Staying competitive while earning a profit often requires constant evaluation and review, especially when it comes to manufacturing costs. One of the largest, if not the largest, expense that you have as a business owner likely relates to manufacturing costs. If you review your process and analyze your costs often, you can look for ways to increase your profit margin while passing on significant savings to your consumers. Following are four ways you can increase profit and reduce manufacturing costs.
Reduce Labor Costs
While efforts to reduce labor costs can include laying off employees or cutting hours, it doesn't have to. You can reduce labor cost without having to shrink the size of your employees' income. How? By improving efficiency and productivity, of course. When you optimize your workforce and process to increase productivity, you produce more product per hour, which reduces the percentage of revenue that goes toward paying your workers.
Buy Materials in Bulk
If you have the space for storage, purchase your raw manufacturing materials in bulk. Bulk always costs less. If you purchase a month's rather than a week's worth supply of stamped metal products, glue, screws or anything else you use in the manufacturing process, you will likely get a discount from the supplier. You will also save in shipping costs, especially if your order usually doesn't fill the entire shipping trailer.
Reduce Overhead Costs
Look for ways to reduce overhead costs, including utility services, leasing expenses and storage. If your utility company charges more during peak times, you may want to consider running fewer pieces of equipment during that time. You may also want to look for less expensive storage facilities from time to time. Every bit of savings adds to your bottom line.
Streamline the Process
Lastly, you can streamline and optimize the process in an effort to reduce waste. For example, if you use a metal stamping company, look for ways that you can design your templates to reduce scraps. Also, if certain features on your materials, such as a clip, hole or tooled image, doesn't provide real value to your consumers or improve the product in any way, consider removing the feature.
As you can see, there are several ways you can reduce manufacturing costs. If you're not sure where to start, you may want to hire a professional like Hub Manufacturing & Metal Stamping who will help you streamline your process and put a stop to unnecessary spending.