Reducing Overhead Costs in Manufacturing
When the conversation of reducing overhead costs in manufacturing comes up, the first word that experts often 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 manufacturing processes, as those must be in place before the conversation turns to cost reductions.
Manufacturing costs are borne by the creator of the products or services and by the consumer at the tail end of the supply chain. Profit margins are determined in large part by material costs, the amount of money spent on raw materials, production costs, labor costs, overhead expenses, and more. Manufacturers in search of cost-saving measures would be wise to seek to reduce manufacturing overheads.
The production process is complex and, therefore, susceptible to all kinds of pressures that can affect a company’s bottom line. Fortunately, there are ways of reducing costs — reduction strategies that include the implementation of cost-cutting measures that reduce manufacturing costs while maintaining quality control over product designs and production.
We’ll explain a few methods below which can greatly help your factory reduce your production costs.
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.
At Bizain.com, they write, “In order to reduce such wastes, your business needs to have a strong internal control system. Conduct periodical checks should be conducted to minimize wastes. As we know prevention is always better than cure. Thus, you should detect the areas of waste and implement measures to prevent them. Tighten the quality control measures, so that only those units are offered to the market that meet the quality standards.”
There’s also some good advice at Chron.com. “Another way to reduce material costs,” they write, “is to use fewer materials in your products. If you can reduce the amount of material going into a unit without significantly impacting the quality of the product, then you reduce your material costs. You can also eliminate or reduce the materials that do not contribute directly to your product, such as packaging and documentation. If a feature isn’t necessary to the ultimate market appeal of your product, then you can do without that feature.”
Other ways of reducing overhead costs in manufacturing
- Inventory and storage management. As you may know, inventory is one of the major costs for manufacturing facilities. Cost of storage, as well as insurance and maintenance, can add up quickly. It’s important to avoid overproduction and stay responsive to changing customer needs.
- Upgrade intelligence systems. With smarter technology and oversight, you can improve root cause analysis, which allows you to better anticipate spills or quarantines in the future.
- Avoid compliance issues. Compliance issues can come with a hefty price tag. As part of the optimization of your system, you can enhance production so that mistakes are prevented and compliance costs are avoided.
- Lower energy costs. For most manufacturing facilities, energy use is the highest or second-highest cost. There are both barriers and opportunities for reducing energy use, you just need a smart way to navigate them.
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 Storee Construction. 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.