In the sanitaryware industry, the production cost is calculated based on the cost per kg. Monthly production costs are important for understanding production efficiency and improving it.
To improve, one must look closely at the numbers element-wise. This helps us understand why and how to reduce costs. Today’s competitive, price-sensitive market makes production cost the basis of product cost. So, in this article, we will deep dive into elements of sanitaryware production costs and discuss them one by one.
A simple production cost calculation is the total spending cost on all the below elements divided by the total kg produced and sent to packing as cost per kg.
Cost per Kg = Total Spending on Production Elements/Total Kg Produced and Sent to Packing
The following are the elements in the Sanitaryware production cost:
Raw Material Cost:
Raw material costs are the first element in the production cost. These raw materials can be divided into three sections. They are, 1) raw materials for slips. 2) Raw materials for glaze. 3) Plaster Cost.
Having separate material costs for slip, material costs for glaze, and material costs for plaster will help to understand where the cost is going per kg.
The cost is the total consumed per month, considering stock.
Manpower Cost:
All labor costs, including those for production staff, will be categorized as manpower costs within the overall production cost. Sanitaryware manufacturing is labor-intensive, typically accounting for around 30-40% of the production cost. It will vary based on the automation level.
The labor cost method varies based on the type of contract. Generally, well-structured & technically strong companies use permanent or contractual labor. The second type is labor paid by piece rate. Labor is paid for the output they provide. These companies lack quality control measures, which leads them to outsource their labor.
Comparing both types of manpower cost, the piece rate payment method is higher in cost.
Energy Cost:
Power & fuel costs are the energy cost elements in the Sanitaryware production process. This is another major cost factor in the sanitaryware cost per kg.
Compared to other elements, energy costs exhibit significant fluctuations from one country to another. Countries with significant oil exports tend to have lower percentages of energy costs.
Consumable Cost:
Everyday consumable items like sponges, scouring pads, gloves, etc. are cost elements in production. Avoiding waste and maximizing the use of consumables will help reduce costs.
Providing proper consumables to get a high firing yield will reduce the overall cost of production. the cost.
Maintenance Cost:
All costs of machine spare parts, labor cost related to maintenance, scheduled maintenance cost, outsourcing costs of machine maintenance, and consumables related to maintenance like oil, etc. are included in this cost element.
Doing preventive maintenance to avoid emergency breakdown will help to reduce the overall production cost as well as the maintenance cost.
Maintenance service costs can be amortized to get the correct cost element. For example, air compressor service with an interval of 6 months can be divided into six months and added to the production cost.
Other costs:
Any cost associated with water is included in the water cost element.
Recycling water and related water treatment will also be added to this section, or some companies will add this cost to the maintenance cost.
Conclusion:
In total, we can see 9 cost elements are present in the sanitaryware production cost. 1) Body raw material cost, 2) Glaze raw material cost, 3) Plaster cost, 4) Labor cost, 5) Fuel cost, 6) Power cost, 7) Consumable cost, 8) Maintenance cost, and 9) Water cost. By analysis, these cost elements can be reduced and optimized.
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