Many say that reducing production costs is equivalent to lowering the quality of products produced by a manufacturing company. But do you know that there are several ways to reduce production cost and increase profit ?
The key to reducing production costs is to approach systematically to control production costs (materials). To manage products and materials accurately, you can use a supply chain management system so that the supply chain can be controlled and more efficient because it is done automatically through a system. Then, Here are 5 tips to cut production costs in manufacturing companies.
1. Internal savings
Most manufacturing companies or factories agree that labor and raw materials are the biggest sources of corporate expenditure. Even though the costs for employee salaries or raw material expenditures are meant to be spent, this does not mean that austerity measures cannot be taken.
There are several ways that manufacturing companies can take to reduce these costs, namely optimizing raw material spending, operational efficiency, and reducing waste during production.
2. Look for cheaper raw material providers
Try to renegotiate the price of the material you bought from your provider. If this is not possible, look for other raw material providers that are cheaper for each item you produce.
In manufacturing companies, it is quite common to found suppliers of raw materials are acquaintances or even relatives of company owners or one of the staff. This makes the price negotiation process more difficult due to the relationship between the provider of the raw material and the business owner.
3. Inventory optimization
The accumulation of goods in the warehouse has the potential to drain your company’s funds, among them are excess produces or expired raw materials stored in warehouses for a long time. If your company does not have a warehouse, this can increase the costs you have to spend to rent a warehouse.
Therefore, you need to carry out inventory checking regularly. With inventory checking, you can reduce a lot of expenses for spending raw materials or reduce employee spending if needed. To make it easier to check inventory, you can use inventory management software. The software will help track receipt using barcode management and amount of goods to be provided in a certain period.
4. Go green
An environmentally friendly production process is the right way to significantly reduce your production costs. This policy can improve the worker’s morale, improve company’s image in the community, and make the company’s environment healthier.
We can use a simple method to start this policy, such as turning off lights when not in it, reviewing water consumption, going paperless, buying energy-saving equipment, and making repairs regularly to maintain the efficiency of your company’s machinery.
5. Take advantage of supporting technology
Various manufacturing companies are starting to implement software manufacturers, such as Hash Manufacturing Automation to maximize productivity, increase efficiency, and cut production costs for your manufacturing company.
Not only that, supporting software is able to measure the performance of each employee and make savings a corporate culture. Business can use this technology to evaluate the profit you make from your business to cut production costs.
Conclusion
Increasing the profit received is not always obtained by increasing sales of manufactured goods. But by cutting production cost it increases both efficiency and profit.
One of the most effective ways to improve efficiency is to implement supporting technologies such as ERP Manufacturing from HashMicro. For more details and schedule a free demo about ERP Manufacturing from HashMicro, please contact us.
