Cost reduction in the production process using the ABC and Lean tools: Case Study in the refrigeration components industry

Abstract

This paper focuses on production management with respect to operating costs that relate directly to the value of the product. For this study, three methods were used, ABC - Activity Based Costing, which provides accurate information about the knowledge of the real costs, VSM - Value Stream Mapping and Lean Manufacturing. The method adopted for this research was the case study. The study was conducted at a refrigeration components company in the Industrial Center of Manaus. The analyses and observations initially went through the process of mapping the value stream, measuring the current state of activities (cycle time, setup, etc.). After analysis it was possible to map the cost for each activity and finally calculate the cost of the product before and after the improvements resulting from the lean methodology. The results obtained in this study showed a 20% reduction in product costs resulting from operational improvements. The activity-based cost led to a discovery of the real costs of waste. The steps for this study include process mapping through the value stream, measuring the current state of activities (cycle time, setup, etc.), establishing the cost driver for each activity, and finally calculating the cost of the product before and after the application of lean improvements. The paper was conducted through literature and descriptive review, and used a case study method. It describes the model that has been tested in a production line for a refrigeration components company from the Manaus Industrial Center, achieving a 20% reduction in product cost.

Keywords

• Activity-based cost.
• Value stream mapping
• Lean manufacturing
• Manaus Industrial Center
• Waste