16
Jul
2021

7 Effective Cost-Saving Rules for Manufacturing Companies

Last year’s outbreak of COVID-19 was very rough for manufacturing industries. Frequent lockdowns, forced layoffs, and other unpopular measures brought some facilities to a complete halt. Of course, these ripples were felt across the entire business landscape, making the whole economic outlook very uncertain.

Of course, this is not the only crisis the global economy has faced in recent years, so there are some conclusions we can draw out. Like always, a part of the solution can be found in the cost-effective measures that won’t hurt the productivity of the manufacturing company.

Let’s take a look at some of the most popular and effective mentions.

Adopt lean manufacturing principles

The overall goal of this measure is to improve efficiency while gradually reducing invested resources. Although this may seem like a very improbable demand, we can find some tried and tested principles that produced significant results in the previous years and decades. Most of them focus on greater utilization of available resources:

· Greater focus on automation and reduction of human labor

· Lower production volumes with fewer resources

· Reduction of unnecessary equipment

· Reducing idling through learner and shorter shifts

· Downsizing to smaller and more efficient facilities

Put a greater focus on ROI (Return of Investment)

Large volume manufacturing usually includes an extensive portfolio of products, all of which have their role in keeping the company represented on the market. However, in the time of crises, the flagship products driving the greatest ROI should get higher priority. At the same time, other parts of the portfolio must be represented according to current market demand or temporarily shut down. Also, you should consider outsourcing departments that are not generating revenue. In some cases, letting third-party run these vital tasks is more affordable than developing and running these departments in-house.

Invest in more efficient equipment

This may sound like too significant a financial burden since cost-saving rules don’t entirely go hand in hand with the upfront investment. But, instead of completely overhauling the manufacturing infrastructure, you can focus on low-level equipment that affects the overall efficiency of the facility. We can find an excellent example of this practice in the petroleum industry where facilities have managed to achieve higher productivity by moving to more efficient oilfield equipment like modern drilling tools, bridge plugs, and similar assets that can be easily installed or replaced. Of course, similar examples can be found in other manufacturing industries.

Review labor costs

Massive layoffs have been one of the most unfortunate consequences of the COVID-19 pandemic. To make the situation even worse, some of these jobs could’ve been saved with a more rational labor optimization. The first thing you will do is perform a detailed review of your labor costs and assess where the high expenses are made. When you have a clearer picture of which positions are feeling like a burden, you can consider some of the following steps:

·         Splitting schedules into shifts to achieve higher productivity

·         Provide better training to less efficient department

·         Temporarily transform some potions into a part-time model

·         Organize shorter but more productive shifts

·         Consider outsourcing some positions

Reduce energy costs

The manufacturing industry consumes an excessive amount of power. This fact, at the same time, makes energy costs one of the areas where you can make the biggest saves. According to recent research, replacing traditional incandescent fixtures with LED alternatives can decrease downlight wattage by a staggering 75%. Similar saves can be made by allowing your facilities better access to natural light and organizing shifts during the daytime, replacing on-premise fixtures for modern alternatives with better STAR rating, updating and maintaining your HVAC system, and strategically schedule machinery use. All these accumulative saves can have a profound impact on the budget of your company.

Pay more attention to standardization and quality control

Both these things lead to something we like to call GMP or Good Manufacturing Processes. Aside from achieving higher efficiency and utilizing the available resources to a greater extent, implementing also presents an excellent opportunity for branding your company as a part of the sustainable, environmentally conscious family. On top of that, with environmental issues becoming a very relevant global topic, you will become qualified for various governmental rebates aimed at encouraging green policies. Even so, the core goals of these reforms are to make your production faster, more streamlined, and more efficient.

Pay more attention to logistics and shipping costs

Although these two activities are not always under your direct jurisdiction (usually run by third-party companies), you can still make considerable saves in these areas. For instance, if you partner up with similar companies, you can share logistics and transportation costs and make sure your shipments are always fully utilized. Another way to reach a more favorable agreement with the transportation vendors is to offer your products as compensation for the shipping services. If you are operating in similar fields, there is also an option for cross-promotion and shared marketing strategies.

These few suggestions are far from a complete story, but they should give you a general idea about the direction in which you should take your company in the following period. The year behind us was very rough, and judging by all relevant indicators, the stabilization won’t be coming that soon. In situations like these, one of the best things you can do for your company is to rationalize expenses and enforce some useful money-saving rules. Now, you have some general framework.

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