Due to the current economy, it is more important than ever to keep businesses and manufacturing costs under control. The more money a business spends, the more money they have to bring in to break even. The goal of any business should be to make money, not just to break even. The following will go over nine proven ways to cut costs in manufacturing.
Keep an Eye on Payroll
One area that companies spend a lot of money on is payroll. Payroll seems to be constantly rising, as employees can earn raises and bonuses, yet their hourly rate will never decrease. Onboarding new employees is not a cheap process and can take a huge chunk out of the payroll budget. Learn more about Infor LN software.
Business owners need to keep an eye on payroll and look for areas in the department where they can cut costs. One way to save on payroll and cut payroll costs down is to keep the company’s employees with the company. By reducing turnover, a company can avoid a lot of those high onboarding costs.
Schedule Hours Appropriately
Cut costs by scheduling staff hours appropriately. This means not having extra employees scheduled to work during slow times. Instead, schedule more employees only during peak times.
Utilize Software as Needed
Smart business owners use software to keep an eye on payroll, sales, and more. Some software will even automatically invoice customers and send the invoices to the customer. Software is great for tracking trends, minimizing errors, and giving a good look at the bottom line.
Negotiate Costs with Suppliers
Once a relationship has been built with a supplier, a business owner may feel comfortable negotiating costs. It’s also important to note that two companies may have very different pricing. Sharpen those negotiation skills and work with suppliers to bring supply costs down.
Only Buy What Is Needed
Buying a year’s worth of inventory at a time may seem like a good idea, but this can actually mean that money is sitting on a shelf collecting dust. Cut costs now by only ordering the supplies that are needed. Instead of ordering twelve months’ worth of supplies, consider ordering a few months’ worth to free up some cash.
Look for Cheaper Options
If the price of one material goes up, smart business owners look for an alternative. Look at what products the company is spending the most money on and then look for a cheaper alternative. Every dollar saved on supplies is a dollar less that has to be earned back.
Look for the Value in Processes
Over time, manufacturing processes can become inefficient. Always consider the costs of processes and make sure that the cost is worth the finished product. Redesign the processes as needed to maximize efficiency.
Look for a Cheaper Place to Rent
One flat fee that a company pays every month is rent. If rent is high, cut costs by looking for a new cheaper place to rent. The same goes for storage facilities and storage facility rent. Finding a cheaper storage area, building, or storefront can mean that it saves money throughout the year.
Keep an Eye on Miscellaneous Costs
Those little extras add up, so keep an eye on all miscellaneous spending. This includes office supplies, coffee for the breakroom, cleaning fees, and everything else that a business spends money on throughout the month. A proven way to cut manufacturing costs is to cut out the extras, buy cheaper brands, and only buy what is needed.
In conclusion, there are many ways to cut costs in manufacturing. The above suggestions are just the tip of the iceberg. A small business owner will always be looking for ways to cut costs, improve performance, and increase sales.
