Waste Reduction through the Application of Activity-Based Costing in the Manufacturing Process of Rubber Smoked Sheet: A Case Study of Farmer Institutes in the Southern Areas

Abstract

Regarding waste reduction through the application of activity-based costing, it was found that the activities causing waste had affected the lowering of costs.  The objectives of this research were to study the cost drivers, to analyze the value-added and the non-value-added activities, and to reduce waste by applying activity-based costing in the manufacturing process of smoked rubber sheets. Through conducting in-depth interviews utilizing open-ended questions, the data was collected from 9 farming institutes. The data of the value-added and non-value-added activities, as well as activity-based costing, was then analyzed by using cost drivers, including SIPOC. With respect to the study results on the cost drivers, the processes of manufacturing the rubber smoked sheets had been comprised of 7 main activities and 37 sub-activities, all of which had taken 10,362.5 minutes. The top 4 resource costs, consisting of labor costs, chemical costs, firewood costs, and the depreciation of machinery and equipment, had been 2.14, 0.75, 0.75, and 0.26, respectively. The non-value-added activities had been the smoked rubber activities. After the non-value-added activities had been improved, the total cost of the resources decreased from 4.53 to 3.89 baht per kilogram, which is equivalent to 14.1 percent. In other words, after 8 of the sub-activities had been decreased to 4 sub-activities, the time was reduced from 10,220 minutes to 9,323 minutes, which is equivalent to a reduction of 8.7 percent. Therefore, executives should use the results of this study as a policy proposal to reduce waste or non-value-added activities, which will benefit the development of cost efficiency in the future.