Top 5 Techniques to Reduce Manufacturing Costs

Manufacturers are always looking for techniques to reduce their cost. Here are five of them that will help the manufacturers reduce cost irrespective of their sector. The primary step would be to assess their process and do on internal audit. Only when the big picture is at view, methods can be implemented to reduce the costs.

Energy Efficiency

Most of the time without our notice we tend to waste a lot of electricity. Implementing sensors that would stop the machines immediately after usage can reduce quite a lot of cost. Replacing energy guzzling machinery with those consuming less energy can save up to 10% of the cost. Usage of alternative energy sources like solar energy which is the cheapest source of energy can cut down operating cost significantly.

Fixed Cost Reduction

Machinery for a manufacturing industry is very important, but only a few machineries are constantly used. Hence, owning the machinery that is used passively wouldn’t be feasible; renting/leasing such machinery can reduce the fixed cost. Using automation in production process can decrease the labour cost abundantly. Outsourcing advertising, marketing and sales could also help in cost reduction.

Overhead Cost Reduction

Maintaining inventory by not over producing and recycling/selling the wastage or scrap of the raw material can always free up and manage the factory space and reduce wastage. At times, outsourcing supply can reduce the business space, risk, staff, and maintenance of vehicles. Buying raw materials at bulk and sharing it with another manufacturer can reduce the material and inventory space. Intercom and internet calling, conferencing and video calling meetings can help reduce administrative cost.

Reduction in Labour Costs

Usage of technology for the manufacturing process like implementing sensors and automation, robotics can drop down as the number of labours drops as the automation requires less human interference and is more accurate. Using part time workers and free lancers can eliminate the idle time of labourers. Implementing methods to increase efficiency; comfortable positive workplace, eliminating overtime as it reduces efficiency, training employees, getting to know the employees, reskilling of the employees rather than assigning them monotonous task can help the manufacturer make optimum use of the labour force.

Customer related cost reduction

Technology can help the manufacturer cut down the cost in every stage of the manufacturing process and also at marketing. Using technology for marketing, advertising and promoting of goods can reduce cost abundantly. Designing products digitally 3D print of the product would help the manufacturer in better understanding of customer needs and can reduce correction and reproduction.

5 Challenges Facing the Industrial & Manufacturing Sector

  • Changing Compliance Regulations & Traceability
  • Relevance
  • Skills Gap
  • Healthcare
  • Environment Concerns

The industrial and manufacturing sector keep evolving and that evolution doesn’t just happen. It’s almost always a direct result of overcoming the challenges that threaten the very existence of the sector. So, are there any challenges that the sector is dealing with currently?

Well, here are 5 challenges the manufacturing sector is currently trying to overcome.

Changing Compliance Regulations & Traceability

Changing regulations have always haunted manufacturers. But, they’re there for a good reason. Without compliance standards, manufacturers could very well end up cutting corners, which ultimately ends up affecting the end consumer.

So, for the sake of things such as quality control or proper waste management, compliance standards need to exist. However, complying with new standards isn’t an easy task for manufacturers. More often than not, they’re a burden and thanks to globalization, manufacturers are also forced to deal with regulations that are unique to each territory.

Manufacturers are also tasked with tracking compliance as well. This means that have to go through the entire supply chain to check for compliance, right from vendors to the end-product that’s sent to the customer.

Relevance

As technology evolves, the rate of innovation increases. But, this also means companies have to rush and that can lead to all kinds of temptations. The urge to skip a step or avoid certain tests can be hard to resist when the goal is to market the product as soon as possible.

But, the last thing a manufacturer needs is to put the business at risk with a low-quality product. So, innovation management becomes a must in these situations. Preferences change by the day and any delay in delivering appropriate solutions can mean the end of everything.

So, manufacturers have to establish a system that allows for the consistent delivery of new ideas and innovation. Only this can sustain manufacturing success.

Skills Gap

As one generation exits the workforce, it makes way for a new generation of workers. This transition is, in itself, quite a challenge. But, things are very different today.

Manufacturers face the challenge of filling up those positions with equally skilled members from the current generation. However, the new generation of employees is simply not skilled enough, making the challenge even harder to overcome. As a result, manufacturers have to develop strategies such as working with the education sector to offer the skills training necessary to fill these positions.

Some manufacturers are also retaining skill by extending the retirement age.

Healthcare

As healthcare costs go up, it becomes very difficult for manufacturers to manage their budgets. For instance, in the US, it’s manufacturers who foot healthcare bills for their employees. But, with costs going up, it is simply not feasible and there are no viable alternatives.

Environmental Concerns

Regulations with regard to sustainable and environmentally safe processes and practices put more strain on the manufacturing process. Whether it’s waste disposal or the regulation of materials, more resources are needed to follow best practices.

How To Identify The Right Manufacturers to Work With

Sourcing is perhaps among the most exciting parts of the product development lifecycle. The first step is to picture a new design in the mind, then create prototypes, and finally, the product is ready to be manufactured.

However, according to majority of companies that create products, sourcing and deciding on a manufacturer can lead to the success or failure of a product. Finding a compromise between deciding on a factory to manufacture a quality product and managing logistics – like timelines, shipping and minimum order quantities – is the challenge usually encountered in developing new products. It becomes even more difficult in today’s worldwide economy to identify many factories to choose from.

The steps that need to be taken in identifying manufacturers are as follows:

How To Identify The Right Manufacturers to Work With

As a start, identify a number of factories that a business can learn more about. It would help to get referrals. A business can contact the companies with similar products and inquire about the manufacturer they use. This way, the business can discover more about this company from the outlook of someone in the same position.

At this point, a business should identify the factories that could meet their requirements and make a shortlist. When identifying factories that they will investigate further, they should ask the following questions:

Do they like a domestic or overseas manufacturer?

There are important things to consider in choosing between a domestic and overseas manufacturer. There are advantages and disadvantages to each, and it also depends on the product they plan to manufacture. They should weigh the cost, quality and speed. Most of all, they should think about their needs. Products that need to be assembled will be cheaper abroad, since they have lower labor costs. However, big parts that occupy much space in a crate will be cheaper locally. Also, shipping and duties need to be considered as well.

Do they like to work directly with the factory, or would rather work with a broker/agent that is a factory representative in the US?

The answer really depends on their needs. When they work directly with the factory, it would cost less, and they may be more involved. When they work with a broker/agent, though they will be less involved, they will be able to work through an agent whose relationship with the factory is already established. Everything depends on what is best for their situation.

Can the type of manufacturing they need be managed by the factory?

It is obvious that businesses have to be specific in identifying the manufacturer they need. For example, a factory that is working with electronics does not necessarily mean that they have the capacity to manufacture all kinds of electronic products, since there is a vast assortment of requirements involved. So, businesses should choose a manufacturer that best meets their needs.