How to Reduce Production Cost in Manufacturing

When the conversation of reducing costs in manufacturing comes up, the first word that people mention is “complexity”.

Rapid shifts in both technology and business practices have led companies to learn to adapt on the fly. This has led to a greater need for control over processes, as that must be in place before the conversation turns to cost efficiency.

Systems optimization as a whole

Before you consider your bottom line, you need to have control of your process and system. This keeps you thinking “big picture” – many factories get tripped up by working with parts as opposed to the whole process. By losing sight of this, many companies will rush into cost reduction while damaging the system’s infrastructure overall. It’s ironic, but a company’s decision to improve systems can sometimes hinder the process as a whole.

The benefits of sustainable manufacturing

Going green is now beyond just an environmental benefit – it can actually boost your bottom line.

One major factor of inefficiency is waste. Most plants produce an obscene amount of waste, and could save themselves tons of money by figuring out how to repurpose it.

That is why Waste reduction is the ultimate target of any manufacturing company, a manufacturing practice that takes into account all expenditure of all resources to identify value from the customer’s perspective. In general, one of the biggest contributors to waste is inventory.

Thus, manufacturers would decide to cut down expenses on procurement. However, there are also several other effective ways that manufacturers can implement to reduce waste.

1. Identify the Key Areas of Waste

Anything that provides no value to the customer and contributes nothing to your bottom line, but definitely has a cost can be classified as waste. It may exist in every department of your company, thus it’s critical for you to find out the most common areas of waste in your business.

Have you been producing too many goods that are not even needed by your customers? Or is there too much delay in your production process so you need more time and costs to spend on machines and workers?

2. Manage Inventory Efficiently

Efficient inventory management means keeping the right amount of inventory (including raw materials, WIP, and finished goods), thereby reducing the risk of loss, decay, and, damage. So, how do you control the procurement of goods at a manufacturing plant?

First of all, you must be able to forecast your inventory needs. You need to make sure that the amounts and types of materials that you keep are adequate for your production and the goods you will produce are in accordance with your customer demands, so there will be no more unnecessary purchases.

Examine your previous sales data and keep yourself up to date with current trends to estimate how many items you have to produce and what materials you are going to need. Find out your best-selling products and those that are less profitable, so you can produce and sell the right items this time.

In addition to using the right forecasting technique, you also need to control your inventory by regularly monitoring your stock levels. Make sure your inventory is always at the predetermined minimum level. Know when you have to reorder, so you can avoid stock-outs.

3. Reduce Packaging Materials Usage

Product packaging is one of the major contributors to waste. Good packaging designs are sometimes needed to highlight the uniqueness of your product, but that does not mean you have to sacrifice a lot of money for them.

Redesign your product if that’s possible. Replace your product packaging with reusable and recyclable materials for starting a zero-waste lifestyle.

4. Establish Routine Maintenance Schedules

Check the condition of your machines and equipment regularly. Equipment damage or failures lead to unplanned downtime in the production process and other activities on the shop floor, which then cause order fulfilment delays. Furthermore, you will end up spending more on new machines and equipment. Therefore, it’s important to schedule regular preventive maintenance.

5. Avoid compliance issues

Compliance issues can come with a hefty price tag. As part of your systems optimization, you can enhance production so that mistakes are prevented and compliance costs are avoided.

Using a third party company to optimize systems

Sometimes, you need an outside company that’s able to see the forest for the trees, as they say. This is why manufacturing facilities will reach out to a consultant or outside company to help optimize their systems.

Plant optimization is one of our core competencies at VYAPT. We are able to spot inefficiencies and figure a way to improve them while causing minimal downtime.

To discuss your plant’s needs, get in touch with someone from our team

@ (011)-43042255/


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