This Slideshare presentation is a partial preview of the full business document. To view and download the full document, please go here: http://flevy.com/browse/business-document/robust-production-management-rpm-module-6-unit-costs-464 Unit costs can tell more about the health of an organization than any other indicator. But what if your company doesn't produce typical "widgets" (say - in a back office processing environment)? Robust Production Management (RPM) Module 6 "Unit Costs" walks you thru the calculations with examples and templates - for any business, anywhere. "Unit Costs" is the sixth module in the Metrilogics RPM management training series - more on the way.

1. Copyright © 2005 Metrilogics, LLC. All rights reserved.
Robust Production Management
Metrilogics
Front-line controls for bottom-line savings.
TM
SM
Module 6:
Unit Costs
By Lance Latham
Senior Managing Partner

2. Copyright © 2005 Metrilogics, LLC. All rights reserved.
Metrilogics
TM
Definition of Unit Costs
Unit Costs represent the “per unit” operating cost associated with
completing task work.
v Direct and Indirect costs spent by an organization for a given
period of time (day week, month, quarter, year, etc.)
v Task hourly capacity rates
v Task volumes completed for the same period
Unit Cost analysis works within the overall Performance
Framework (see Module #2) and takes into account the same key
variables, including:
2
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3. Copyright © 2005 Metrilogics, LLC. All rights reserved.
Metrilogics
TM
Benefits of Performing Unit Cost Analysis
v Managing Unit Costs helps increase profitability and reinforces
a company’s competitive position (see example on next slide).
v Unit Cost analysis enables managers to assess “per unit”
performance and track improvement at every level of an
organization, including the individual team member,
production unit, department, cost center and the corporation as
a whole.
v Unit Cost analysis enables managers to assess “per unit”
performance and track improvement for every process task.
All of the above benefits help managers to focus on what is and isn’t
working within an organization, thus reinforcing individual accountability,
facilitating waste reduction efforts, and driving company profits.
5
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4. Copyright © 2005 Metrilogics, LLC. All rights reserved.
Metrilogics
TM
How to Calculate Unit Costs (cont.)
As an example, assume that an organization performs 3 types of
tasks (A, B and C), and that each task type has its own hourly
capacity rate. Management wants to calculate Unit Costs for each
task, based on the following parameters for the first quarter
(January 1 – March 31):
Task A 15.0 35,195
Task B 3.5 7,228
Task C 40.0 22,515
Hourly Capacity Rate # Completed Units
Total Operational Direct and Indirect costs:
$210,750.00
8
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5. Copyright © 2005 Metrilogics, LLC. All rights reserved.
Metrilogics
TM
Example of a Unit Cost Template
Logistics / Supply Chain Example
11
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6. Copyright © 2005 Metrilogics, LLC. All rights reserved.
Metrilogics
TM
Preview of Module 7: Resource Alignment Matrix
In Module 7 we will examine the
Resource Alignment Matrix (RAM), including:
v Definition of a Resource Alignment Matrix
v The benefits of using a Resource Alignment Matrix to assess
front-line team member contributions and potential
v Example of a Resource Alignment Matrix template
14
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