Cost Control For Lean Manufacturing In China

1. Increasing Labor Productivity

The productivity of factory workers is much lower in China than in Europe or North America. Managers are aware of surprisingly few “best practices”.

We typically look for opportunities such as:

• Reorganization of assembly & packing activities into cells;
• Reorganization of machining & fabrication activities in a way that necessitates less labor time;
• Semi-automation, to reduce the amount of time spent on each process;
• Concentration of operators on their task, reduction of non-value-added work.

2. Reducing Costs of Non-Quality

Is the factory aware of the money it loses because of poor quality? Here are the main sources of such costs:

• Scrap or rework;
• Re-inspection after a problem was caught;
• Disruption of the production planning (to expedite an urgency);
• Discounts given to disgruntled customers.
• Our methods to improve quality are exposed here.

3. Reduction of inventory

By reducing set-up times and batch sizes, we can easily get work-in-process inventory down to 1 day in each workshop.

It allows for the following savings:

• Less need for transportation of parts, by locating subsequent processes in an adjacent manner;
• More capital freed up (fewer bank charges).

Read here for more information on how to reduce inventory in a Chinese factory.

4. Re-design of products

When this option is on the table, product designs should be re-examined with the following questions in mind:

• Is it possible to remove a few processing steps? (Example: using fewer screws by placing them differently).
• Is it possible to make errors less likely? (Example: avoiding symmetrical pieces being inserted in the wrong side).
• Is it possible to use more components in common between our different products? (Example: using only black zippers on jackets in all colors).