Internal manufacturing can be thought of as the opposite of outsourcing. It covers everything you create in-house, usually without an end client in mind. Similar to how, when outsourcing, your suppliers will send you the bill, internal manufacturing comes with its own costs. Even though you don’t need to see these costs directly, it’s important to keep track of them.
Tracking your costs for internal manufacturing can have a huge number of benefits. Firstly, when you know your costs, you can know how much profit you make when you sell your products. It can help you set your per-unit pricing and what bulk discounts make sense for you to have. Usually, the more you produce at once, the less the cost per unit is, but without tracking your costs, including labour and materials, you can't know how much that cost has changed.
The second reason it's important to track your costs is to check if different methods work better. Without tracking, it's difficult to test new processes and know if you're saving money, and it can be hard to judge whether outsourcing parts of your production can improve your costs or not.
Tracking internal manufacturing is a lot like tracking any other project in your business, with a few extra steps. When working on your production, you'll still want to track your team's time and cost of materials, which are the main costs that make up your product price.
You'll want to divide your costs per unit to get an accurate idea of how much production has cost you. This can be tricky when you've worked on producing multiple products with different values in the same run. The maths can get complicated, but you can rely on systems that can help you.
In WorkGuru.io's internal manufacturing tracking, the costs of production are split depending on the value of the materials produced. So, if you build 5000 units valued at $1 and 100 items valued at $20, the costs will be split accordingly.
Once the costs have been split, you can get an accurate idea of your profit margins on those items and the price you need to charge.
Here's a quick video to show you how that will look for your business.