Cost Reduction in Industrial Jigs Manufacturing

Recently cost reduction has become one of the major activities in every manufacturing organization especially from current global competitive market impact. This paper will demonstrate how an electronic Japanese company trying to perform the cost reduction in industrial jigs through the in-house manufacturing activities. By implementing the cost management approach, cost driver is used as tool to define the cost causality. Once the cost causality being determined, then the manufacturing operation management can be established. Since the objective of this paper is to reduce industrial jigs cost through in¬-house manufacturing and to determine the payback of the manufacturing setup investment cost, the implemented methodology is divided into three phases which begin with to determine the cost incurred, then followed by processes and systems applied. All the methodology applied must be well organized to ensure that no unnecessary cost could be shifted elsewhere within the project. While in order to determine the return on investment (ROI) of the project setup of the study, cost benefit analysis is used to measure the economic performance of the manufacturing setup. As for the outcome, in¬-house manufacturing project could only attain about 24% of cost reduction which cover for 51% of total quantity of manufactured jigs within the first half fiscal year of operation. From the cost benefit analysis, the project's ROI with depreciation achievement is about 54% whereas without depreciation could only achieve about 61 % of target which due to several problems that mainly related to the delay in receiving manpower.