When it comes to running a successful manufacturing business or plant, keeping costs low is a must. Unfortunately, it’s not always easy to identify where you’re bleeding money or being excessive with resources. If you can isolate them, you stand a pretty good chance of addressing them. At that point, the sky’s the limit (in terms of profit margin).
3 Ways to Cut Costs
Cutting costs is one of the most significant things you can do in manufacturing. And unlike industries or areas of business, even the tiniest cuts can produce significant savings when multiplied across thousands of units.
For example, let’s say you find a way to cut manufacturing costs by 25 cents per unit in a plant where you produce 1,000 units an hour 24/7/365. That comes out to $250 in savings per hour, or $6,000 per day. Further extrapolating those numbers, you get $42,000 in savings per week, $180,000 per month, and $2.16 million per year. Suddenly, a 25 cent cost reduction seems pretty significant!
Now, saying you want to cut costs by 25 cents is one thing – but doing it is another thing. You have to be intentional in your approach and learn to focus on the dials, levers, and processes that are most significant to the overall process.
Here are a few suggestions:
- Focus on Continuous Improvement
In Japanese culture, the term “kaizen” stands for continuous improvement. It’s the idea that optimum productivity levels are only reached as a result of gradual and steady improvement. It’s usually not one big change that causes massive results – it’s the culmination of dozens of small changes over a period of time. Constant and never-ending improvement must become a priority for your business.
- Apply Lean Principles
Lean manufacturing principles will serve you well. If you haven’t already implemented lean principles to reduce waste, this could be one of your last chances to do so. Waste is on the way out, and businesses that don’t address their waste will become obsolete within several years.
Lean manufacturing is all about eliminating waste and improving throughput. This is done by using less of everything – including less human effort, resources, equipment, time, and space.
- Conduct Preventive Maintenance
The old adage of “if it ain’t broke, don’t fix it” does not apply in manufacturing. In fact, taking this traditional approach could actually hamstring your productivity and bring output to a screeching halt in the future. In this light, preventive maintenance is a must.
“You have to see your machinery as an investment – not an expense – for your company,” wholesale marketplace Alibaba explains. “Keeping them in good shape is not only sound manufacturing practice, it’s the absolute minimum required.”
For example, you must routinely lubricate different machinery to prevent rust buildup. If precision is important, having the right cylindrical gaging products is a must. As equipment or parts become obsolete, you have to replace them quickly, so as to prevent unnecessary downtime.
- Save on Energy Costs
Energy costs usually aren’t at the forefront of every manufacturing plant manager’s mind, but this is a very important line item on the expense sheet. If you can reduce energy costs, you could potentially save thousands of dollars every month without having any detrimental effect on product quality.
In terms of slashing energy costs, here is some low-hanging fruit:
- Switch from traditional incandescent bulbs to LED lights.
- Integrate more natural light into your workspaces. Install smart thermostats and prevent employees from being able to manipulate heating and cooling settings.
- Invest in more energy-efficient manufacturing equipment the next time you’re set for an upgrade or replacement.
- Turn off equipment when not being used for several hours. Only run equipment when required.
- Use smart tech to schedule shut-downs and start-ups on equipment that isn’t used around the clock.
It doesn’t take much to make a big difference. Even the smallest changes in energy consumption can have a significant long-term impact on your bottom line.
Set Your Plant Up for Success
Cutting costs is never as simple as one quick fix. It generally requires a comprehensive analysis of your workflow, followed by plenty of testing and iterations.
But if you focus on the suggestions mentioned above, you’ll find the process much more efficient.