If your company makes products, then manufacturing is most likely to be one of the business’s largest expenditures, and it can directly affect profitability. However, it can be difficult to reduce material costs without impacting the quality of your product.
Take a look at these different ways that you can cut costs in manufacturing.
Analyze your Costs and Processes
Before you even start actually cutting costs, it’s important to take a look to see at what you’re spending money on and how much you’re spending. Take a note of areas that have increased over time and look into why. Take a look at your business processes and ask you staff for ideas on how to improve them. As the ones who are intimately involved in the production of your business’ products, then they will be aware of areas that might need improvement. For instance, they may suggest higher quality tools or equipment, such as these from Handling Equipment Online, that don’t break or need repairing constantly. This may be a way to improve profitability without cutting costs.
Re-evaluate your Suppliers
When you first looked at finding suppliers for your materials, then you probably tested a few out, got quotes from a number of suppliers, so you could have a look at what was the best quality for the best prices. If you’re looking for ways to cut costs, then revisiting this exercise is an important place to start.
If you can, negotiate with your vendors and suppliers for discounts for your loyalty. Use an offer of quick payment for lower prices. This may be helpful for those with short term cash flow issues.
Substitute for Lower Cost Materials
With technology constantly changing materials, creating higher performance and cheaper alternatives, you may be able to find cost saving alternatives. However, it is important to remember that with different materials come different disadvantages, and even different labour costs.
Review your production methods to help minimise your waste, whether that’s labour or materials. Consider asking your production engineers to consider waste when designing products to help ensure that there is less to waste in the first place.
Streamline the Product
Examine and analyse your customer’s motives for buying the product and the feedback that they’ve given, so you can look at what elements of the product aren’t important to them, and you can potentially get rid of them.
It’s also important to note that custom products will costs more to manufacture than mass-produced products.
Cutting costs is incredibly important to make sure that your profit margins are good. If your vendors, suppliers or partners aren’t on the same team as you, i.e. wanting to reduce costs, then you should find different ones.