To remain competitive, all the companies must offer quality products at cutthroat prices. To make this possible, a company can cut their manufacturing cost per unit and increase productivity with the same amount of input.
Cost cutting isn’t restricted to stay ahead in the competition but also to survive in the market due to new entrants today. These new entrants are externally funded and their competitive market approach makes it hard for the already set manufacturers to keep up.
It is clear that every manufacturer needs to raise up their productivity charts to stay alive. Here are the 5 best ways that can help a manufacturer to reduce costs and increase productivity.
1. Work Flow Optimization -
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Analyse the workflow of the manufacturing of your product. This includes everything related to the manufacturing, from people and resources to communication and procedures. Mapping all of these activities helps business professionals to monitor them and look out for any room for improvement. When you are able to examine a process in detail, you tend to find many cracks which are yet to be filled. Improvising is the main aim of analysing the workflow. It is important that the business professionals look out for these pitfalls and try to counter it, which ultimately can result in cutting down costs and increase productivity.
2. Reduce labour costs -
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After analysing your process, if the physical labour turns out to be the biggest burden in your cost sheets, it is better to find out ways to operate on the modest labour force. Though labour force in India is much cheaper, but in the companies where highly skilled labour is required, the costs are much higher. With some effective process plans, manufacturers with the help of professionals and experts can eliminate some of the labour work required. Companies can even hire moderate or low-skilled labour by giving them some training in the manufacturing process. Its cost may be higher for the training at the start, but they are just the initial costs and the trainees can work for much lower than the previous ones. This can help save some cash to the firm which can be useful in increasing productiveness. Incentives can be offered to obtain better and faster work out of them.
3. Material costs -
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When the material cost forms the bigger chunk of the total production costs, noticeably you need to bring its costs down to control your expenditure. Purchase material in bulk to cut down the unit prices. Research is a vital role to be played by a manufacturer to audit which material it requires in what quantity and which it doesn’t. Proper documentation and training of employees can reduce the amount of material scrapping during production. Deploying initiatives like lean manufacturing like the sigma six principles can help a manufacturer to a great extent in saving bucks by organised use of materials.
4. Overhead costs -
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Costs of building, utility, supply storage, travelling and administrative costs all add up to become the overhead costs which eventually add up in the manufacturing costs. Setting a budget for these costs and reviewing them constantly could be a measure to keep these costs under control. Choosing appropriate network supply can save a lot in land and logistics prospect. Monitoring other simultaneous expenses is also important as sometimes it is found that they leak away a lot of the capital and unbalances the expenditure and profits.
5. Installing Modern Equipment -
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Sometimes to save money, you need to spend some. Investing in equipment to increase productivity doesn’t seem a bad idea. You cannot keep using the old machinery and equipment in today’s time and expect it to work wonders for you. As technology advances, better tech keeps hitting the market. Investing in this modern machinery can lower the production costs in the long run. Moreover, it can also reduce the requirement of manpower which was previously required for some of the processes. The initial part of the installation of this equipment can be expensive, but if you think about the long term gain out of it, then it’ll sure give you that!
Reducing cost can be the best way for efficient working of a firm no matter of which field of work it is in. In manufacturing, the term efficient stands for saving on raw materials and maximising the output. If a manufacturing firm is able to cut costs with the given points, it surely can increase its productivity and even spare out some extra cash in hand!