April 02, 2020
Cutting Costs & Reducing Manufacturing Expenses in Response to COVID-19
The current situation during COVID-19 is brimming with uncertainty. Shelter in place orders and social distancing measures bring new challenges for every sector of industry and commerce around the globe. Manufacturing is a broad and diverse industry and companies are being affected differently depending on where they are located and the products they produce. Whether you find your business pushed to the limit or putting on the brakes, now is an important time to examine ways to save money in manufacturing.
We have compiled a list of cost-saving efforts that can be utilized by all types of manufacturing companies. The easiest way to save money is more complicated than finding a large expense and cutting it. Rather than making large cuts to one or two departments, it’s better to cut costs through small cost-saving efforts that add up to large savings. This method helps your employees and partners feel the effects of the cuts minimally.
1. Perform a Complete Assessment
Big decisions require research. Making unnecessary cuts or uninformed decisions can actually increase manufacturing expenses. It might be the perfect time to look at the last time a complete review of systems and audits were performed. An audit can help to discover outdated processes and procedures. Prioritizing ROI (return on investment) during the audit will keep the focus of assessments on what matters most right now. Companies that use a modern ERP to manage their data and processes will have an easier time assessing where they stand at any given moment.
2. Ask Employees
Collaboration not only boosts morale and leads to higher retention rates, but employees are also your richest resource for feedback. They are essentially on the front lines every day completing the processes and working hand in hand with the equipment. Not only can they help locate key cost-saving process improvements but also redundant policies that hinder their productivity.
3. Lean Manufacturing
Cutting the fat isn’t just for your waistline. Bloated spending can live under the radar for years without notice, sneaking up on your bottom-line year after year just like those extra notches in your belt. Here are some specific areas to watch for in your audit to decrease manufacturing expenses.
- Storing Inventory
- Correcting Mistakes
- Unnecessary Movement
4. Reduce Cost of Materials
Buying materials in larger bulk options can save money if you have somewhere to store the materials. A more practical solution is to reach out to your supply partners that you have a long-standing relationship with to negotiate cheaper prices. Sometimes it’s not what you know but, who you know. Long term partnerships based on consistency and reliability are valuable. The first step in negotiating a cheaper price for raw materials is getting quotes from other companies. Explain that you prefer to stay with the current company if they can match the price of a competitor.
5. Sell Your Scraps
One man’s trash is another man’s treasure. No, it really is, especially in today’s greener climate. The first step is to exhaust all options to reduce scrap. Even the selling of scrap can cost in labor and unnecessary material waste. After all of the reduction of waste has been reduced selling scraps can help decrease manufacturing expenses. Chaos often calls for creativity, and people are good at finding uses for different materials when their usual supplies run short. Keep an eye out for new opportunities and places to help solve a problem.
6. Go Greener
Energy consumption is a difficult number to quantify because it is more than the bottom line cost. It’s important to know how the energy is consumed. An energy audit can help locate the most efficient uses of energy and mitigate unnecessary waste. Here are 5 ways you can reduce energy consumption.
- Install energy-efficient lighting
- Optimize air compressors and fix leaks
- Overhaul or replace old HVAC units
- Create an energy management team
- Reschedule usage of high-powered electric machinery
7. Take Advantage of Technology
Work smarter not harder, by eliminating monotonous tasks using technology. Business intelligence and analytics can streamline your operations by giving you actionable insights. An effective ERP solution will maximize ROI utilizing auto start/shutdown utility, an effective backup manager, provide maintenance reports, and audits. We cannot recommend Infor CloudSuite Industrial ERP highly enough for this purpose, especially seeing how its features are helping our clients through these challenging times.
Remember, You're Not Alone
We are in this together. As we navigate the uncertain waters of COVID-19 at Guide Technologies we are committed to the success of all our clients, business partners, and friends in the manufacturing and technology communities. Cost-cutting measures like reducing manufacturing expenses and increasing ROI is not a new concept. As the circumstances of shutdowns and slowdowns across the globe shift all our daily lives, we will strive to serve you in the best ways to stay afloat and make it through to the other side.