Robust Production Management (RPM) Module 6: Unit Costs

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Unit costs can tell more about the health of an organization than any other indicator. But what if your company doesn't produce typical "widgets" (say - in a back office processing environment)? Robust Production Management (RPM) Module 6 "Unit Costs" walks you thru the calculations with examples and templates - for any business, anywhere. "Unit Costs" is the sixth module in the Metrilogics RPM management training series - more on the way.

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Robust Production Management (RPM) Module 6: Unit Costs

  1. 1. Copyright © 2005 Metrilogics, LLC. All rights reserved. Robust Production Management Metrilogics Front-line controls for bottom-line savings. TM SM Module 6: Unit Costs By Lance Latham Senior Managing Partner
  2. 2. Copyright © 2005 Metrilogics, LLC. All rights reserved. Metrilogics TM Definition of Unit Costs Unit Costs represent the “per unit” operating cost associated with completing task work. v Direct and Indirect costs spent by an organization for a given period of time (day week, month, quarter, year, etc.) v Task hourly capacity rates v Task volumes completed for the same period Unit Cost analysis works within the overall Performance Framework (see Module #2) and takes into account the same key variables, including: 2 This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/robust-production-management-rpm-module-6-unit-costs-464
  3. 3. Copyright © 2005 Metrilogics, LLC. All rights reserved. Metrilogics TM Benefits of Performing Unit Cost Analysis v Managing Unit Costs helps increase profitability and reinforces a company’s competitive position (see example on next slide). v Unit Cost analysis enables managers to assess “per unit” performance and track improvement at every level of an organization, including the individual team member, production unit, department, cost center and the corporation as a whole. v Unit Cost analysis enables managers to assess “per unit” performance and track improvement for every process task. All of the above benefits help managers to focus on what is and isn’t working within an organization, thus reinforcing individual accountability, facilitating waste reduction efforts, and driving company profits. 5 This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/robust-production-management-rpm-module-6-unit-costs-464
  4. 4. Copyright © 2005 Metrilogics, LLC. All rights reserved. Metrilogics TM How to Calculate Unit Costs (cont.) As an example, assume that an organization performs 3 types of tasks (A, B and C), and that each task type has its own hourly capacity rate. Management wants to calculate Unit Costs for each task, based on the following parameters for the first quarter (January 1 – March 31): Task A 15.0 35,195 Task B 3.5 7,228 Task C 40.0 22,515 Hourly Capacity Rate # Completed Units Total Operational Direct and Indirect costs: $210,750.00 8 This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/robust-production-management-rpm-module-6-unit-costs-464
  5. 5. Copyright © 2005 Metrilogics, LLC. All rights reserved. Metrilogics TM Example of a Unit Cost Template Logistics / Supply Chain Example 11 This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/robust-production-management-rpm-module-6-unit-costs-464
  6. 6. Copyright © 2005 Metrilogics, LLC. All rights reserved. Metrilogics TM Preview of Module 7: Resource Alignment Matrix In Module 7 we will examine the Resource Alignment Matrix (RAM), including: v Definition of a Resource Alignment Matrix v The benefits of using a Resource Alignment Matrix to assess front-line team member contributions and potential v Example of a Resource Alignment Matrix template 14 This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/robust-production-management-rpm-module-6-unit-costs-464
  7. 7. 1 Flevy (www.flevy.com) is the marketplace for premium documents. These documents can range from Business Frameworks to Financial Models to PowerPoint Templates. Flevy was founded under the principle that companies waste a lot of time and money recreating the same foundational business documents. Our vision is for Flevy to become a comprehensive knowledge base of business documents. All organizations, from startups to large enterprises, can use Flevy— whether it's to jumpstart projects, to find reference or comparison materials, or just to learn. Contact Us Please contact us with any questions you may have about our company. • General Inquiries support@flevy.com • Media/PR press@flevy.com • Billing billing@flevy.com

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