How to Reduce Manufacturing Costs in Your Plant: Definitive Guide for Plant Managers
In this post, we are going to show you how you can reduce manufacturing costs in your plant.
We have over 40 years in the material handling industry and we would love to share our expertise and experience with you.
The definitive guide will go through the top strategies to help reduce manufacturing costs in an easy to follow format. So, let's get going!
Reduce manufacturing costs to help increase profits
Strategies to Reduce Manufacturing Costs
The main goal of any business is to make a profit. To increase the amount of profit that your business makes requires either increasing the price that you charge for your product or service or reducing your operating costs.
Since your customers may not appreciate a raise in your prices and may choose to deal with a competitor who has a better price, the safer option is to find effective ways to reduce manufacturing costs. Here are some great tips to help you do that.
1. Lower the Cost You Pay for Your Materials
The materials that you use in the manufacturing of your product makes up a large portion of your manufacturing costs.
An effective way of lowering the cost of your materials is Economic Order Quantity (EOQ). EOQ means that you figure out the optimal quantity of materials to order.
This way, you lower the cost of placing and receiving that order while making sure that you are not tying up too much of your cash flow in your inventory.
Getting the right balance is a skill, but the EOQ formula can help. The following video will show you how you can set up this formula in an Excel spreadsheet for easy calculations.
Buying the perfect amount of materials to decrease ordering costs can help you reduce manufacturing costs
2. Do a Thorough Search of Your Raw Material Suppliers
Another way that you can try to reduce the cost you pay for materials is to find suppliers who will sell their raw materials to you in bulk at a discounted rate.
This doesn't mean buying inferior materials. Instead, you find suppliers of the quality of raw materials that you require and ask them to give you quotes.
You can then choose the one with the best material at the best price. In addition to local suppliers, you can also look online to find appropriate suppliers.
Websites such as Alibaba, Global Sources, and eWorldTrade help suppliers and customers locate each other.
3. Encourage Your Staff to Work More Efficiently
Finding creative ways to get your staff to work more efficiently is another great method to reduce manufacturing costs. Here are some suggestions:
Training: Provide specialized training that will teach your workers to work at a faster rate.
Ergonomic Equipment: Provide ergonomically designed equipment and work areas that will help your workers to work better, longer, and with fewer injuries.
Incentives: Offer incentives such as bonuses or time off to those who produce an average unit faster than the normal rate.
Innovation: Reward employees who figure out any cost reducing techniques in production
Encourage your employees to work more efficiently
4. Lower Your Total Overhead Costs
Another way to reduce manufacturing costs is to lower your total overhead costs. Are there ways that you can reduce big capital purchases, such as purchasing new forklifts?
For example, you may find that you can actually save money by renting additional material handling equipment during your peak seasons instead of purchasing extra equipment that you don't need to use all year long.
5. Analyze and Get Rid of Non-Value-Adding Processes
A value-added process is a step in the manufacturing of your product that either:
Brings your item closer to completion (changes it in some way)
Is done right the first time and isn't a re-work step
The customer will pay for this step to be done
It is important to analyze each step in your manufacturing process to determine whether or not that step does one of the above things. If it doesn't, then it is not adding to the value of your process, and should be stopped.
Get rid of production steps that don’t add value to your finished product
6. Find Ways to Automate Where You Can
You can reduce manufacturing costs by finding ways to automate processes and thereby producing products at a faster rate.
Automation generally will make your manufacturing process run more efficiently by:
Reducing the amount of defects due to human error
Processing products faster
Being able to operate around the clock if necessary
7. Cut Down on Waste
There different kinds of waste in a manufacturing setting. These include:
Producing Too Soon: Producing products before they are needed means you are tying up your cash flow and your product could get damaged while it is being stored.
Overstocking: Overstocking your inventory with more product and materials than you need also ties up your cash flow
Production Delays: Production delays that make your staff and machinery wait around during the manufacturing cycle wastes time and money
Unnecessary Movement: Moving people and products around unnecessarily wastes time and resources
Defects: Defective products that need to be repaired while still under warranty wastes time and resources as well
As a plant manager, you need to conduct periodic checks to find out what is causing excess waste and develop an effective plan to reduce the waste.
Find ways to incorporate automation in your production
8. Accident and Injury Reduction
Accidents and injuries can add to your manufacturing costs. Not only do you want your staff to be safe, but you also don't want to have to pay for the downtime and product damage caused by avoidable accidents.
Providing proper safety training for your staff and proper safety equipment around your facility can help to decrease the number and severity of workplace accidents.
Proper Forklift Maintenance
If you use forklift or other material handling equipment, keeping it properly maintained and serviced will go a long way in preventing huge repair bills or having to replace damaged equipment. Regular maintenance can catch a small problem and get it fixed before it becomes a larger, much more costly one.
Keep your equipment regularly maintained
Wayco: Forklift Repairs and Service You Can Trust
You can trust Wayco with all your forklift equipment repairs. Wayco can also help make sure that your forklifts are well maintained.
We can track and pre-schedule all maintenance work for you so that your equipment is properly serviced in a timely manner.
This will help you avoid expensive downtime, and you won't have to remember to schedule or book your service work. We'll do it for you!
Wayco also has an incredibly fast response time so you won't have to wait to get your lift trucks back in operation. We can usually have our service tech at your location within 2 to 3 hours and we also guarantee same day.
Contact Wayco today to set up regular maintenance schedule.
"Our company shopped around for the most competitively priced lift equipment repairs and rental services in the KW region and found Waco Multi Lift Inc. … Just want to thank Steve P, Chris and Rob for their help the past few months for keeping our production and shipping rolling […Read More]”
- CanadianBakeInn
