Cutting Production Costs – Business Acumen 101
Today is the start of several days of looking for ways to cut costs. These methods can be used internally by managers looking to improve their productivity or unit performance. Externally, B2B sales people can look for ways their products or services can produce these advantages for their customers. The key is to review the lists and find one that makes sense for you. Then take that one method – launch and measure your results.
So, we will begin the cost reduction segments looking at overall production cost and what we can do to reduce or optimize our production results. There are sixteen unique methods for cutting production costs:
- Reduce the number of operations.
- Reduce cost of one or more operations.
- Combine two or more operations.
- Automate operations.
- Reduce labor costs (or redistribute labor costs into other areas.)
- Improve production scheduling.
- Reduce operating time to speed up production.
- Reduce insurance costs.
- Reduce materials consumption
- Recycle materials or waste.
- Substitute materials with less costly materials or reformulate product materials.
- Reduce raw materials inventory ( just in time inventory management)
- Reduce parts inventory (As basic as using same screws in multiple products)
- Improve controls (can be in people, CMC programming, or production scheduling).
- Simplify product and/or package design.
- Dedicate an entire production line to one product or customer (if value warrants)
Again, the key is to pick one method and launch a project to improve results. Be sure to measure your results to prove your methodology. The methods listed above have been used and are proven as cost cutting methods for production expense items.
If you need to actually experience some of these methods without the business risks, we have a manufacturing business simulation process that will provide the experience and practice needed for these tough decisions. Check our main website or call us during work hours – 9 to 5 Central Time and find out if we can help you.