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What Effect Does Product Assembly Have on Production Costs?

What Effect Does Product Assembly Have on Production Costs?

One of the many challenges associated with manufacturing a new product is finding cost-effective methods of managing production. As demand for a product increases, businesses often explore alternative ways of getting products out the door fast, efficiently and error-free. 


Factors Affecting Production Costs

Production costs fall into three categories: direct materials cost, direct labor cost and manufacturing overhead.

Direct Materials

Maybe the most obvious component of manufacturing a product, direct materials includes all raw materials needed to make the finished product. 

Direct Labor

Direct labor costs include the cost to pay your workers who are responsible for each unit of production. Assembly workers are a good example of direct labor costs. 

Manufacturing Overhead

This includes any manufacturing cost that is neither materials nor labor costs. These can include indirect labor such as management and maintenance staff, indirect materials such as factory supplies, or other indirect manufacturing costs like rent, utilities, property tax. 

Benefits of Product Assembly

Specialization of Labor

The product assembly process employs an assembly line in which a sequence of workers and machines each perform a specific task that moves the product toward its finished form. This allows assembly workers and engineers to optimize each task within the sequence and as a result, overall production becomes more efficient and cost-effective. 

Lower Cost Per Unit

With increases in production, a 3PL product assembly team reduces the direct labor cost of production. By reducing labor costs, the total cost of production goes down, thus, reducing the total cost per unit. 

Uniform Product

One additional benefit of assembly line production is that the regimented process creates a very uniform finished product. These products are less likely to vary from each other and ensures all customers are getting the same high-quality products as expected. 

Companies That Assemble Products for You

When looking to reduce cost of production, it’s important to consider the services offered by an outsourced product assembly partner like NewStream Enterprises, LLC in Springfield, MO and Joliet, IL. Outsourcing not only gives you improved assembly line production, but also can offer a wide range of other value-added services. Outsourcing to the right company, rather than handling your assembly needs in house, can give you a more streamlined solution that considers other needs such as warehousing, kitting, sub-assembly, supply chain management, packing and shipping.

Tagged: sub-assembly

Feb 5, 2020 12:07:00 PM