Labour cost: might be different machine, different skill set, Over time Pay etc. Transition cost: transfer the product line from the other plants to Cookville. Limited capacity: Cookville's machine has limited capacity in producing drill pits. Once the limit has been overpassed, there's no more room to improve overall production. Cut other overhead costs: The article mentioned 'Since reducing the production costs of individual machine parts is the only way to achieve our larger goal of reducing our overall production costs' which is not right. i.e. Production costs = direct cost + indirect cost. Labor, rental costs are also attributed to product costs. Therefore we're able to improve the efficiency through mutliple cost cutting projects rather than simply boosting the machine operating hours. Just my two cents. It could be more. |