As these are uncertain times, many business owners are looking at ways to reduce manufacturing production costs if their profits are slim. The trick is to minimize expenses efficiently without sacrificing the quality of your products or firing loyal employees.
This post will look at seven ways to reduce manufacturing costs in your facility without lowering your product’s overall quality.
Audit Your Facility
The best way to understand your manufacturing costs is to audit your company. Before cutting costs, audit all your essential operation costs and track them over a predetermined time. This way, you have an overview of all your expenses.
By knowing how things work, you can make an informed decision regarding eliminating certain services and managing your debt. You can also assess your maintenance, rent, and utilities spending and make better financial decisions.
Cut the Direct Cost of Materials
A straightforward way of reducing your manufacturing production cost is to cut the cost of materials. You can research your supplier’s competition and check out their offers. They usually offer discounts for switching sides.
If a cheaper supplier is unavailable, you can still negotiate your contract to get a better deal on lower unit prices. If your business is booming and you can increase your supplier’s annual turnover, you can get offers for bulk discounts. Other suppliers offer discounts if you can pay for everything in cash.
Evaluate Production Processes
It’s time to check out all your production processes and assess what needs improving and what needs to go. For example, some techniques can be outdated, which means they are time-consuming, and cost more than you produce.
You will need to investigate each step of the production cycle and look at all its aspects. For example, track how long each process takes and how many people are required for each piece of machinery. This way, you can evaluate each method and develop a better alternative.
Take advantage of new technologies which can improve your production processes. For example, you can opt-in for Lock-Up Technology to lower production costs. Traditional methods mean significant downtime, but your business can become cost-efficient once you upgrade your technology.
Cut Out Unessential Items
Surplus consists of unnecessary documentation and packaging. You can cut these items without impacting your business. Nowadays, most companies are going green. Excessive packaging is harmful to the environment, so this is an area you should explore further.
Oversized packaging means it weighs more, adding more to the shipping taxes. Improving your packaging methods and making them lighter can significantly reduce manufacturing costs. When it comes to documentation, the best way to go green is to go digital. It means no more physical format, just digital. Most customers appreciate companies that do everything they can to become environmentally friendly.
Reduce Shipping Costs
When you audit your facility, don’t forget to investigate how much money and time you spend on fuel for delivering materials and shipping finished products. Then, you can alter your traveling routes to optimize delivery. This way, you can expand your daily shipments and generate more income.
If you prefer to sub-contract shipping, look for a company that provides extra services such as loading and unloading. You can always negotiate long-term contracts with the competition for better deals.
Optimize Your Workforce
Another way to reduce manufacturing costs is to motivate your workforce. People work better if they are motivated. So, share your company’s short-term and long-term goals with your employees to help them feel involved in the business.
Employees can become more efficient if they are adequately trained. So, instead of hiring many employees, invest in the ones you already have. Trained employees can work harder and faster than unprofessional ones. This way, you can cut costs on new hires and manage loyal ones.
Match your employee’s skills with the available tasks. For example, when you buy new technology, always train them to work proficiently. Then, as incentives, you can offer rewards to employees that can reduce the standard unit production time.
Reduce Energy Consumption
Another audit is necessary to find out about the general workflow and all the machinery in your facility. This way, you can see where you can cut costs on energy. For example, one service that’s easy to miss is air conditioning. Some facilities are well ventilated, so they don’t require extra support.
Another way to cut energy consumption is to switch off electrical equipment when it’s not needed. You can also install an automated system to turn off unused machinery.
Keeping costs low without cutting corners is a complex task. However, by following these ideas on reducing manufacturing costs, your business can thrive without sacrificing its essence.