Factory Overhead Cost Reduction

Appreciate if viewers will give their inputs on FOH Cost Reduction - Key steps to take and further steps for sustainabily.

Re: FOH Cost Reduction - Key steps to take and further steps for sustainability

satishr said:

Appreciate if viewers will give their inputs on this.

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Hi satishr-

Could you give us a definition of "FOH". It is a term I am not familar with.

Re: FOH Cost Reduction - Key steps to take and further steps for sustainability

Fixed Overheads?

Re: FOH Cost Reduction - Key steps to take and further steps for sustainability

CarolX said:

Hi satishr-

Could you give us a definition of "FOH". It is a term I am not familar with.

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FOH means Factory Overheads - Fixed and Variable types

Re: FOH Cost Reduction - Key steps to take and further steps for sustainability

Please list a few examples of Factory Overheads. Thanks!

Re: FOH Cost Reduction - Key steps to take and further steps for sustainability

In general for this sort of thing I would say do the following:

1. Establish an area where you believe savings can be made

2. Setup a team with the goal of reducing the cost for the area identified

3. The team comes up with a set of proposals showing how they intend to reduce the cost

4. With the help of management the proposals are implemented

5. Monitor the effectivness of the changes

6. Review the results and determine the effects and what further action is required

7. go back to step 4

Once completed move on to the next area.

So in effect what I am saying is plan, do, check, act

Re: FOH Cost Reduction - Key steps to take and further steps for sustainability

So, at this point you have not defined specific existing Factory Overheads. Correct?

Re: FOH Cost Reduction - Key steps to take and further steps for sustainability

Marc said:

Please list a few examples of Factory Overheads. Thanks!

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Maunfacturing overhead is generally considered to include everything except direct labor and material costs. Things like electricity, fuel, indirect labor (maintenance, inspection, e.g.) are indirect costs and considered overhead.

The "key steps to make" are simple:

• Identify all costs associated with the area of interest
• Separate them into direct and indirect costs (with "direct" being defined as only what's theoretically necessary to produce the product).
• Examine the indirect costs, and find opportunities for saving money.

Note that this assumes that direct costs have been properly identified and justified. If that hasn't been done, it should be before anything else is done.

Re: FOH Cost Reduction - Key steps to take and further steps for sustainability

Jim Wynne said:

Maunfacturing overhead is generally considered to include everything except direct labor and material costs. Things like electricity, fuel, indirect labor (maintenance, inspection, e.g.) are indirect costs and considered overhead.

The "key steps to make" are simple:

• Identify all costs associated with the area of interest
• Separate them into direct and indirect costs (with "direct" being defined as only what's theoretically necessary to produce the product).
• Examine the indirect costs, and find opportunities for saving money.

Note that this assumes that direct costs have been properly identified and justified. If that hasn't been done, it should be before anything else is done.

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Jim,

In some places I have worked, Manufacturing overhead includes Quality department, and the first one to be trimmed.

Re: FOH Cost Reduction - Key steps to take and further steps for sustainability

JHagani said:

Jim,

In some places I have worked, Manufacturing overhead includes Quality department, and the first one to be trimmed.

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You'll note that I listed "inspection" as an example. And it should be considered overhead, which is not a pejorative term.