Unit Cost Improvement


Unit Cost, Unit Product Cost, Unit Cost Improvement, Lean Consulting

Unit cost is the cost acquired to produce, store, and sell one unit of a specific product. Unit costs include all fixed and variable costs. The variable costs can be broken into the two main categories of direct labor and direct material.

We can now look at a Profit and Loss statement as to where we can directly apply our process improvement capabilities to positively impact these three leading categories.

At Lean Teams USA we have identified and improved on these related unit cost sub-groups:

  1. Production capability (meeting scheduled orders, or when afforded, exceeding scheduled sales)
  2. Capital equipment avoidance (Throughput improvement through cycle time improvements)
  3. Direct labor wages (overtime reduction, training and development)
  4. Direct material cost (focus on meeting quality targets, scrap, suppliers, Obsolescence)
  5. Maintenance (Maximizing OEE Overall Equipment Effectiveness)
  6. Consumables (Preventative maintenance improvement, 5S program)
  7. Utilities (TPM Total Productive Maintenance, Power Management)
  8. Insurance (TWI programs to improve safety – reducing insurance costs)

A unit cost improvement strategy uses many of the Lean Sigma tools and is either the main focus or an extension of your continuous improvement program.

Lean Teams USA