Nearly every manufacturing manager has been directed to reduce product cost by some monetary or percentage amount. It’s a task that is simply stated, but because of the intricacies—really distortions—associated with most costing systems focused on external financial reporting, it’s also a task that is far from clear in execution.
You can improve the efficiency of your workforce, but unless you terminate or move people outside the “direct and overhead” cost pools that feed product cost, those savings won’t be recognized. The surest savings is reducing material waste, but that can be convoluted by raw material inventory calculations or resistance from purchasing.
