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1、Reducing Manufacturing Cost to Enhance Competitiveness in Jiahua Electric Co Ltd摘要嘉华电业公司（简称嘉华）是一家以生产、加工电子连接线及电子连接器的电子加工公司。该公司于1980年在香港创建，以其悠久的历史、良好的信誉和优质的产品吸引着一批新老客户。但在2009年初开始，由于产品制造成本的不断增加，公司不得不不断调高其销售价格，最终导致销售额的锐减，同时盈利也减少。经过研究发现，导致公司产品制造成本增加的最主要原因有两个：一是嘉华未能合理地掌控供应商提供的原材料的价格从而导致公司采购的原材料的价格偏高；二是公司生
2、产部门产品的一次合格率偏低，导致生产重工的耗费的工时偏高，同时也增加了生产的成本。本论文通过设计一个成本分析以及谈判的计划，力图掌握供应商提供原材料的成本，从而合理地掌控原材料采购成本价格。同时，本论文也设计一个绩效考核与奖罚政策，减少生产的重工的工时而降低单位产品的生产成本。通过对本论文计划的设计、实施、监督与评估，希望可以探索出一套通过降低销售价格来提高公司竞争力的方法。只有降低销售价格，提高竞争力，公司才可以提高销售额，增加利润，才可能在激烈的市场竞争中立于不败之地。本论文设计的具体目标是：使原材料的采购价格降低10%; 减少制造部重工费用RMB 180,000 元。关键词： 降低原材料
3、成本 ；减少制造部重工费用； AbstractI work as a financial manager as well as human resource manager in Jiahua Electric Co. Ltd (abbr. JH) for over six years. JH is a company that processes electrical components and wiring harnesses; these products are widely used in electric appliances. Being in the electrical m
4、arket for more than twenty years, the company has developed a reputation for manufacturing excellent products for its customers and has maintained its competitiveness for many years. However, the situation had changed drastically in 2009 because of the rising cost of JHs products, and we had to rais
5、e the price of our products. which leads to the loss of many loyal customers, who transferred some of their purchases to our competitors. At the same time, it was difficult to attract new customers. The company thus faced a severe problem of profit losses that year.Through the research of the whole
6、processes of the factory, I found that there are two factors lead to our high sale price of the products. One is the high price of the material, the other is the high cost of the rework costs in the manufacturing department.In order to solve the two problems, we have two ways. Firstly, we can approa
7、ch our suppliers to see if they can get any discounts or we can check out other new suppliers to see if they offer the same materials at lower price. Secondly, we can reduce the rework fee of the manufacturing departments.Key words: reduce the cost of the material ; reduce the cost of rework ; Table
8、 of ContentsPages1. Introduction 72. Project Problem Identification and Analysis8 2.1 Project problem8 2.2 Problem analysis10 2.3 Results of problem analysis113. Project Objective and Hypothesis12 3.1 Project objective12 3.2 Project hypothesis134. Project Rationale135. Project Design 17 5.1 Plan of
9、Activities17 5.2 Critical path analysis19 5.3 People involved in the activities and their responsibilities195.4 Cost consideration205.5 Risk analysis and proposed protective measures216. Project Implementation22 6.1 Plan for the monitoring and evaluation227. Results and Discussion22 7.1 Results22 7.
10、2 Discussion248. Conclusion24Bibliography25Appendix I. Table of Figures 1 The price of the material per month.26Appendix II. Table of Figures 2 Rework time every month in manufacturing department.26Appendix III. Time-scale of the Activities27Reducing Manufacturing Cost to Enhance Competitiveness in
11、Jiahua Electric Co. Ltd.1. Introduction I work as a financial manager as well as human resource manager in JiaHua Electric Co. Ltd (abbr. JH) for over six years. JH is a company which processes electrical components and wiring harnesses; these products are widely used in electric appliances. Being i
12、n the electrical market for more than twenty years, the company has developed a reputation for manufacturing excellent products for its customers and has maintained its competitiveness for many years. However, the situation has changed drastically in 2009 because of the rising cost of JHs produce, a
13、nd we have to rise the price of our product. which leads to the loss of many loyal customers. They have transferred some of their purchases to our competitors; at the same time, it is difficult to attract new customers. The company thus faces a severe problem of profit losses this year.I noticed thi
14、s problem and decided to take the responsibility to change this situation. By analyzing the companys financial statements, it is evident that the rising costs of manufacturing lessen JHs competitiveness .Firstly, we can approach our suppliers to see if they can get any discounts or we can check out
15、other new suppliers to see if they offer the same materials at lower price. Secondly, we can reduce the rework fee of the manufacturing departments. Thus we must be able to purchase reliable material at the cheaper price as well as having well trained workers that can perform their duties effectivel
16、y and efficiently. It is believed that by reducing the cost of manufacturing, our company will be able to manufacture the same products with lower prices and regain its competitiveness gradually, thus regaining its profit in the foreseeable future.2. Problem Identification and AnalysisIn order to be
17、tter understand the problem of our company, I conducted an analysis of the companys current situation, an analysis of the customers needs and wants, and a SWOT analysis to assess the situation of the company.2.1 Project problem2.1.1 The Companys Profile Jia Hua Electric Company (abbr. JH) was first
18、established in Hong Kong in 1980 as a family owned company; the business is only run by three of the family members. It first started by processing wiring harnesses with a limited range in the electrical field. Not until 1992 did the company move to Shenzhen as the owner of the JH saw the great mark
19、et potential in mainland China and at the same time, JH already had many customers in Hong Kong who were planning to move to Shenzhen. As the operating cost of running a business in mainland China is much cheaper than in Hong Kong, the company expanded its business rapidly. Until 2009, its processin
20、g products are widely used in electrical appliances such as televisions, DVDs, mobile phones, LCD monitors and medical equipment.2.1.2 Physical ResourcesThe company owns the property of the manufacturing facility which covers 1000 square meters and the property of the employees dormitory which cover
21、s 900 square meters. It has 45 different kinds of machines processing a wide range of wiring harnesses. The annual processing capacity for these machines can be reached RMB15 million.2.1.3 Financial StatusOver the past few years, JH has maintained its revenue of RMB 9 million and average net profit
22、of RMB 1 million each year. JH reached its peak in 2006; this year the net profit was over RMB 1.67 million with revenue of RMB 11.1 million. However, JH is facing serious profit losses，the net profit was no more than RMB 1.1 million with revenue of RMB 12.2 million in 2009 because of the rising cos
23、t of manufacturing which leads to the loss of many customers as the company decides to increase the selling price to its customers.2.1.4 Human ResourcesThe company has 60 employees working in six different departments. There are 2 employees working in Finance Department, 3 employees working in Perso
24、nnel Department, 2 employees working in Marketing Departing, 1 employee working in Purchasing Department, 4 employees working in Technology Department and 48 Manufacturing Department. 80% of the employees work in the manufacturing department. The company has many experienced employees. About 80% of
25、the employees have worked for JH for more than one year and also 20% of them who served for the company for over 15 years. An ISO (International Standard Organization) system for the company in 2006 also guarantees the company has qualified employees.2.1.5. Customer profileThe company mainly has fou
26、r groups of customers, and the revenues for these customers account for over 85% of the total revenue. These four groups are illustrated as follows: EmployeesMajor ProductsRevenue from Jan to Aug in 2008(RMB000)Revenue from Jan to Aug in 2009(RMB000)Revenue accounts for the total revenue in 2009 (%)
27、1.Channel Well1,600Server, adapter2,8611,60749.322.Keji200Medical equipment45953416.393.Venson600Toys for McDonalds1,09139112.014.TPO2,000Home appliances for Philips7012547.80The above table shows the revenue of these major customers for JH is plummeting this year. The companys purchasing materials
28、are mainly wires and connectors. There are three major suppliers in which the company purchasing over 75% of the total purchases from these suppliers. These suppliers also illustrated below.EmployeesPurchasing materialsPurchases accounts for the total purchase in 2009 (%)1.HR600Connectors54.912.Wond
29、erful2,000Wires13.523.HC60Wires9.55As the purchasing cost represents over 70% of the total manufacturing cost, it is therefore very important to reduce the cost of purchasing material so that the company will enhance its competitiveness and regain its major customers as well as expanding to new cust
30、omers.2.1.6. The PEST AnalysisThe companys major materials are made of copper and therefore, the price of copper is the determining element for its major materials. However, the copper price has fluctuated in recent years. In March 2008, the copper price reached the highest price of US$8325/T. And t
31、hen it fell drastically to US$2825.5/T at the end of 2008 because of the global financial tsunami. In August 2009, it rose back to US$6490/T with the gradual recovery of the global economy.In 2007, the Chinese government also carried out a new regulation of the labor law to go into effect on 1st, Ja
32、nuary, 2008. This regulation has put some new standards on the contracts between the employers and employees and also strengthens the implementation of minimum wages and extra working hours. It is supposed to bring the employees a great benefit but also brought the company some extra costs for imple
33、menting the new law. Thus, it is urgent for the company to improve its current performance appraisal for employees to work more effectively.The percent of the product meet the standard at first time is very low in our company. So the workers have to spend lots of time to rework. Which increase the c
34、ost of produce fee.2.1.7. Needs Analysis of JHIn order to know the factors that affect the cost of manufacturing i.e. material cost and the cost of rework. A needs analysis for the people involved in the purchasing department and the manufacturing department is therefore very essential. Because mate
35、rial cost is related by purchasing department and the rework cost is related by manufacturing department.There is only one person that works in the purchasing department so I had a face to face interview with her directly. The content of the interview is a list of questions related to the factors af
36、fecting the materials, set as a questionnaire which is required to be answered by the interviewer and was recorded in paper. There are 48 people working in the manufacturing department so a questionnaire was designed covering the factors related to the working efficiency？ and the questionnaires were
37、 issued to 20 employees randomly and all were returned back. With the purchasing department, the result revealed that the current price of purchasing material is higher than expected. There are many factors that would affect the purchasing price such as the global market, the total amount of the pur
38、chases, and the scale of the supplier. To acquire a better material price, it is important to negotiate with the current suppliers as well as expanding the companys material purchases to new suppliers.2.1.8. A SWOT ProfileAccording to the analysis of the companys internal and external situation as w
39、ell as the companys needs analysis, a SWOT profile can be shown as follows:Strengths the company has a long history and developed a good reputation in electronics it has a stable financial status during the past few years well experienced employees in manufacturing that ensures the high quality of t
40、he products self-owned property that enables the company for saving the cost of rentingWeaknesses facing profit losses due to the decrease of revenue limited suppliers the current cost of purchasing materials are less competitive inflexible regulations mitigate the working efficiency of the employee
41、sOpportunities On-time payments has attracted new material suppliers Potential customers in mainland China from Chinese governments new policy for increasing the domestic demandThreats facing possible financial hardship because of profit losses the copper price in global market remains unstable new
42、competitors offer lower prices that has carved up JHs revenuesIt reveals that the companys major problem is the high cost of purchasing materials and the rework cost of manufacturing department, which directly lessens the competitiveness, reducing the revenue and finally leads to profit losses. It i
43、s therefore very important for JH to reduce the cost of purchasing materials and increase working efficiency,which can overcome these weaknesses and threats.3. Project Objective and Hypothesis3.1 Project ObjectiveThrough the research of the whole processes of the factory, I found that there are two
44、factors lead to our high sale price of the products. One is the high price of the material, the other is the high cost of rework costs in the manufacturing department.In order to solve the two problems, we have two ways. Firstly, we can approach our suppliers to see if they can get any discounts or
45、we can check out other new suppliers to see if they offer the same materials at lower price. Secondly, we can reduce the rework fee of the manufacturing department.the following objectives are expected to be achieved:1) The price of material reduce 10%.2) The cost of rework at manufacturing departme
46、nt reduce RMB 180,000yuan.3.2 Project HypothesisIt is hypothesized by reducing the price of material and the cost of rework at manufacturing department can reduce the cost of manufacture.The goal of this project can be reached.4. Project Rationale4.1 The way to decrease costs for you manufacturingAs
47、 most of you are probably already aware of the costs for your manufacturing are usually called manufacturing costs and they refer to any costs that you incur to make your product, with the exception of amortization and depreciation. But manufacturing costs can include both fixed and variable costs,
48、remember that fixed costs are costs that stay the same no matter how much of the product you make and variable costs are costs that change depending on the amount of product you are manufacturing. And as most of you are probably already aware of if you can lower your manufacturing costs you can increase your profits, which means more money for the c
