How the Flow of Manufacturing Costs Works

The flow of manufacturing costs refers to the process of using materials and labor to complete a finished good that can be sold to a customer. A supply chain management system can reduce the cost and complexity of the manufacturing process, particularly for a manufacturer that uses many parts. A clothing manufacturer, for example, will move raw materials into production first, such as fabric, zippers and other pieces that are used to make clothing. The manufacturer then incurs labor costs to run machinery and perform other work using the materials. Once the items are completed, they must be packaging and stored until they are sold to a customer.