Paying attention to different types of manufacturing costs incurred by a firm is crucial to the success of any business. Being cost effective in your manufacturing business practices, as with many things, is a game of balance: it is important to know which areas to invest in versus which to save money in.
In our digital era, human employees and machine technology are of equal importance to this success, in terms of how both work to ensure that the quantity of capital being put into a supply chain is being represented by the quality of the output that is the product.
There are many parts that fall under an umbrella term regarding management of the manufacturing cost of your firm. Here are a few to consider, when talking about how to boost cost-effectiveness in manufacturing:
- Invest in the latest technology.
The presence of automation in manufacturing technology is probably the latest and an indisputable, way that modernization is manifesting itself within this particular field. Though utilizing the newest technologies at your firm might have a high initial price tag, a return on your investment is often promised. Ensuring that your business has the best machinery to get the job done will minimize the costs your business has to absorb in the long run.
A good example of this is industrial robots, which are essentially set to take over manufacturing. Their benefits include optimizing production efficiency and limiting human work in hazardous environments. This specific market is expected to exceed $11,920 million by 2024.
Implementing automation into your supply chain boosts cost-effectiveness because it reduces production costs, therefore increasing overall profitability. Automated practices also give managers more control over production processes, as they give us the option to match output to certain budget guidelines or breakeven points.
- Practice internal promotion.
It is usually in a firm’s best interest to hire from inside of the company rather than looking externally to fill positions. A Wharton School of Business study found that when compared to leaders who had been promoted from within a business, those hired from the outside cost more and had a poorer overall performance.
Internal promotion may be advantageous to manufacturing cost analysis because it does not incur the training costs that new hires do and the transition to leadership positions is often more efficient. Past experience with the company and the people they may be working with often make current employees ideal candidates for leadership positions.
Employers underestimate the time it takes for workers to get up to speed, says the conductor of the study. Cost-effectiveness when it comes to hiring in manufacturing can be increased by focusing on attributes that make up good employees, and consequently, what a certain individual might be “worth” to the business.
- Manage materials kept in inventory.
Not having existing inventory to prevent a stock out can seem like a worst-case scenario for a manufacturing firm. However, failing to correctly manage your inventory levels can harm the potential success of a company. If not managed properly, materials kept in inventory can add to the overall manufacturing cost of running your firm.
The extreme example of this is what is often referred to as obsolete inventory, or materials kept that have no value to a business because they have exceeded their marketability or product lifecycle. Many businesses actually view this type of inventory as a signal that overall, the firm has failed to correctly oversee its materials.
A good way to boost cost-effectiveness in manufacturing is to ensure that your inventory is being controlled by both digital and manual means, the latter meaning that human employees are working alongside machinery to see how much stock is being kept and classified as inventory.
- Commit to marketability.
A manufacturing company will retain its market share, and therefore its profitability, over the years if it commits to modernizing its product line and company culture. Cost effective firms generate a business model that forecasts how they will remain relevant in the long run and continue to create value for clients and employees alike.
One surefire way to do this to sponsor a research and development department of your company. These employees will be responsible for an in-depth analysis of your goods and services, as well as industry trends, to help forecast what might have to be tweaked in your business plan to keep up with changing times.
Another way to do this is to set up a marketing program for your firm. Whether that is in-house or an external agency might depend on the specific needs of your business. Marketing and advertising are essential components to attracting new business and to make sure that your profitability continues to climb instead of flatlining.
Want to talk more about being cost-effective in manufacturing?
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