When embarking a cost reduction strategy, it is important to know what causes the costs, how the costs are connected to value adding and to non-value adding activities, and thereby conduct a knowledge-intensive production development. This paper present a method on how to connect costs to production losses and how they can relate to different cost factor groups. The method uses a digital tool that was designed in collaboration with a medium-sized tool manufacturing company, using several manufacturing operations in sequence.

The tool is designed to be used for management monitoring and for strategic decisions. The method uses a performance-based cost model for discrete part manufacturing and incorporates an approximation when dividing the calculated loss costs. To ensure the accuracy of the model a sensitivity analysis was conducted. The result shows that only smaller errors occur due to this approximation and amount to a few percent when extremely high losses are in effect. The novelty of the paper is the variation of the cost model, ensuring that costs can be divided on each of the cost factor groups and investigated performance parameter. In addition, the designed layout of the result presentation in the digital tool, is a further development of the previous presented production performance matrix, which contribute to a comprehensive overview used for production monitoring.