Minimization of Total Cost - Article Example

Your name School affiliation Date Total cost minimization. Introduction From an economic perspective, total cost is the combined cost employed in the production process. Total cost includes fixed cost and the variable cost. Fixed cost is the cost of the necessary equipment for production. Fixed cost does not change irrespective of the quantity of the finished products achieved. Conversely, variable cost is the cost incurred in relation to the desired amount of the products to be achieved. Variable cost would thus include the cost for recruitment and compensation of employees as well as the cost for raw materials. In a production chain, an influence on the total cost would be easily achieved through influencing variable cost(H’mida, Martin, and Vernadat, 17-35). The core goal of businesses is for profit realization. In order to achieve this, costs for sale of the final product must be realistic to cater for the cost of production as well as to give a provision for the profit. It is thus common to find several organization undergoing internal organizational restructuring to adjust on the factors that influence the manner with which profit is realized. In the engineering sector, realization of the ultimate goal of the production process is achievable through reduction in the total cost of production. A successful firm would thus assess the market demand of its final products to determine the profit potentiality of its final products(Ganesan and Paturi, 1-10). Engineering in high scale economics must thus appropriately determine the profit worth of the products as a means of reducing the total cost. A reduction in the total cost would translate to realization of much profit even for the limited productions made. The most attainable mechanism of reduction in the total cost in an alteration in the number of labor force coupled with a reduction in the production line. In certain instances, an increase in the number of employees does not necessarily translate to an increase in the rate of production. There are cases when production reaches its optimum point. Thus, addition of employees to the line of production would not positively influence the production output. Having realized this mechanism, engineering firms in high-cost economics would resort to minimize the cost of production by retrenchment of employees and maintenance of only the essential lines of production. The primary objective of cost minimization is the attainment of the profit value in relation to the goal and objectives of the organization(Santos and Rodrigues, 985). Manufacturing engineering is a system used for turning raw materials into finished products. The process is an effective way of reducing the cost of production. The field of manufacturing engineering entails use of technology with the aid of a limited human resource in the production of high quality and quantity products at an optimum cost. Henry Ford, the founder of the Ford motor company, employed the use of manufacturing engineering to develop the motor assembly line that resulted to an increased production in the quality and quantity of the finished products(Alizon, Shooter, and Simpson, 588). The use of manufacturing engineering employed by Ford reduced the total cost of production by reduction in time spent in the production process. It, therefore, mean that an increased rate in production increased the rate of stock turnover thus, the company could realize a higher margin of profit. Additionally, the assembly lime technology reduced the need of workforce demanded the production process(Laird and Sherratt, 3-9). A reduction in the number of workers led to a reduction in variable cost. Ford used the system to revolutionize the motor production industry achieving its goal of production of a model T automobile that became common among the American middle class who could not afford the expensively produced cars. Assembly line invention in 1913 by Henry Ford revolutionized engineering process of production. The system has resulted to a mechanism that has been adopted world over for the production process delivering supplies that would meet the demands of the world growing population. The core purpose of the assembly line despite constant improvement due to the development of modern technology has relatively remained the same. The system was intended to fasten the rate of production, as well as reduction in the production cost thus creating a high demand for the finished products(Alizon, Shooter, and Simpson, 588). The outstanding features of the assembly line are the potentiality of the system to produce similar products of similar quality. This comes because of specialization of the employees and the subsystems of production. An aspect of specialization leads to a faster rate of production with quality products. Having a comparison of Ford created assembly line and production before the assembly line, the invention of the assembly line system reduced the cost of production by reducing the number of person-hour needed for the production process. It took approximately 10 hours of hard labor to produce one model T car before the assembly line and only 93 minutes to produce the same car with the development of the assembly line(Laird and Sherratt, 3-9). The development of modern technology has thus improved the art of an assembly line with further replacement of human labor with the use of robots. Using machines majorly in engineering production process result to a reduction in the total cost of production with the company only left with the cost of fixed assets to maintain as the variable cost reduces. The system thus has been termed as progressive production allowing for continuity in the production process with one sector of the company doing one part and the other sector making a continuation for the next part. Ford realized that the production of the car models by use of assembly line production process led to the loss of the artisanship that would stand as an identification feature of the car. Most of the rich customers of the company thus withdrew from the purchase of the products terming the car as common and lack luxury value. With the car produced by a multiple of hands, there was entirely no effort made in ascertaining the quality of the car by each of the individual workers. The introduction of A-Model Ford car caused a need to revert the interchangeable system used in the production of the T model. The interchangeable parts of model T car were not the same as those of model A. it thus necessitated the need for additional training of the workers on the functionality of the new model and its manufacturing process. A shift in the production design thus meant an additional cost in the initial process of production due to the need of educating the workers and changing the whole system of production. Changing a model like wisely resulted to a reduction in the speed of the production process, as the workers had to specialize on the assembly process of the new model(Wernle, 12). The abandoning of model T car by henry ford was an attempt to make a production of a unique car that would convince the potentially growing market. With the development of competition from other car manufacturing companies like Chevrolet, the Ford Company realized that a continuation in specializing on a specific model would become monotonous in the market and would lose its market value. It was thus determined that a different model be made that would offer dynamic needs of the consumers while retaining the same Ford name that had captivated the marked. The development of model A car thus came as a replacement of model T as a new offer to the dynamic needs(Alizon, Shooter, and Simpson, 588). Conclusion Reduction in total cost of production is important for attaining the market value for an engineering product. The development of assembly line system by henry ford provided one of the best avenues with which engineering firms could employ for reduction in the production cost. In spite of monotony and boredom created by the system on its employees, the goal of profit maximization by the firm is ultimately realized. Work cited. Alizon, Fabrice, Steven B. Shooter, and Timothy W. Simpson. “Henry Ford and the Model T:.” Design Studies 30 (2009): 588–605. Web. Ganesan, Eswar, and Ramesh Paturi. “Key Performance Indicators Framework - 15th Americas Conference on Information Systems (AMCIS) 2009. N.p., 2009. 1–10. Print. H’mida, Fehmi, Patrick Martin, and François Vernadat. “Cost Estimation in Mechanical Production: International Journal of Production Economics 103 (2006): 17–35. Web. Laird, Robert A., and Thomas N. Sherratt. “The Economics of Evolution: Henry Ford and the Model T.” Oikos 119 (2010): 3–9. Web. Santos, Ana C., and João Rodrigues. “Economics as Social Engineering? Questioning the Performativity Thesis.” Cambridge Journal of Economics 33 (2009): 985–1000. Web. Wernle, Bradford. “Looking at Henry Ford the Man.” Automotive News 87 (2013): 12. Print.  Read More