Direct Manufacturing Costs Research Articles

Repurposing Consumer Hardware

These days you have to be more and more creative when tackling home technology projects because the inventory of raw material is changing so rapidly. Market and product cycles continue to shrink, standard form factors are being discarded to drive down costs, and pricing is becoming more dependent on market value and less on direct manufacturing cost. As a result, standard modular building blocks are disappearing. New alternative uses for obsolete or low-price products are emerging, however. I enjoy finding ways to extract new value from new or used hardware platforms, so I think it’s still a good time to be a technology hobbyist.

Examining the production costs of antiretroviral drugs

To present direct manufacturing costs and price calculations of individual antiretroviral drugs, enabling those responsible for their procurement to have a better understanding of the cost structure of their production, and to indicate the prices at which these antiretroviral drugs could be offered in developing country markets. Direct manufacturing costs and factory prices for selected first and second-line antiretroviral drugs were calculated based on cost structure data from a state-owned company in Brazil. Prices for the active pharmaceutical ingredients (API) were taken from a recent survey by the World Health Organization (WHO). The calculated prices for antiretroviral drugs are compared with quoted prices offered by privately-owned, for-profit manufacturers. The API represents the largest component of direct manufacturing costs (55-99%), while other inputs, such as salaries, equipment costs, and scale of production, have a minimal impact. The calculated prices for most of the antiretroviral drugs studied fall within the lower quartile of the range of quoted prices in developing country markets. The exceptions are those drugs, primarily for second-line therapy, for which the API is either under patent, in short supply, or in limited use in developing countries (e.g. abacavir, lopinavir/ritonavir, nelfinavir, saquinavir). The availability of data on the cost of antiretroviral drug production and calculation of factory prices under a sustainable business model provide benchmarks that bulk purchasers of antiretroviral drugs could use to negotiate lower prices. While truly significant price decreases for antiretroviral drugs will depend largely on the future evolution of API prices, the present study demonstrates that for several antiretroviral drugs price reduction is currently possible. Whether or not these reductions materialize will depend on the magnitude of indirect cost and profit added by each supplier over the direct production costs. The ability to achieve price reductions in line with production costs will have critical implications for sustainable treatment for HIV/AIDS in the developing world.

At the Heart of Controversy: Genentech Markets a Genetically Engineered Drug

This case, developed from a wide variety of publicly available information, presents ethical and economic issues arising from the development, marketing, and pricing of a biotech drug. Genentech developed TPA, the first genetically engineered drug that could be used in clot-dissolving therapy for heart attack, and marketed it as Activase. Public outrage focused on the disparity between the drug's $10 direct manufacturing cost and what Genentech charged for its drug. Activase/TPA was priced at $2200 a dose, raising immediate concerns about its affordability and therefore availability to those who needed it. Additional issues arise from other events, including concern over related-party relationships between the company and organizations which researched and recommended TPA, as well as aggressive marketing of TPA to physicians and the company's refusal to participate in an international drug study to compare TPA with competitor drugs.

Maximizing supply chain profits with effective order management: integration of activity-based costing and theory of constraints with mixed-integer modelling

The development of a profitable-to-promise order management model in a make-to-order manufacturing environment is presented. The primary objective is to maximize profitability while ensuring that the firm has adequate resources to satisfy demand. The effectiveness of Activity-Based Costing and Theory of Constraints-based approaches is compared to assess order profitability. This order management model uses a mixed-integer program to consider simultaneously capacity, the relevant costs of supply chain resources and profitability. The results suggest that a close examination of cost structures is necessary for choosing an effective framework for a profitable-to-promise application. In manufacturing environments where direct manufacturing costs constitute a relatively small percentage of the total manufacturing cost, it would be beneficial to consider an Activity-Based Costing approach. On the other hand, in environments where direct costs are large, a Theory of Constraints-based approach would suffice.

Low cost processing of CIGS thin film solar cells

A set of low cost techniques with realistic potential for direct manufacturing costs reduction were developed in the last five years while the industrial Cu(In,Ga)Se 2 (CIGS) solar cell production is based on vacuum processes, which require high initial investment into production machines. The common properties of these low cost techniques are the use of simple and fast non-vacuum deposition methods and the prefixing of the film-composition on a molecular level in a precursor layer, which is chemically and thermally treated to form a high quality CIGS film. The paste coating approaches use premixed inks which are applied by doctor-blade coating to yield solar cell efficiencies of 13.6%, with the potential to reach 15% and more in the next years. The choice of the precursor material has to be made with respect to the used selenization conditions to avoid detrimental impurity phases. A new precursor material is discussed, which allows fast conversion in selenium atmosphere and was used to produce solar cells with 6.7% efficiency. The CIGS film thickness has to be increased for complete absorption of the incident light.

Current status and future prospects for the PVMaT project

The goals of the Photovoltaic Manufacturing Technology project (PVMaT) are to help the US PV industry improve photovoltaic manufacturing processes and accelerate cost reductions for PV components and systems. PVMaT is in its ninth year of implementation, and subcontracts with industry have been completed from four solicitations for R&D on manufacturing process problems. We are in the second year of subcontracts for a fifth PVMaT solicitation. Based on the latest (1998) data from ten PVMaT industrial participants, the average direct manufacturing cost for these producers has been reduced by 29% – from $4.08 to $2.91 per peak watt since 1992 – and there has also been a more than five-fold increase in manufacturing capacity – from 13.1 to 73.3 MW. We believe R&D on manufacturing processes contributes significantly to expeditious reductions in PV manufacturing costs, and we identify areas for future R&D.

An integrated fuzzy multi-criteria decision making method for manufacturing strategies selection

Potential of many new manufacturing systems is being roadblocked in many cases by the wrongful use of traditional justification methods. Since, these new systems can offer not only the financial benefits but also longer-term strategic benefits. Thus, piece-by-piece traditional justification approaches, overemphasising short-term saving in direct manufacturing costs rather than longer term company strategic benefits, need to be modified to be able to evaluate those benefits which are long-term and perhaps intangible. The study also presents a further step by introducing the concept of fuzzy set theory in overcoming the precision-based evaluation. Results from this approach present a better understanding of each alternative and an easier approach to decision makers for evaluating issues which cannot be precisely defined.

Ergonomic Improvement in Games Manufacturing: Leveraging One Initial Success into an Integrated Self-Sustaining Ergonomics Effort

Initial success is easy to achieve. Creating a self-sustaining ergonomics improvement process that produces significant, measurable improvements to employee health and safety and manufacturing profitability over the long-term is a challenge. This paper presents the results of a 6-year follow-up study and charts how one games manufacturing company leveraged one initial ergonomics “job improvement” case study into an integrated analysis, design, and planning process which has generated over $1 million in direct manufacturing cost savings—while meeting continuous improvement objectives for employee health and safety. Ergonomics improvement case studies (production staffing modification, equipment re-design, product packaging re-design, and use of ergonomics criteria for new process design) will be presented as examples for each of 4 phases through which the company's ergonomics effort progressed. Lessons learned, including the process for and the utility of assigning primary responsibility for success in the hands of engineering, are provided.

Quality Improvement and Learning in Productive Systems

Recent interest in product quality suggests that effort devoted to improving the quality of manufactured products may reduce unit costs. This conjecture—that improving quality can lower costs—challenges the traditional assumption that unit costs increase with increased quality assurance activities and has significant implications for quality management. By introducing the idea of a quality-based learning curve, this paper links the previously disjoint literatures of quality control and learning curves to explain why high quality and low costs need not be inconsistent. When costs are affected by a quality-based learning curve, product quality favorably influences the rate of cost reduction due to learning. Thus, costs decline more rapidly with the experience of producing higher quality products. Two formulations of the quality-based learning phenomenon are presented. The first assumes that quality-based experience affects direct manufacturing costs. For this formulation, the optimal quality level is decreasing over time, but is always larger than the optimal base-case quality level. The optimal production quantity is constant if the interest rate is zero and increasing in time when the interest rate is positive. The second formulation assumes that quality-based experience affects quality control costs. In this case, the optimal quality level is always increasing over time. The optimal quantity behavior is qualitatively similar to the first formulation. A key feature of the second quality-based model is that it resolves the controversy between the economic conformance level model of Juran, which asserts that one should use cost-tradeoff analysis to find the optimal quality level, and the claims of Deming and Crosby, that zero defects is always the optimal quality level. For certain parameter values, the optimal quality policy in the second model conforms to the economic conformance level model but the dynamics of the model demonstrates the optimality of always pushing towards zero defects.