excessive. With a rich transaction history that provides detailed audit trails and electronic approval processes, a manufacturing execution solution will facilitate compliant processes without excessive paperwork and manual work-arounds. Additionally, a manufacturing execution solution is designed to be responsive to change over time. This means that new regulatory requirements are easily met without system upgrades or customizations.

8. Personalized Manufacturing

Customer-specific manufacturing is a trend driving increased complexity and cost for today's manufacturers. Customer specific bills of materials, routings, and test instructions are challenging to manage, but can be a source of competitive differentiation. Manufacturing execution solutions respond to this challenge by offering personalization capabilities that meet today's customer requirements and adapt to meet tomorrow's unforeseen demands.

The ability to personalize a manufacturing execution solution is a key benefit—but not one that all applications offer. The greatest level of benefit will be achieved through a solution that accommodates personalization via configuration tool sets. With this type of platform, configurations can be made easily and cost-effectively. This means the manufacturers—not the solution vendors—truly own the system. With a flexible manufacturing execution solution, there is no custom coding required for configuration; changes carry over, and workflow can be altered as needed after the system go-live. The result of this is that the system's total cost of ownership is greatly reduced over the lifetime of the application.

9. Focused Technology Approach

With the most robust manufacturing execution solutions, nearly any station or work cell in the facility can be integrated into the system and either monitored, controlled, or reported against. Machines, scales, gauges, statistical process control (SPC) systems, PLCs, label printers, serial devices, PDAs, automated material handling equipment, wired and wireless terminals, and RFID systems are integral parts of manufacturing execution—and the best manufacturing execution solutions will integrate seamlessly with all of them. Manufacturing execution solutions often feed multiple host systems and facilitate reporting beyond the current capabilities of many ERP systems. Solving the problems inherent in today's manufacturing environment is best accomplished using a modular technology approach. Manufacturing execution solutions start with bar code or RFID data acquisition to improve order visibility and extend beyond basic data collection as appropriate in each company's individual situation. This allows for a right-sized application based on current business needs and areas requiring the most attention. Oftentimes, this provides self-funding for future projects because ROI is generated quickly.

10. Increased Business Value With Collaborative Manufacturing

In today's emerging global economy, seamless communication does not stop at the four walls of the plant. Sharing information in real time both within the enterprise and beyond is an essential component to maintaining information integrity and achieving operational excellence. This communication must also include supply chain-wide notification of status and events in real time to effectively link a global network of suppliers, manufacturers, and customers. The right manufacturing execution solution will empower manufacturers to achieve seamless integration across their business systems and software—while protecting IT investments and customer relationships. It will achieve this by integrating web-based solutions directly with enterprise and business-to-business applications. A manufacturing execution solution should also provide the platform for real-time information flow, eliminate process gaps, and deliver competitive advantage—eliminating the delays and errors caused by systems that cannot effectively share operational data.

Finding the Right Manufacturing Execution Solution for Your Unique Environment

As you move toward coupling your manufacturing operations tightly with logistics, transportation, and customer demand, finding the right solution is key. As with any enterprise-wide software evaluation process, there are a handful of important questions that must be answered prior to selecting a vendor. You must be able to find a solution that addresses your business's specific pain points at a cost that works within your budget. For each vendor involved in the selection process, it is essential that your selection team gather detailed responses to the following issues:

Breadth of technology—Does the vendor offer a wide range of supply chain-related solutions that integrate easily on the same platform? Does it have experience integrating with a variety of software and hardware systems? Does it have a history of releasing product upgrades containing new functionality that demonstrates a commitment to excellence in the space?

Ability to adapt to change—How does the vendor approach changes to your system as your requirements shift? Does it utilize costly custom code? Do these changes carry forward during an upgrade?

Company history—Has the company been in business for a number of years?
Does it have a track record of solving problems for manufacturers?
Does the product line demonstrate progressively more complex technologies developed using the most advanced toolsets?
Financial stability—Will the company be around in three years to support the system you have purchased?
Are the vendor's sales growing?
Does the company have a sufficient amount of emergency capital in case of an economic downturn?
Customer base—Does the vendor have a long list of satisfied customers?
Are the majority of these customers referenceable?
Can the vendor prove it can keep customers happy over the long term?
Implementation success—Has the company ever had a failed implementation?
If so, how recently? What were the reasons?

Conclusion

By now the good news for manufacturers should be clear: manufacturing execution solutions offer a host of bottom-line benefits through the creation of a “paperless shop-floor environment.” The most effective manufacturing execution solutions will provide you with the tools necessary to cost-effectively increase productivity, eliminate non-value-added activities, decrease operating costs, and eliminate the potential for errors and waste. By leveraging this type of solution to streamline your operations and "go paperless" on the shop floor, you'll have the information and processes in place to meet stringent customer demands on time, every time.

Production

Seven Types of Waste in Manufacturing

1. Overproduction

Waste from overproduction is one of the greatest wastes commonly found in manufacturing operations. It is created by producing more products than are required by the market. When the market is strong, this waste may not be very noticeable. However, when demand slackens, the overproduction creates a very serious problem with unsold inventory and all the by-products associated with it:
Extra inventory
Extra handling
Extra space
Extra interest charges
Extra machinery and equipment
Extra defects
Extra overhead
Extra people
Extra paperwork

Overproduction usually begins by getting ahead of the work required. More raw materials are consumed and wages paid than necessary, resulting in extra inventory. This situation requires additional material handling, storage space, and interest paid on money used to carry the inventory. Additional staff, computers, and equipment may be needed to monitor the extra goods. But as serious as these problems are, even more critical is the confusion about what the priorities are (or should be). People are distracted and unable to focus on immediate goals, which results in additional production control staff. Since the overproduction causes the machinery and operators to seem busy, additional equipment may be purchased and labor hired, under the assumption that they are necessary.

Since overproduction creates difficulties that often obscure more fundamental problems, it is considered one of the most serious types of waste and should be eliminated as promptly as possible. The elimination lies in the understanding that machines and operators do not have to be fully utilized to be cost-efficient, as long as market demands are met. Unfortunately, this concept is difficult for many people to grasp. It is helpful for the operator at each stage of production to think of the next stage of the process as his or her "customer." Only the amount required by this customer should be produced, meeting the requirements of high quality, lowest cost, and correct timing.

2. Waiting

Unlike waste from overproduction, waste from waiting is usually readily identifiable. Idle workers who have completed the required amount of work and employees who spend much time watching machines but are powerless to prevent problems are two examples of the waste of waiting and are easy to spot. By completing only the amount of work required, the capacity—both speed and volume—of each work station can be monitored. This will result in using only the machinery and personnel required for the minimum amount of time to meet production demands, thereby reducing waiting time.

3. Transportation

The transportation and double or triple handling of raw and finished goods are commonly observed wastes in many factories. Often the culprit of this type of waste is a poorly conceived layout of the factory floor and storage facilities, which can mean long-distance transportation and over-handling of materials. This situation is aggravated by such factors as temporary storage or frequent changes of storage locations. In order to eliminate transportation waste, improvements must be made in the areas of layout, process coordination, methods of transportation, housekeeping, and general organization of the operation.

4. Processing

The processing method may be another source of waste. In observing this type of waste, one often finds that maintenance and manufacturability are keys to eliminating it. If fixtures and machinery are well maintained, they may require less labor on the part of the operator to produce a quality product. Regular preventative maintenance may also reduce defective pieces produced. When the principles of design for manufacture (DFM) are employed and manufacturability is taken into consideration in product design, processing waste can be reduced or eliminated before production even begins.

5. Inventory

Inventory waste is closely connected with waste from overproduction. That is, the overproduction creates excess inventory, which requires a list of extras including handling, space, interest charges, people, and paperwork. Because of the often substantial cost associated with extra inventory, rigorous measures should be taken to reduce inventory levels. Disposal of obsolete materials

Production only of the number of items required by the subsequent process
Purchase of required amounts of materials—savings achieved through volume discounts must be carefully weighed against inventory and storage costs
Manufacture of products in required size lots—measure setup and changeover costs against inventory carrying costs to achieve the most appropriate size It is important to understand that in many operations, inventory covers a myriad of other problems. As levels are reduced, these problems will surface and they must be corrected before inventory levels can be reduced to their optimum levels:
Poor scheduling
Machine breakdown
Quality problems
Long transportation time of raw materials and/or finished goods
Vendor delivery times
Line imbalance
Lengthy set up time
Absenteeism
Lack of housekeeping or factory organization
Communication problems within the organization, with suppliers and with customers

6. Motion

Waste of motion can be defined as whatever time is spent not adding value to the product or process:
Movement Work
This type of waste is most often revealed in the actions of the factory workers. It is clearly evident in searching for tools, pick and place of tools and parts kept out of immediate reach of the work station, and especially the walking done by one operator responsible for several machines. All of these can be eliminated by carefully planned layout and fixture selection.

7. Product Defects
Waste from product defects is not simply those items rejected by quality control before shipment, but actually causes other types of waste throughout the entire manufacturing process.
Waiting time is increased in subsequent processes, increasing costs and lead times.
Rework may be required to make the part usable, increasing labor costs. Additional labor may be required for disassembly and reassembly.

Additional materials may be needed for replacement parts.
Sorting the defective from acceptable parts requires additional labor.
Scrapping the defective pieces wastes both the materials and the work already added.
All of the above are serious, but pale in comparison with the results when customers discover defects. Not only are extra warranty and delivery costs incurred, but customer dissatisfaction may result in loss of future business and market share.

To eliminate product defect waste, a system must be developed to identify the defects (or the conditions that cause the defects) so that anyone present may take corrective action. Without this preventive system in place, other time-saving efforts are futile.

There is no advantage in using a highly automated machine to make defective parts faster.
The first step to eliminating the seven deadly wastes is to identify each one within the operation. After that, measures can be taken to correct the situation and eliminate the problems. Such action may require simple, inexpensive solutions to a single work station or may involve changes as massive as a new layout of the factory floor with more efficient machinery. The appropriate solutions require careful study of the operation, clearly defined objectives, and thorough investigation of the benefits to be gained by each change.

Ten Ways to Improve Your Manufacturing Productivity

1. Analyze causes for downtime and rejects.

Record and analyze machine downtime and reject events to minimize interruptions and poor productivity.

2. Monitor machines in real time.

Detect problems before productivity and quality suffers: see real-time displays of efficiency, utilization, OEE, yield, rate, cycle time.

3. Automate production reporting.

Implement automated production data collection and reporting from all types of production machines. Print standard and custom reports automatically and export data to Excel, 1-2-3, or your Enterprise systems.

4. Automate production scheduling, job tracking.

Reduce time-consuming manual production scheduling and job-tracking chores to just a few clicks of a mouse.

5. Schedule P.M. based on actual machine/tool use.

Don't wait for your machinery to break or produce scrap before you perform maintenance. Instead, be proactive: schedule preventive maintenance based on actual machine/tool/component usage.

6. Analyze manufacturing process variable performance.

Monitor temperature, pressure, cushion, shot size, stroke, shut height, tonnage, inject/fill/hold time, etc.
7, Implement OEE/ISO/continuous improvement programs.

Develop real-world production standards to make your job costing accurate. Implement activity-based costing, continuous improvement, and OEE programs.

8. Manufacturing data collection for ERP, MES, and CMMS systems.

Close the loop with your Enterprise systems: automatically download production schedules into System's Job Queue, then upload
production/performance/productivity and usage data at shift and job end.

9. Export cycle counts and run time to CMMS systems. Eliminate manual "meter" reading and data collection.

ProductionACE (from Production Process) can export actual runtime and cycle counts to any third-party CMMS/EAM software during the production shift: cycle counts and runtime "meters" are updated in a real-time file.

10. Read and print bar code labels at each machine as parts are made.

Printed labels can contain your choice of information, such as Product Description, Work Order #, Operator Name, Date/Time, Lot Number, etc.

“10 Ways to Improve Your Manufacturing Productivity,” www.productionprocess.com/screens"

Ten Steps to Six Sigma Quality Manufacturing

The Six Sigma methodology for solving problems is similar to many other approaches. The differences arise mostly from Six Sigma’s emphasis on statistical techniques to isolate and quantify undesirable variations in process and product performance. The mathematical techniques and analysis are central to Six Sigma steps for problem solving. The general steps one would follow with Six Sigma are:

1. Identify a process or product variation that is creating undesirable performance results.
2. Define the scope and parameters of the problem.
3. Develop and apply initial measures of process or product variability. 4. Estimate the business performance impact.
5. Prioritize the project with other Six Sigma projects to establish when analysis begins.
6. Collect and organize the data needed to carry out a thorough analysis.
7. Analyze the data to pinpoint the cause or causes of variation.
8. Develop an action plan for improving the process or product and a time frame for full implementation of the action plan.
9. Implement the improvements.

Establish the control and feedback mechanisms for continuous improvement of the process or product.

Six Sigma dovetails nicely with performance improvement initiatives intended to transform a traditional manufacturing company into a lean supply chain operation. An effective Six Sigma program can help to improve customer response time, cut cycle times, and improve product quality in engineering and performance. These improvements appear not just in a narrow “reduction of defects” but can also generate revenue based on improved customer satisfaction. Customer satisfaction improves, not because goods are more reliable and have fewer defects but because the entire process that the customer experiences from start to finish, from the sales office all the way through delivery and post-sale servicing and technical support, is improved. In addition, companies that implement Six Sigma programs can get additional benefits just by advertising their commitment to Six Sigma, as many have done, thereby raising the company’s public profile. There is one important caveat, however: Six Sigma’s heavy reliance on mathematical and statistical techniques for determining process as well as product performance intimidates many managers, making it harder to sell as an approach to key people within the organization. Six Sigma has its advocates, but it also has its detractors.

Resistance to Six Sigma arises sometimes because managers see Six Sigma advocates as “blind zealots” wedded to a single performance improvement philosophy. Companies that are considering implementing a Six Sigma program should be prepared to understand and cope with such resistance.

"Six Sigma Approach to Quality Manufacturing,”

Distribution

Key Factors That Impact Your Distribution Network Effectiveness

Distribution professionals “see” their operations on a daily basis. Competitive pressures, mergers, acquisitions, new product lines, and greater customer expectations are just the tip of the change iceberg for the modern logistics leader. On the surface, this continuum of change is just a cost of doing business in the latest “new economy.” However, for those intimately involved in a distribution process, how these changes are accommodated can mean the difference between survival and burnout and/or even extinction in today’s rapidly changing supply chain. This article focuses on 15 key areas that are the roadmap to an effective, flexible, and proactively responsive distribution operation.

1. Centralization vs. Regionalization—In distribution network planning, there is a well-established relationship among the number of distribution points, transportation costs, and customer service targets. In a graphical sense, the point at which these three entities merge is the optimum balance of facility and transportation costs to develop a low-cost, high-service distribution network. Normally, as distribution networks become more centralized, so do the internal support structures, such as facility management, order entry, customer service, and data processing. Depending on the degree of centralization achieved in support staffs, it is not uncommon to see cost savings of 50 percent or higher over decentralized networks. However, service levels, limitations on total facility size, risk mitigation, and throughput peaks must be factored into the decision matrix.

2. Energy—Any significant shift in the cost of energy—electricity, fuel, etc.—could have an impact on operating costs and, therefore, on distribution. Many distribution projects that are otherwise viable fail once the cost of energy becomes a factor. This is especially true for energy-intensive facilities such as refrigerated warehouses. For this reason, it is crucial to work with all energy providers to determine the load that a prospective operation would put on the local energy system and develop solutions that conserve energy while achieving goals. Some interesting energy solutions are:

? Abatement programs: Many energy providers provide incentives to users who cut back their usage during defined high-load periods. This could be as simple as running the facility on minimal power during off-shifts or as complicated as metering the use of the facility or using a secondary power source (high-power generator or solar power) to run normally on a reduced energy load.

High-efficiency units: Many companies install high-efficiency appliances and fixtures in a facility to conserve energy usage with no performance penalty. There is some investment required, but the payback is often reduced rates and/or a lower monthly bill.

Rising fuel costs make this a very sensitive component of distribution costs, regardless of whether transportation is handled via third party carriers or a private fleet. Here are some strategies to consider to mitigate this factor:

Cube out containers: When a trailer is partially cubed out, you are often paying to transport air. Utilizing the maximum cube ensures that more of the shipping costs are being used to ship product. Mode assessment: Depending on service requirements, it may be possible to move from LTL (less than truckload) services to truckload or from parcel to LTL. In general, each shift will result in reduced freight costs.

Transportation management systems (TMS): Poor transportation performance often stems from poor transportation planning. A TMS can provide more efficient route planning and load tendering, and result in savings in the process.

Private fleet concerns: Private fleets can benefit from an in-house fuel supply program to gain control over fuel costs and usage. The investment can be offset by the elimination of one or more fuel supply chain links, reducing operating costs and sometimes allowing fuel blends that are more efficient and economical.

Regional vs. centralized networks: The costs of delivery using different modes of transportation, as well as service availability, can be directly impacted when fuel costs rise. Understanding the modes used most often, the customer expectation and the risk associated play into the network structure decision.

3. Flexibility—In today’s unpredictable business climate, flexibility is a key to continued success for some and survival for others. When designing a distribution facility, specifying versatile equipment is a critical requirement. The latest technology may look nice at start up, but if it can’t keep pace with unpredictable events, it is simply a waste of money. Planning for likely (and unlikely) changes in the distribution profile should drive the warehouse design and equipment specifications. For the majority of distribution operations, flexible equipment is the more practical choice.

4. Global Marketplace—In the ever-changing supply chain, global impact must always be considered. This could be as minor as a domestic customer wanting direct shipments to an international location, or as major as an acquisition by a global company or addition of a key global account. Successful distribution operations are ready for this type of change. Transportation systems should be designed with exports in mind; there should be contingencies for customs documentation and international shipping paperwork. Operations should be designed in a manner that product re-labeling or special packaging for international customers can be accomplished easily. Facilities may need to accommodate inbound or outbound airfreight or ocean freight containers. Customer service functions may need to operate in 24-hour mode to assist customers in all time zones. Preparedness is the critical element in a global marketplace. If you are not a global company today, your success will drive you into that marketplace sooner rather than later.

5. Government Involvement—Just as government involvement has an impact on distribution, distribution leaders have an obligation to be involved and aware of legislation that involves their industry. Many decisions are made daily at local, state, and federal levels that impact distribution operations. Taxes, labor regulations, transportation restrictions, and infrastructure decisions are continually up for review and discussion at every level of government. Without proper input, uninformed decisions often have a dramatic effect on the distribution community. In addition, involvement in professional societies (many of which conduct lobbying activities) is an effective way to track the pulse of legislative movement and also an ideal forum to make your concerns known. For some ambitious souls, a direct role in local or municipal government may be an effective and fulfilling way to make an impact. By being proactive, distribution leaders can ensure that distribution and government entities can collaborate to provide benefit to both sides without unpleasant surprises.

6. Information Systems—In today’s e-enabled world, timely and accurate information is a requirement. The days of keypunching in daily distribution activity and nightly updates to host financial systems are becoming a distant memory for successful distribution operations. Today’s reality is that distribution execution systems must be:

Real time: Customer requirements are moving toward being able to instantly track an order through every step of the fulfillment process to delivery. Optimally, this information is linked to an internet front-end where a customer can easily log in and see the exact status of his or her order. Real-time interfaces and host system updates enable this customer-focused initiative.

Paperless: The reality is that paper equates to errors. Language and educational barriers result in paper pick documents that are often misinterpreted, at best resulting in lost dollars within the distribution operation or, worse, lost customers due to fulfillment issues that escape even the best inspection processes. The solution is paperless systems requiring operator validation that the right steps were followed and that the correct product was picked and packed.

Standardized: In the past, many companies developed proprietary, legacy systems to manage their distribution operations. With the high growth associated with a successful distribution operation, many of these companies are finding that the investment to develop and maintain an in-house system no longer is viable. Standardized, industry-tailored software is now the rule rather than the exception. Software companies leverage their client base to continually update their product, adding far more base functionality than inflexible legacy systems.

7. Modularity—As companies in the distribution space come and go, their business will typically move to a new distributor or distributors. The ability to quickly take on significant business volumes dictates that modularity is a necessity for a thriving distribution organization. Modularity must be evident in:

Assets: Distribution assets must be modular, providing the ability to easily expand facilities, capacities, and equipment to meet increasing demands and diverse products. Many companies design this into a facility, while others are constantly tracking alternate local space that could be closed on quickly.

Work assignments: The workforce must be able to handle new work assignments and transfer knowledge to new employees effectively. This is a key to a successful start-up of a new operation or an addition to an existing operation.

Labor management systems: These systems must be able to handle the addition of new operations quickly and economically so that performance can be measured and costs kept under control.

Types of Manufacturing Costs
Manufacturing cost estimates can usually be organized as shown below.
1. Upfront Costs
a. Development "Guestimate." Usually this is only an order-of-magnitude opinion of how difficult it might be to develop a "production ready" technology.
b. Product Design—This is the work needed to specify a component in such a way that it can be produced. This differs from development in that there is no unproven product or production technology involved. There is usually iteration among the product designer, the tool designer, and the production people to optimize the design.
c. Tooling Design and Fabrication—This is usually done by the tool maker. Production levels and peak capacity have the biggest impact. Tool life must also be considered.
2. Production Setup—The cost to set up for a production run, this usually includes some amount for the waste generated while tuning and testing the process. It is often impractical to set up for less than ten or twenty thousand units with mass production techniques.
3. Production Costs
a. Component Production Cost—This is the incremental cost to produce "one more item" after it is in production. This usually includes raw material, machine time cost, machine operator cost, supplies, and post-production finishing.
b. Assembly Setup and Assembly Cost—This is similar to the corresponding items for component production cost.
c. Quality Control—This addresses what sample testing might be needed to ensure that the units work as intended.

Seven Key Points for Estimating Manufacturing Costs

1. Comparing a product to others can give a rough idea of manufacturing cost when you know the markup.
2. The minimum order price is often the biggest start-up cost.
3. A sensible strategy helps manage risk. Cost depends on the strategy you choose.
4. If you cannot describe your strategy, an estimate will be a waste of time and money.
5. Estimates usually include upfront, setup, and incremental production costs.
6. Patents that are prepared before manufacturing issues are analyzed may be of little value.
7. A preliminary technical evaluation can get you pointed in the right direction when you need to develop a strategy.

Business Feasibility

Aerospace

Advertising/Marketing

Automotive

Bulbs

Computer Hardware and Software

Construction

Construction material plants

Education

Edible oil/Ghee

Films

General Industry Resources

Garbage Landfills, Garbage truck with trash bin cleaning system/Janitorial Services

Health Insurance

Housing & Urban/Rural Development

Handicrafts

Law

Machinery and Heavy Equipment

Mining/Minerals

Milk & Dairy Products

Medical Equipment & Supplies

Paint and Coatings Industry

Paper/Pulp

Pharmaceutical/Biotechnology

Plastics/Rubber

Planning Commission

Political Science/International Relations

Publishing/Media

Postal/Parcel Service

Social security/public distribution system

Soap, Shampoo, Tooth Paste

Shoes

Travel and Transportation

Toys

Technology and Telecommunications

Warehouse, Cold Storage, Store, Godown

List 5. Ten Ways Going Paperless in Manufacturing Will Reduce Costs Immediately

1. Increased Levels of on-Time and Complete Shipments

Manufacturing execution solutions provide the workflow, visibility, and event notification required to ensure that manufacturing is meeting customer demand. Additionally, these systems reduce non value-added activity, increase data accuracy, and provide ERP and MRP systems with the real-time data needed to maximize processing, planning and scheduling activities. This results in your ability to increase levels of on-time and complete shipments.

Creating a “paperless shop floor” means putting information in the hands of those who actually produce your products. The manufacturing execution solution creates this paperless environment by giving operators instant access to work instructions and CAD drawings, so they always have the direction required to build products that meet customers' demanding specifications. More importantly, having information about events as they occur allows companies to more easily identify and prevent potential problems or bottlenecks. For example, you may already be well aware of the problems created by shortages of key manufacturing materials that halt production, shipments arriving late or incomplete, and backorders. Additionally, a lack of visibility into machines operating outside control limits or processes not meeting appropriate yields can ultimately delay customer shipments. With event management, you have real-time notification of events and exceptions—often before they occur—so you are able to take proactive steps to manage them. This will likely save you the cost of expediting shipments that were unexpectedly completed late. Ultimately, you're able to keep costs in check, production and shipments on schedule, and customers happy. By streamlining data acquisition and execution for operators on the factory floor, companies create efficient processes that consist only of value-added activities. The result is a leaner environment. From mobile data terminals for material handlers to strategically placed WIP stations or touch screens on the factory floor, workers are directed to perform tasks and collect information in real time using intuitive and graphical user interfaces. In addition, new employee training time is significantly reduced, while event-driven notification and workflow via electronic communication provides cross training opportunities for the existing workforce. Manufacturing execution solutions empower companies to easily implement and manage truly paperless manufacturing processes.

2. Strengthened Decision-Making Based on Real-Time Information

Using a leading manufacturing execution solution, key personnel are given the decision-making data necessary to optimize manufacturing performance. From any location, the technology will allow managers to make immediate decisions on staffing, maximize labor efficiencies, control order fulfillment, and monitor machine utilization. Real-time performance reports such as actual vs. plan, production unit cycle time, production efficiency, scrap, and downtime by machine or work cell can all be specifically configured for up-to-the-second review and action by management. When unexpected events occur, a manufacturing execution solution also helps managers and lead operators take proactive steps by utilizing a broad set of alerts and alarms. Using alert/alarm notification mechanisms such as e-mail, reader boards, lights, pagers, and phones, key individuals are notified about potential issues—before they become costly problems. Manufacturing execution solutions do not stop after notifying operators of unexpected events. This type of system pairs event notification with appropriate workflow so operators take suitable resolution steps in real time without affecting operations.

Production order status and work in process are readily accessible via web browser. This empowers managers and other decision-makers to communicate information electronically to customers and other manufacturing locations. Ease of information access also smoothes the daily transition between shift managers and provides updated statistics on key performance indicators (KPI), wellness views, and other important reports.

3. Continuous Improvement: "Adapt or Fail"

Manufacturers have learned that staying competitive means they must continually improve their processes or face the consequences of technological Darwinism—"adapt or fail." Whether the initiative is Six Sigma or kaizen, traditional manufacturing execution solutions are nearly impossible to change when needed because they require expensive, time-consuming custom code-based modifications. Because of this, they become a barrier to operational excellence. This usually means that improvement opportunities are lost or work-arounds are developed to accomplish tasks outside of the system. This results in poor data accuracy.

A new type of adaptable manufacturing execution solution has recently been built on the belief that software should be a catalyst for continuous improvement—not an obstacle. These adaptable manufacturing execution solutions not only provide a detailed view of plant history, but their flexible architecture also allows you to reconfigure processes quickly and cost-effectively as your manufacturing operations change. It also provides metrics needed to make fact-based decisions and adapt as manufacturing operations improve over time.

4. Maximized Supplier Relationships

In today's lean and just-in-time manufacturing environments, collaboration with key suppliers is essential. The best manufacturing execution solutions provide manufacturers with the capability to exchange information among trading partners and enable true collaborative execution up and down the supply chain. A secure web portal replaces time-consuming phone calls and faxes as the basis for real-time information sharing and improved inventory visibility—critical factors in enhancing collaboration and streamlining supply chain operations.

Some manufacturing execution solutions also provide both the communication and visibility necessary to facilitate the effective delivery of goods from supplier to buyer. From the point of purchase order (PO) release at the buyer's location through fulfillment, shipment, and receipt, processes that have historically been performed manually—or in some cases simply not performed—are automated. With improved communication regarding compliance and/or serialized labeling requirements, inventory is received at the dock door with the required bar codes already applied. Functionality can also be provided to allow suppliers to perform other value-added services for their customers, including demand-pull replenishment, advanced shipping notification (ASN), and supplier quality inspections.

5. Rapid Product Recall Decisions

Product safety and quality are paramount concerns for manufacturers. When there are concerns about safety or quality, it is essential for manufacturers to have traceability tools that assist them in making product recall decisions. Manufacturing execution solutions aid in this process by capturing detailed product genealogies. When suppliers communicate a product defect, it is possible to trace exactly which finished goods were manufactured using the supplier's defective component. This traceability can be achieved using lot number, serial number, or other product attribute such as version, revision, or "born-on date."

Product recalls often result in enormous costs for the company issuing the recall. In most cases, companies lack information about the affected products. This results in companies inspecting individual products or being overly cautious and recalling products that have no risk of quality or safety issues.

Manufacturing execution solutions bridge this information gap for many manufacturers. With detailed product and order history information, these systems help companies deal with recalls in a timely, cost-effective manor.

6. Leveraged ERP Investment

Manufacturers that have implemented an ERP system have invested significant effort (and money) creating an enterprise software solution. Despite these investments, manufacturers often find their ERP systems do not provide the results they expected on the shop floor. ERPs often fall short because they are overly complex, difficult for shop floor employees to use, and rooted in traditional MRP batch-based processing. A manufacturing execution solution is designed to leverage an ERP investment, not replace it.

Manufacturing execution solutions address these issues by providing intuitive execution capabilities based on a real-time, lean execution philosophy. This means manufacturers get the best of both worlds—easy-to-use execution tools for the shop floor that also support planning decisions by continuously feeding real-time transaction information to the ERP. Manufacturing execution solutions share information with the ERP in real time, allowing the ERP to have an accurate representation of shop floor activities. With real-time visibility to execution, the ERP makes intelligent decisions about supply/demand matching and order promising.

7. Reduced Cost of Regulatory Compliance

Manufacturing environments are becoming increasing regulated. Whether the compliance requirement is for the FDA or Sarbanes-Oxley, the costs associated with achieving compliant processes can be excessive. With a rich transaction history that provides detailed audit trails and electronic approval processes, a manufacturing execution solution will facilitate compliant processes without excessive paperwork and manual work-arounds. Additionally, a manufacturing execution solution is designed to be responsive to change over time. This means that new regulatory requirements are easily met without system upgrades or customizations.

8. Personalized Manufacturing

Customer-specific manufacturing is a trend driving increased complexity and cost for today's manufacturers. Customer specific bills of materials, routings, and test instructions are challenging to manage, but can be a source of competitive differentiation. Manufacturing execution solutions respond to this challenge by offering personalization capabilities that meet today's customer requirements and adapt to meet tomorrow's unforeseen demands. The ability to personalize a manufacturing execution solution is a key benefit—but not one that all applications offer. The greatest level of benefit will be achieved through a solution that accommodates personalization via configuration tool sets. With this type of platform, configurations can be made easily and cost-effectively. This means the manufacturers—not the solution vendors—truly own the system. With a flexible manufacturing execution solution, there is no custom coding required for configuration; changes carry over, and workflow can be altered as needed after the system go-live. The result of this is that the system's total cost of ownership is greatly reduced over the lifetime of the application.

9. Focused Technology Approach

With the most robust manufacturing execution solutions, nearly any station or work cell in the facility can be integrated into the system and either monitored, controlled, or reported against. Machines, scales, gauges, statistical process control (SPC) systems, PLCs, label printers, serial devices, PDAs, automated material handling equipment, wired and wireless terminals, and RFID systems are integral parts of manufacturing execution—and the best manufacturing execution solutions will integrate seamlessly with all of them. Manufacturing execution solutions often feed multiple host systems and facilitate reporting beyond the current capabilities of many ERP systems. Solving the problems inherent in today's manufacturing environment is best accomplished using a modular technology approach. Manufacturing execution solutions start with bar code or RFID data acquisition to improve order visibility and extend beyond basic data collection as appropriate in each company's individual situation. This allows for a right-sized application based on current business needs and areas requiring the most attention. Oftentimes, this provides self-funding for future projects because ROI is generated quickly.

10. Increased Business Value With Collaborative Manufacturing

In today's emerging global economy, seamless communication does not stop at the four walls of the plant. Sharing information in real time both within the enterprise and beyond is an essential component to maintaining information integrity and achieving operational excellence. This communication must also include supply chain-wide notification of status and events in real time to effectively link a global network of suppliers, manufacturers, and customers. The right manufacturing execution solution will empower manufacturers to achieve seamless integration across their business systems and software—while protecting IT investments and customer relationships. It will achieve this by integrating web-based solutions directly with enterprise and business-to-business applications. A manufacturing execution solution should also provide the platform for real-time information flow, eliminate process gaps, and deliver competitive advantage—eliminating the delays and errors caused by systems that cannot effectively share operational data.

Finding the Right Manufacturing Execution Solution for Your Unique Environment

As you move toward coupling your manufacturing operations tightly with logistics, transportation, and customer demand, finding the right solution is key. As with any enterprise-wide software evaluation process, there are a handful of important questions that must be answered prior to selecting a vendor. You must be able to find a solution that addresses your business's specific pain points at a cost that works within your budget. For each vendor involved in the selection process, it is essential that your selection team gather detailed responses to the following issues: Breadth of technology—Does the vendor offer a wide range of supply chain-related solutions that integrate easily on the same platform? Does it have experience integrating with a variety of software and hardware systems? Does it have a history of releasing product upgrades containing new functionality that demonstrates a commitment to excellence in the space? Ability to adapt to change—How does the vendor approach changes to your system as your requirements shift? Does it utilize costly custom code? Do these changes carry forward during an upgrade?

Company history—Has the company been in business for a number of years? Does it have a track record of solving problems for manufacturers? Does the product line demonstrate progressively more complex technologies developed using the most advanced toolsets? Financial stability—Will the company be around in three years to support the system you have purchased? Are the vendor's sales growing? Does the company have a sufficient amount of emergency capital in case of an economic downturn? Customer base—Does the vendor have a long list of satisfied customers? Are the majority of these customers referenceable? Can the vendor prove it can keep customers happy over the long term? Implementation success—Has the company ever had a failed implementation? If so, how recently? What were the reasons?

Conclusion

By now the good news for manufacturers should be clear: manufacturing execution solutions offer a host of bottom-line benefits through the creation of a “paperless shop-floor environment.” The most effective manufacturing execution solutions will provide you with the tools necessary to cost-effectively increase productivity, eliminate non-value-added activities, decrease operating costs, and eliminate the potential for errors and waste. By leveraging this type of solution to streamline your operations and "go paperless" on the shop floor, you'll have the information and processes in place to meet stringent customer demands on time, every time.

10 Key Ways “Going Paperless” With Your Manufacturing Operations Will Drive Immediate Cost "

Manufacturing Tax Tips

Manufacturing companies may be liable for manufacturer excise taxes as well as the federal highway vehicle use tax. These companies may also be eligible to claim an income tax credit or a refund for gasoline, diesel fuel, or kerosene that is used in nontaxable uses. Manufacturers are responsible for manufacturers taxes on the following items. (For more information on each item listed, see IRS Publication 510, Excise Taxes,

Sport fishing equipment—tax based on the sale price of the item
Bows—tax based on the sale price of the item
Arrow components—tax based on the sale price of the item
Coal—tax based on either sale price of the item or weight of the item
Tires—tax based on the weight of the item
Gas guzzler automobiles—tax is based on the fuel economy rating of the automobile

Vaccine—tax is based per dose
For purposes of reporting and paying manufacturers’ taxes, a manufacturer includes both producers and importers.

A manufacturer is any person who produces a taxable article from new or raw material, or from scrap, salvage, or junk material by processing or changing the form of an article or by combining or assembling two or more articles. If you furnish the materials and keep title to those materials, and to the finished article, you are considered a manufacturer even though another person actually manufacturers the taxable article.

A sale is defined as the transfer of title to, or the substantial incidents of ownership in, an article distributed to a buyer for consideration which may involve the receipt of money, services, or other things. A sale can include both use and lease of an article.

A manufacturer who uses a taxable article is liable for the tax in the same manner as if it were sold. The lease of an article (including any renewal or extension of the lease) by the manufacturer is generally considered a taxable sale. However, for the gas guzzler tax, only the first lease (excluding any renewal or extensions) of the automobile by the manufacturer is considered a sale.

Credits or Refunds

A credit or refund of the manufacturers taxes may be allowable if the tax paid article is, by any person:

Exported

Used or sold for use as supplies for vessels (except for coal and vaccines)
Sold to a state or local government for its exclusive use (except for coal, gas guzzlers, and vaccines)
Sold to a nonprofit educational organization for its exclusive use (except for coal, gas guzzlers, and vaccines)
In addition a credit or refund of manufacturers taxes may be allowable for the following special cases:

Taxable articles in which the price is readjusted by reason of return or repossession of the article

Tax paid articles for further manufacture of another article subject to the manufacturers taxes (except for coal)

Heavy Highway Use Vehicle Tax

A truck or truck tractor is subject to the highway vehicle use tax if it: Is a highway motor vehicle (generally, a vehicle moved by its own motor and designed to transport a load over the public highways, even if it is designed to do other things)
Is registered or required to be registered for highway use Is used on a public highway, and
Has a taxable gross weight of at least 55,000 pounds (taxable gross weight means the weight of the vehicle plus the weight of the trailers and semi-trailers customarily used in connection with vehicles of the same type, plus the weight of the maximum load customarily carried on vehicles, trailers, and semi-trailers of the same type)
The tax applies to the first use of a taxable vehicle on a public highway during the taxable period, which is each July 1st through June 30th. The person in whose name a taxable vehicle is registered or required to be registered must pay the tax on Form 2290, Heavy Highway Vehicle Use Tax Return (PDF, www.irs.gov/pub/irs-pdf/f2290.pdf). The tax is due by the last day of the month following the month in which the vehicle is first used during the taxable period. Thus, if you use a taxable vehicle in July, you must file Form 2290 by August 31st. See Form 2290, Heavy Highway Vehicle Use Tax Return (PDF), and Publication 378, Fuel Tax Credits and Refunds (www.irs.gov/publications/p378/index.html).

Fuel Tax Credits and Refunds A federal excise tax is imposed on gasoline ($.184 per gallon), clear diesel fuel ($.244 per gallon), and clear kerosene ($.244 per gallon). The amount of these taxes may be credited or refunded if these fuels are used in many types of off-road uses. Common off-road uses include use as heating oil, use in stationary engines, use in non-highway vehicles, and use in separate engines mounted on highway vehicles.

Generally, refunds of $750 or more may be claimed quarterly on Form 8849, Claim for Refund of Excise Taxes. Claims not made on Form 8849 may be claimed as income tax credit on Form 4136, Credit for Federal Tax Paid on Fuel. See the forms and their instructions for specific claim requirements.

Note that a credit or refund is not allowable for the following: Any use in the propulsion engine of a registered highway vehicle, even if the vehicle is used off the highway.

Any fuel that is lost or destroyed through fire, spillage, or evaporation.

Any use of dyed diesel fuel or dyed kerosene. In fact, you may be subject to a substantial penalty if you use dyed fuel as a fuel in a registered diesel-powered highway vehicle.

It is important to keep records to support your claim. Keep these records at your principal place of business. These records should establish the number of gallons used during the period covered by the claim, the dates of purchase, the names and addresses of suppliers and amounts bought from each in the period covered by the claim, the purposes for which you used the fuel, and the number of gallons used for each purpose.

Source: Internal Revenue Service, “Excise Taxes - Manufacturing Tax Tips,”

Understanding Manufacturing Costs

Three Types of Manufacturing Costs

Manufacturing cost estimates can usually be organized as shown below.

1. Upfront Costs

a. Development "Guestimate." Usually this is only an order-of-magnitude opinion of how difficult it might be to develop a "production ready" technology.

b. Product Design—This is the work needed to specify a component in such a way that it can be produced. This differs from development in that there is no unproven product or production technology involved. There is usually iteration among the product designer, the tool designer, and the production people to optimize the design.

c. Tooling Design and Fabrication—This is u
sually done by the tool maker. Production levels and peak capacity have the biggest impact. Tool life must also be considered.

2. Production Setup—The cost to set up for a production run, this usually includes some amount for the waste generated while tuning and testing the process. It is often impractical to set up for less than ten or twenty thousand units with mass production techniques.

3. Production Costs

a. Component Production Cost—This is the incremental cost to produce "one more item" after it is in production. This usually includes raw material, machine time cost, machine operator cost, supplies, and post-production finishing.

b. Assembly
Setup and Assembly Cost—This is similar to the corresponding items for component production cost.

c. Quality Control—This addresses what sample testing might be needed to ensure that the units work as intended.

“Manufacturing Cost Estimates for Inventions,” www.octs.com/inventhelp/mfrcost.htm

Seven Key Points for Estimating Manufacturing Costs

1. Comparing a product to others can give a rough idea of manufacturing cost when you know the markup.
2. The minimum order price is often the biggest start-up cost. 3. A sensible strategy helps manage risk. Cost depends on the strategy you choose.
4. If you cannot describe your strategy, an estimate will be a waste of time and money.
5. Estimates usually include upfront, setup, and incremental production costs.
6. Patents that are prepared before manufacturing issues are analyzed may be of little value.
7. A preliminary technical evaluation can get you pointed in the right direction when you need to develop a strategy.

Source: O’Connor Technical Systems, “Manufacturing Cost Estimates for Inventions,” www.octs.com/inventhelp/mfrcost.htm

10 Key Ways “Going Paperless” With Your Manufacturing Operations Will Drive Immediate Cost Reduction, www.highjumpsoftware.com/promos/supply-chain-execution-wms-costs.asp

Manufacturing Tax Tips

Manufacturing companies may be liable for manufacturer excise taxes as well as the federal highway vehicle use tax. These companies may also be eligible to claim an income tax credit or a refund for gasoline, diesel fuel, or kerosene that is used in nontaxable uses.

Manufacturers are responsible for manufacturers taxes on the following items. (For more information on each item listed, see IRS Publication 510, Excise Taxes, www.irs.gov/publications/p510/index.html.)

Sport fishing equipment—tax based on the sale price of the item
Bows—tax based on the sale price of the item
Arrow components—tax based on the sale price of the item
Coal—tax based on either sale price of the item or weight of the item
Tires—tax based on the weight of the item
Gas guzzler automobiles—tax is based on the fuel economy rating of the automobile
Vaccine—tax is based per dose

For purposes of reporting and paying manufacturers’ taxes, a manufacturer includes both producers and importers.

A manufacturer is any person who produces a taxable article from new or raw material, or from scrap, salvage, or junk material by processing or changing the form of an article or by combining or assembling two or more articles. If you furnish the materials and keep title to those materials, and to the finished article, you are considered a manufacturer even though another person actually manufacturers the taxable article.

A sale is defined as the transfer of title to, or the substantial incidents of ownership in, an article distributed to a buyer for consideration which may involve the receipt of money, services, or other things. A sale can include both use and lease of an article.

A manufacturer who uses a taxable article is liable for the tax in the same manner as if it were sold. The lease of an article (including any renewal or extension of the lease) by the manufacturer is generally considered a taxable sale. However, for the gas guzzler tax, only the first lease (excluding any renewal or extensions) of the automobile by the manufacturer is considered a sale.

Credits or Refunds

A credit or refund of the manufacturers taxes may be allowable if the tax paid article is, by any person:

Exported

Used or sold for use as supplies for vessels (except for coal and vaccines)

Sold to a state or local government for its exclusive use (except for coal, gas guzzlers, and vaccines)

Sold to a nonprofit educational organization for its exclusive use (except for coal, gas guzzlers, and vaccines)

In addition a credit or refund of manufacturers taxes may be allowable for the following special cases:

Taxable articles in which the price is readjusted by reason of return or repossession of the article Tax paid articles for further manufacture of another article subject to the manufacturers taxes (except for coal)

Heavy Highway Use Vehicle Tax

truck or truck tractor is subject to the highway vehicle use tax if it:
Is a highway motor vehicle (generally, a vehicle moved by its own motor and designed to transport a load over the public highways, even if it is designed to do other things)
Is registered or required to be registered for highway use
Is used on a public highway, and Has a taxable gross weight of at least 55,000 pounds (taxable gross weight means the weight of the vehicle plus the weight of the trailers and semi-trailers customarily used in connection with vehicles of the same type, plus the weight of the maximum load customarily carried on vehicles, trailers, and semi-trailers of the same type)
The tax applies to the first use of a taxable vehicle on a public highway during the taxable period, which is each July 1st through June 30th. The person in whose name a taxable vehicle is registered or required to be registered must pay the tax on Form 2290, Heavy Highway Vehicle Use Tax Return (PDF, www.irs.gov/pub/irs-pdf/f2290.pdf). The tax is due by the last day of the month following the month in which the vehicle is first used during the taxable period. Thus, if you use a taxable vehicle in July, you must file Form 2290 by August 31st. See Form 2290, Heavy Highway Vehicle Use Tax Return (PDF), and Publication 378, Fuel Tax Credits and Refunds (www.irs.gov/publications/p378/index.html).

Fuel Tax Credits and Refunds

A federal excise tax is imposed on gasoline ($.184 per gallon), clear diesel fuel ($.244 per gallon), and clear kerosene ($.244 per gallon). The amount of these taxes may be credited or refunded if these fuels are used in many types of off-road uses. Common off-road uses include use as heating oil, use in stationary engines, use in non-highway vehicles, and use in separate engines mounted on highway vehicles.

Generally, refunds of $750 or more may be claimed quarterly on Form 8849, Claim for Refund of Excise Taxes (PDF, www.irs.gov/pub/irs-pdf/f8849.pdf). Claims not made on Form 8849 may be claimed as income tax credit on Form 4136, Credit for Federal Tax Paid on Fuel (PDF, www.irs.gov/pub/irs-pdf/f4136.pdf). See the forms and their instructions for specific claim requirements.

Note that a credit or refund is not allowable for the following: Any use in the propulsion engine of a registered highway vehicle, even if the vehicle is used off the highway.

Any fuel that is lost or destroyed through fire, spillage, or evaporation. Any use of dyed diesel fuel or dyed kerosene. In fact, you may be subject to a substantial penalty if you use dyed fuel as a fuel in a registered diesel-powered highway vehicle. It is important to keep records to support your claim. Keep these records at your principal place of business. These records should establish the number of gallons used during the period covered by the claim, the dates of purchase, the names and addresses of suppliers and amounts bought from each in the period covered by the claim, the purposes for which you used the fuel, and the number of gallons used for each purpose.

Reaction time to changes in demand. How quickly should production increase if demand is greater than capacity?
This may be closely related to peak capacity, but there are other considerations.
Would you invest more in tooling that can be quickly modified to produce more parts?
Or, do you want to gamble that you can obtain new, higher-capacity tooling in time to meet demand and avoid losing market share?
Tool delivery time can often be many months.
Do you want the optimum tools and the most expensive options so that you will save money in the long run if you are right about exactly what the market will want?
Or do you want to take a less risky approach with conservative options in case you learn that some changes would increase sales and profits?
Breadth of technology—Does the vendor offer a wide range of supply chain-related solutions that integrate easily on the same platform?
Does it have experience integrating with a variety of software and hardware systems? Does it have a history of releasing product upgrades containing new functionality that demonstrates a commitment to excellence in the space?
Ability to adapt to change—How does the vendor approach changes to your system as your requirements shift? Does it utilize costly custom code? Do these changes carry forward during an upgrade?
Company history—Has the company been in business for a number of years?
Does it have a track record of solving problems for manufacturers?
Does the product line demonstrate progressively more complex technologies developed using the most advanced toolsets?
Financial stability—Will the company be around in three years to support the system you have purchased? Are the vendor's sales growing?
Does the company have a sufficient amount of emergency capital in case of an economic downturn?
Customer base—Does the vendor have a long list of satisfied customers?
Are the majority of these customers referenceable?
Can the vendor prove it can keep customers happy over the long term?
Implementation success—Has the company ever had a failed implementation?
If so, how recently? What were the reasons?

What is Manufacturing?

The term "manufacturing" covers a broad set of functional tasks required to harness all the elements needed to make a product.