Manufacturing is a cost-intensive enterprise, and that’s the reason why you don’t see factories in every corner. It takes a lot to set up one and to keep it running for long. It doesn’t matter how big or small the venture may be; you could be a small fabric maker with five employees or a huge mold manufacturer with hundreds of workers, the hoops you have to jump through are not that different. The following are some of the ways you can cut down the manufacturing costs to increase efficiency and boost profits.
Reduce the Wage Bill
Cruel as it may sound, people get fired all the time when scaling down is needed for a company to survive. When starting out, it is easy to overestimate the needs, which, may lead you to hire more than you need. This blows up the wage bill leaving you with so little to use for yourself and improving the manufacturing plant. The only option would be to let go of non-essential personnel that you feel the operations can continue without any significant changes in their absence.
Bad manufacturing processes will lead to a lot of wastage where raw materials are involved and when you don’t have a mechanism of recycling the extra materials that end up not getting used, then you’ll be leaking all your profits to the ground. Optimize the manufacturing process to increase efficiency and the proper utilization of raw materials.
You should also find a way to incorporate any extra raw material that gets cut off in the first batching process to ensure everything is used up. Having a recycling plant on the same grounds is also another added advantage as you’ll be able to reduce the number of raw materials you procure.
Invest in Technology
The automation of manufacturing has become a reality faster than it was anticipated, and this has changed the way business is conducted in factories. The cost of setting up industrial robots may be very high at the initial phase, but once they are up and running, you’ll quickly realize that they are much chea[er to have around than human workers.
Robots work ten times faster, can work for days without stopping, and don’t experience any fatigue or injuries. You can give off a significant chunk of the wage bill through automation.
Negotiate with Suppliers
Manufacturing is a business like any other, and negotiations are part of the deal. Everyone will try to make the most of what they acquire for their own benefit. Customers will try to get you to lower the prices while suppliers will try to raise theirs. You have to also get into that game.
Negotiate with your suppliers for discounted prices with promises of increasing your inventory in the future or committing to buying from them in perpetuity. When you consider the number of raw materials a manufacturer has to acquire, getting even the slightest of discounts can translate to a significant amount of money that can be directed to other areas that need more attention.
Buy What you Need When you Need
Excess stock will always reduce your cash flow, and this can put you in a bind that could see your production come to an abrupt halt. Having money for inventory is not a license to acquire supplies that will last you to the next apocalypse, that could bite you in the back later on.
When ordering stock, do a proper assessment to ascertain what is needed more than the others and get the right amount with a slight variation. You should always have contingency cash somewhere ready for any unforeseen thing. Spending all you have on inventory may look like a good idea, but it could backfire in the most painful of fashions.
Change is inevitable in the manufacturing space. The products you start creating today will not look like anything you’ll be making a few years down the line. This is how growth looks like in this sector, and one of the many reasons that lead to this is your ability to grasp how many products you make over a certain period of time.
This allows you to track what is going to waste and gives you the best plan on how to go about cutting down that wastage. Redesigning the product to maximize raw materials and improving efficiency is one of the most reliable ways of cutting down manufacturing costs.
Get a Cheaper Premise
When starting out, get space whose rent you can afford and only move when you have grown big enough to warrant the change. Rent can eat into your expenditure, leaving you exposed. As a rule, your rent should not be more than 10% of your total revenues; otherwise, you’ll be sinking everything into the rent.
It takes a lot to keep a factory running; the sheer logistics of coordinating the supply of raw materials, assigning roles, designing the product, the maintenance, and distributing the product can be overwhelming. This is why a factory will always have a considerable number of employees. Cutting down manufacturing costs may seem easy on paper, but it takes a lot of deliberations to pull it off successfully without compromising operations.