The more you’re able to bring down your manufacturing costs, the more your manufacturing company will be able to keep as profits. In fact, one of the best ways to boost profits for a manufacturer is to take a careful look at overhead costs and figure out where they can be brought down without compromising the overall quality of the manufactured product.
The following are six suggestions on possible ways manufacturing companies can decrease overhead costs:
Use material more efficiently
In manufacturing, one of the most significant overhead costs is material costs. You need materials for a variety of different purposes including to fabricate your product and to pack and ship it.
Reducing material costs will bring you more profits. Material costs can be reduced if you learn to use materials more efficiently and thereby get more out of every dollar you currently spend on materials. Consider doing things like reusing leftover packing materials or optimizing your production process to create less waste material.
Improve employee training
Excess overhead costs are sometimes caused by faulty processes that employees use in production that waste time and resources. One thing you should do in your efforts to bring down overhead costs is evaluate standard practices for employees and determine ways to improve on them.
Labor costs tend to be one of the most significant costs when it comes to overhead, so getting more from the money you spend on labor can reduce your overhead by a lot.
For manufacturers to know how much they need to improve speed or production, better their safety processes, or understand their general overhead costs, they need to know what all of that information has been historically. Using a data historian system will give manufacturing companies the ability to do all of this, giving them a better projection for decreasing future expenses.
Invest in more efficient equipment
The equipment you use for manufacturing and for lighting your facility could be unnecessarily increasing your utility costs. Upgrading to newer and more efficient technologies could help you reduce the amount you’re spending on utilities.
Research your tax situation for possible loopholes
One frequently overlooked way to bring down overhead is to cut back on your taxes. You may be eligible for certain government programs that bring down your tax liabilities.
Make your shop rates standardized
If your shop rates aren’t standardized, bookkeeping is going to take longer. Manufacturers who subcontract work with other companies should charge standard rates to make it easier to keep the books on dealings with each client.
Minimize storage needs
The less time you need to store inventory, the more you can get out of your existing storage space. Try to work your production schedule to minimize the amount of time inventory is in storage and thereby minimize the amount of space you need to commit to inventory storage.
If you can save money by doing any of the above, you’ll make your company more successful. Your company will also have more capital available to make additional improvements to efficiency that could reduce overhead further over time.
Anica is a professional content and copywriter who graduated from the University of San Francisco. She loves dogs, the ocean, and anything outdoor-related. You can connect with Anica on Twitter @AnicaOaks.