What is internal manufacturing & how can it help your business?

WorkGuru | What is internal manufacturing & how can it help your business?

Internal manufacturing can be thought of as the opposite of outsourcing. It covers all the things that 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 directly see these costs, it’s important to keep track of them. 

Why track internal manufacturing costs?

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 it makes 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 why 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 can be hard to judge if outsourcing parts of your production can improve your costs or not.

How to track your internal manufacturing costs?

Tracking internal manufacturing is a lot like tracking any other project in your business, with a few extra steps. You'll still want to track your team's time and cost of materials when working on your production. These are the main costs that make up your product price.

To get an accurate idea of how much production has cost you, you'll want to divide your costs per unit. This can be tricky when you've worked on producing multiple products in the same run that have different values. 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 spilt depending on the value of the materials produced. So, if you build 5000 units that are valued at $1, and 100 items that are valued at $20, it 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.

Can’t see the video? Click here.

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