6 Steps You Can Take To Reduce Your Manufacturing Costs

While manufacturing costs increased in many industries in 2021, so did labor productivity.

While productivity itself is a great way to cut down on growing manufacturing costs, there are other things you can do to take those savings further, and we’re here to tell you all about them. Whether it’s automation or reducing waste, saving your business money has never been easier than it is right now.

Read on to learn everything you need to know.

1. Audit Your Facility

The first step to take is auditing your facility. This is going to help you reduce manufacturing costs by letting you know exactly where the extra costs are. Audit these costs, and then track them for a set time. Try some utility bill management solutions that helps manage and reduce your utility expenses.

Once you’re done, take your data and assess what can be eliminated by limiting administrative costs and managing debt. You can also look at how much you’re paying for overheads like building maintenance, rent, utilities, insurance coverage, office supplies, and other similar things.

2. Cut Cost Materials

Direct material costs can make up a large portion of total manufacturing costs, so it’s important to ensure you keep track of everything as best you can. There are a few different techniques you can use to help control these costs, like getting quotes from different suppliers, like Intsel Steel West, or learning to negotiate when you’re seeking out new suppliers.

You can consider signing a long-term contract with a shortlisted supplier, meaning you’ll get quantity assurance while also asking for a reduced price.

If signing a contract doesn’t sound like a good option, you can also opt for keeping a database of contacts on hand in the event of price changes, lack of supply, or other factors. You’ll be able to make a few calls and have supplies stocked up in no time.

3. Optimize Employee Routines

When your employees can work quickly, your facility is automatically going to become more efficient. With efficiency comes lower manufacturing costs, and more money in your pocket.

When you’re looking at your facility, be sure to look at your processes as well.

How’s employee training? Do the processes you teach your employees set them up for long-term success, or are there things that can be improved upon? Making small changes in their day-to-day is going to eventually add up, and your business costs will thank you for it in the end.

4. Automate Where You Can

With competition getting stiff, automating when you can to improve efficiency while simultaneously reducing your costs. Humans are more prone to mistakes and accidents than machines, but machinery can help cut down on the number of mistakes and potential errors, meaning more money in your pocket and a lot of time saves. Here are a few things that automation (on some level) works well for:

  • Picking
  • Sorting
  • Packing
  • Painting
  • Cleaning

By automating processes, you’re leaving your business less liable in terms of things like warranties or refunds from unsatisfied customers. While there is a significant upfront cost, it’s worth it if you do things correctly.

If you don’t want to make an immediate commitment, you can also lease automated machines where it makes sense for your business, and then purchase machinery later once you know it works for your business.

5. Control Manufacturing Overheads

Most of your manufacturing overheads are going to non-value-adding expenses and should be avoided where possible.

Start by setting a budget for those costs and work to review them periodically. It’s important to control these when they’re out of hand, and reviewing makes it simple to make changes when they’re needed.

You should also avoid fancy packaging expenses, consider reducing product features that don’t have much value to offer and be sure to regularly check and update machinery so you can avoid costly repair expenses.

For things like HVAC units and other utility costs, investing in energy-efficient machinery is a great way to reduce your costs in the long term.

6. Reduce Waste

There are a few different forms waste can take on:

  • Early production
  • Waiting
  • Overstock
  • Motion
  • Defectives

Early production means producing products before they’re needed. Waiting and overstocking are similar, as they both lead to unnecessary waiting throughout the process. This means an unnecessary blockage of funds for your business, and less money coming in.

Motion means the unnecessary moving of people or products during the production cycle, leading to delays.

Defectives are what make up defective products that don’t live up to standards before they’re shipped out. They’re usually either thrown away or repaired before being delivered to the customer.

To reduce waste like this, your business needs to have a strong control system in place for its operations. That can look like conducting periodic checks that can help prevent these issues before they even appear. An audit can help you find these issues, and then tracking can help you find out the effect this waste is having on your business in its entirety.

From there, you can implement measures to protect your products while preventing them from happening in the first place.

Ready to Reduce Your Manufacturing Costs?

Now that we’ve gone over a few of the best basics to help you reduce manufacturing cost, are you ready to get started? With prices rising on so many things nowadays, finding small ways to save money around your business is crucial for its wellbeing. Whether you only take one of these things into account or a few, you’re sure to save money in the long run.

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