Royalx
Manufacturers are always looking for ways to cut their costs, whether through outsourcing the labor force, purchasing cheaper material, or getting more efficient equipment. Besides these traditional methods, there are some other, less popular strategies that you can implement.
Most of these methods can be implemented on the go. In other words, they won’t affect your overall strategy and might not even require an initial investment to implement. Without further ado, here are 7 ways manufacturers can cut their costs.
1. Consider the rent
A lot of manufacturing businesses have the opportunity to relocate on a whim. This is why it is so important to continuously review the rent and pounce as soon as you notice a good opportunity. Relocating is especially important for businesses that have numerous sites, warehouses, and portable storage structures.
During the time of economic shifts, you might even find cheaper rental properties in nearby counties and states. Just to be on the same side, you should make a calculation in advance to see how this change would affect your revenues and expenses. However, at the same time, a more expensive location can sometimes increase your overall profits.
2. Find the right schedule
This is a bit trickier strategy, but it can yield great results in the long run.
Basically, each person can only be so efficient. This is something that a lot of companies have discovered, which is why there is a global trend to cut hours. When forcing the people to work extra, you get less in return with every additional hour they work. In other words, the 6th hour of a shift will be much more efficient than 9th.
Given all of this, you need to find an optimal number of employees as well as an optimal number of work hours per employee. Just because you’re afraid to lose money due to underproduction, there is a chance you will lose money due to enormous costs.
3. Rely on software
Nowadays, you have different types of manufacturing software that can help you with internal processes. Whether it’s sales, scheduling, finances, or logistics, there is very little these programs cannot do.
When choosing the software, it is very important not to be cheap. The right tool can automate the majority of your processes, significantly cutting the company costs. Some of these products have planning tools that can give you a decisive edge over competitors.
Another benefit of SaaS is that it allows you to save money on servers. All the data is available online, which is especially great for international teams.
4. Proactive approach with suppliers
Regardless of what you’re purchasing or renting, you should always negotiate. In the end, this is the main reason why large companies have sales representatives on several levels. Keep in mind that almost any price can be lowered, especially if you’re one of the supplier’s bigger customers.
Alternatively, if you hear about a new, potential supplier, you should always inquire about their prices. While there will always be some loyalty between older partners, you should also look out for your best interests.
5. Avoid overstocking
Overstocking is especially risky in industries where materials and products have a short shelf life. However, this isn’t the only issue.
Overstocking is always risky, and the effect is amplified for smaller businesses and companies that don’t have a lot of cash flow. Instead of utilizing these resources for something better, you will have a warehouse of materials or items that you cannot use or profit from.
One of the best ways of tackling this potential issue is by relying on inventory SaaS. These tools are great for making predictions based on previous performance. Although they are not infallible, they provide a great starting point that would, at least, help you reduce overstocking.
6. Update equipment and processes
We all live in a global society where manufacturers can buy products, materials, and equipment from other countries on a whim. So, there is always something new on the market.
This is a major issue for companies that are used to doing things the traditional way. But it can also be a great opportunity for proactive management. Basically, by constantly redesigning products and introducing new, more efficient processes, you can stay ahead of the curve.
7. Review office and warehouse supplies and equipment
Lastly, some companies can make enormous savings on office supplies. Keep in mind that you don’t necessarily have to cut out some of the things; simply switching to a different coffee or water supplier can have a major impact on your bottom line in the long run.
