Overhead costs make up a significant portion of manufacturing expenses, yet many companies fail to give them sufficient attention. While direct production costs, such as material expenses and wages, are easily measurable, overhead costs often remain hidden in excessive energy consumption, unnecessary downtime, and inefficient processes. The result is higher expenses, lower productivity, and reduced competitiveness.
With modern digital solutions like SCADA (Supervisory Control and Data Acquisition), MES (Manufacturing Execution System), EMS (Energy Management System), and BMS (Building Management System), companies can not only accurately identify sources of unnecessary overhead costs but also significantly reduce them.
What Are Overhead Costs in Manufacturing?
Overhead costs include all expenses that are not directly linked to producing a specific product but still impact the entire manufacturing process. These typically include:
- Energy costs – electricity, gas, water, cooling, heating
- Maintenance and repairs – unplanned downtime, machine failures, service interventions
- Inefficient production planning – downtime, material waste, underutilized workforce
Many companies accept these expenses as an unavoidable part of manufacturing. However, the truth is that modern technologies can significantly optimize them.
What Are the Most Common Issues That Increase Overhead Costs?
❌ High Energy Consumption and Inefficient Operational Costs
Manufacturers often lack a detailed overview of which machines consume the most energy and where waste occurs. It is common for machines to remain powered even when idle, heating and lighting to run in unused spaces, and production cycles to be poorly optimized for energy efficiency. As a result, energy expenses continue to rise.
❌ Inefficient Maintenance and Frequent Downtime
Many companies still rely on reactive maintenance — fixing machines only after they break down. This leads to unplanned downtime, delays, and increased costs for urgent repairs. A more effective approach is implementing digital planned maintenance and condition-based maintenance, which monitors key parameters such as oil temperature or bearing vibrations, allowing companies to address issues before they result in breakdowns. Once these levels are established, businesses can advance to predictive maintenance using advanced data analysis.
❌ Poor Planning and Underutilized Production Capacity
Lack of accurate data results in inefficient production planning. Machines operate with low efficiency, employees wait for materials, and inventory levels spiral out of control. Poor planning also means that production is not flexible enough to quickly respond to shifts in demand.
How Can Digital Transformation Reduce Overhead Costs?
✅ Optimizing Energy Consumption with EMS and BMS
An Energy Management System (EMS) provides companies with real-time insights into energy consumption across different production areas. A Building Management System (BMS) uses this data to automate energy regulation, shut down unnecessary machines, and optimize production cycles to significantly reduce energy costs.
✅ Immediate Failure Response and Smart Maintenance with SCADA and MES
Supervisory Control and Data Acquisition (SCADA) continuously monitors production equipment and allows for immediate responses to malfunctions through remote control. It also provides essential data for optimizing maintenance strategies—whether planned, condition-based, or predictive. Manufacturing Execution System (MES) further integrates this data into the broader production context.
✅ More Efficient Production Planning with MES
MES connects ERP systems with real-time production data, improving the efficiency of manufacturing operations. This reduces downtime, enhances workforce utilization, and optimizes material inventory, leading to significant cost savings.
Overhead Costs – Example of Savings Calculation
A company that pays €30,000 per month for electricity can reduce consumption by 15–20% using EMS and BMS, resulting in annual savings of up to €72,000. Similar savings can be achieved in maintenance, logistics, and overall production process optimization.
The Key to Successful IoT/IIoT Implementation
Many companies struggle with where to start when optimizing their overhead costs. The solution lies in a detailed analysis of manufacturing processes and the implementation of intelligent control systems. At IoT Industries, we offer tailored solutions – from cost analysis and the implementation of MES, SCADA, EMS, and BMS systems to long-term support and production optimization. Contact us to find out how you can reduce your overhead costs.
Why Choose IoT/IIoT Implementation with IoT Industries?
Traditional companies typically specialize in OT (operational technologies, such as production lines and devices) or classic enterprise IT systems. However, we are able to connect both of these worlds. Our unique expertise in integrating OT and IT allows us to deliver innovative solutions in digital transformation, enhancing efficiency, reliability, and competitiveness for manufacturing companies.