Cutting Cost in Manufacturing
In manufacturing, cutting costs is necessary to remain competitive in the marketplace. However, it is important to determine which cost will yield the greatest benefit. These guidelines can help manufacturers determine the necessary amount of cost cutting needed while ensuring production quality.
First and foremost, manufacturers should assess their processes to determine areas of excess cost. Investigate wasted labor, materials, and energy. If a system consistently produces unsatisfactory results, costs go up due to rework or scrapping the product. Assess and review the processes to improve cost while maintaining the product quality standard.
Second, manufacturers should select the cost cutting measure that stands to yield the greatest benefit. This is usually energy costs, as energy is often the largest expenditure in a manufacturing facility. Invest in energy efficient equipment and monitor energy use by studying energy bills, conducting energy audits, and asking experts for advice on how to best reduce energy consumption.
Third, manufacturers should also consider reducing labor costs as a way to cut costs. This may mean downsizing the workforce and outsourcing operations to a third-party provider. Implement time and motion studies so managers can better understand the time it takes employees to complete tasks. This can be helpful in determining the economic value of a particular task and which activities and related staff members should be outsourced to third-party providers.
Fourth, review the current cost of materials used. Compare current materials cost with historically low costs. Does the cost of materials remain consistent? If not, what can be done to reduce this cost? Consider using similar materials with a lower cost or switching to a supplier that offers a better deals.
Finally, review all investments in production assets. Capital assets, such as manufacturing equipment need to be kept in top condition and updated regularly so as to keep up with advances in technology. Technology can improve production processes and lower operational costs.
By adhering to these guidelines, manufacturers can ensure their products meet quality standards while reducing their costs. Investigate areas of excess cost and decide which cost cutting measure will yield the greatest benefit. Take the necessary steps to reduce energy costs, labor costs, materials costs, and production assets. This will help manufacturers remain competitive in the marketplace and efficient in their production of quality products.
