How you can control operating overhead ?

Operating Overhead can be controlled by revising the resources planning with their allocations, making SOP's for each operation & performance management.

 overheads can be reduced by increasing the effieciency of the production and regularly setting bughets for these expanses and the aactual should be compared with bughted costs and the elments which cause the overhead should be minimised

For controlling the operating overheads we should make operatinal bugets,forcast the  position of demand and supply to set sales targets and improves productin efficiencies for a particulars time frame and update the same according to market demand acceliration and penetration ratios.

Perform variance analysis with budget and cost. Identify the major reasons for the variance if occurred then rectify it according to situation.

Operating overhead can be controled by continuos monitoring and by the suitable cost reduction methods for material and services. All the busgets are monitored with actual consumption. Cost variance analysis is most important to reduce the overheads.

By increasing the prodcution efficiency 

Reduce NVA OEE implementation ME implementation

An operating overhead is direct overhead.  This is a major overhead component of any production.  One of the best method to control this is to define bill of material for the production and comparing the standard consumption vs. the actual consumptio.

* Introduce the budgeting process such as estimate based on expected output and record the actual overheads and identify the varainces and justify the reasons and overhead abnormal or no valid reason take immediate action.

* Introduce performance incentive scheme.

* Reduce wastage & repairs by analytical methods. 

we shouid be knowing the cost items and contribution made by such items.. items of less contribution should be kept at minimal use. hr functions plays a very vital role in cutting operational cost. if employee uses the resources optimally amd not waste thinking as company money will also help citting cost.. you need to analyse every major cost heads and study the trend

1) Improved supply chain logictsic / cost optimization

    Procurement cost of raw materials, credit cycle, inventory carrying cost, 

    manpower cost, reduced cycle time for manufacturing, cost of

    transportation.

 

2) Improved productivity of manpower & machine utilization.

   

3) Increased economy of scale 

    Lower production cost per unit,