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For example, if material usage variances are high and equipment usage is high, it may appear as if the asset is near failure, in this case however, excessive energy usage could simply be due to poor material or formula quality and the equipment is performing properly.
"Our goal is to increase NOI by driving usage variances to zero," Apostolos says.
Generic Certificates of Conformance can be replaced with a report that includes SPC and Cpk analysis, unexpected manufacturing variances (such as longer cycle time for a specific feature), and even down to the minute details including tooling usage variances and lead-time information on raw materials.
Production departments are responsible for using resources, so each foreman is responsible for his or her usage variances.
This activity causes unfavorable materials and labor usage variances and potentially labor rate and variable overhead variances within the Assembly Department.
Instead, unfavorable usage variances that result in subsequent departments are considered their responsibility.
The computer system tracks and reports the material and labor usage variances. Labor rate variances are obtained from the payroll system.
* Cost Management Systems: Including, at least, weekly materials usage variances tied to specific products and operating lines.