Tuesday, March 19, 2019

Unexpected Sources for Cost Reduction

by herbertp343 (writer), , October 18, 2017

There are safety benefits to consider as well: fewer breakdowns mean fewer accidents on the assembly line.

Manufacturing has to have a microscopic view of overhead costs in order to maximize profit potential on every order.

Competition never stops in the world of manufacturing, and costs will continue to rise. Especially in the technology sector currently in high demand. How you respond and manage your own factory will determine your survival in the coming decade. Searching for cost reduction opportunities can lead to some unexpected places.

Equipment Wear

In the attempt to reduce expenditures, reinforcing machinery is a great place to start. Wear and tear can be one contributing factor to downtime, which we’ll cover in detail in a moment. It can also lead to expensive machinery replacements, which can easily run well into 6-figures. However, there are companies like that produce items that can go on, under or into the equipment to reduce damage to the unit itself. These can be more easily, and cheaply, replaced than the entire machine when the time comes.

Often, extending the life of the item leads to fewer instances of maintenance over the life of the machine. There are safety benefits to consider as well: fewer breakdowns mean fewer accidents on the assembly line.

Reduce Downtime

Some are familiar with the Japanese term “muda”, which means wastefulness. As applied to manufacturing, it’s a good tenet to live by, considering that much of a product’s lifecycle is spent waiting for something to happen. Looking for small opportunities to reduce that wait time can have a big impact in the long run.

Costs build up when workers can’t get anything through the assembly line. Especially when producing something meant for shelves ASAP. With the clock ticking, materials that sit around aren't producing any income.

Reducing downtime begins with understanding how employees utilize their time. Track more of what’s happening on the line, break these problems down into broad categories and then look for ways to directly address these roadblocks.

Improve Quality

Spending resources on upgrading the quality of your product and your factory are important too. The old-school way of thought is that upping quality has an upfront cost, typically in manpower and machinery, that has unspecified and uncertain rewards downstream. That mindset, in general, follows the idea "why spend all that money now when I can't be sure it will make a difference over the next few years?"

However, the potential risks of not making the change outweigh the unknowns upon further examination. Defects lead to scrapped products (material loss), re-inspection and more manpower costs, as well as a decrease in overall customer confidence. Of course, if you want certainty, then forgo the upgrades, by all means. Your profit margin will almost assuredly shrink.

Other Areas

There are other opportunities to reduce waste that are effective, but relatively straightforward. Limiting salary increases is one way, but probably not good for long-term employee retention. Nor, is it necessarily the best way to increase profits in today's world.

Instead, look for ways to improve your inventory on hand. Carry only what you need, so you can better manage your warehouse facilities and cut any space you don’t need. Never bet on the success of a new product and over-produce. It’s better to refine the process of making it and duplicate that when demand rises.

If your plant makes things for several clients, rather than being owned and operated by a single entity, and the work instructions you received are inadequate, send them back. Don’t waste time interpreting poor instructions. Expect quality documents that give clear direction. Doing otherwise does no favor to your company or your client.

While there is no simple fix to reducing costs, managing waste is a critical part of profit margins in the world of manufacturing. And, forming a gameplan that attacks multiple aspects is a good place to start.

About the Writer

herbertp343 is a writer for BrooWaha. For more information, visit the writer's website.
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