The manufacturing sector is recovering rapidly after the sharp decline reported in 2020 because of the COVID-19 pandemic. About 35% of businesses reported that their revenue levels had returned to normal by the start of the third quarter of 2021, while 30% more anticipate reaching pre-COVID-19 levels by the close of 2021. Despite the impressive spring back, many challenges stand on their way to full recovery, such as supply chain disruptions, trade uncertainties, and retaining a high-value workforce. However, how to keep the cost of operations low is the most notable challenge. 

This post is a closer look at manufacturing production-related costs to help you identify the best methods for cutting down production costs. 

A Closer Look at Production-Related Costs in Manufacturing 

In manufacturing, product development/ architecture accounts for more than 80% of production costs. Therefore, it is an excellent point to start when thinking of cutting down costs. Indeed, the concept architecture alone can take up 60% of the production costs. The architecture provides the product definition, part combination, team composition, technology, and off-the-shelf components. 

The product design phase is also very important in defining the strategy that should be adopted for manufacturing, quality, reliability, vendors, service, customizations, configurations, and supply chains. As you can see, cutting down the costs can help your facility save a lot of money. So, here are some of the strategies that you can adopt. 

Strategies You Use to Help Cut Costs in Manufacturing 

Adopt Lean Manufacturing Model 

Lean manufacturing can be summarized as doing a lot more in your production with less. To use lean manufacturing, you need to start by understanding wastes and then work on how to cut them down. Good examples in the manufacturing industry can include waste of time, resources, and workspace. It might also mean that you are not optimizing the available skills or tools in your facility. No matter the angle that you look at it, wastes always result in high financial costs.

Lean manufacturing covers every avenue to help you cut down wastes and enhance production. This means that from your equipment, such as motors and material handling machines, you look for ways to give customers what they want. A good place to start is reviewing material flow and checking how to use less effort, fewer resources, and less time. For example, you can improve material handling efficiency and costs by shifting from manual operations to the use of forklifts.

Review Your Labor Costs 

While the best way to cut costs in manufacturing is focusing on the production areas, you should also move to the next level by checking the labor costs. Well, cutting down the labor costs is a quick way to cut down on costs, but it can easily go wrong if you do it the wrong way. This is because the cost of recruiting and training staff is very high. Also, it can easily erode staff morale. So, how do you trim the workforce effectively? 

• Review the organization workforce. 
• Avoid overshadowing. 
• Offer training to employees to reduce the need to hire regularly. 
• Consider outsourcing or hiring part-time staff. 

Where you need to lay off staff, make sure to go for a negotiated exit plan that leaves them happy. Indeed, you can even try to assist them in securing employment in other firms. See: you will have offloaded the excess staff but retained a positive image, which is equally critical. 

Save Energy-related Costs 

Notably, every manufacturing unit requires ample energy to operate. Although the energy requirements vary based on the size of the company and operations, a significant chunk of the budget will no doubt go into energy. Lighting, cooling, heating, and operation of your equipment such as motors and pumps all have energy costs that you must factor into your budget. If you are not careful, these costs can be really high. 

By cutting down energy costs, you can slash the production costs for your plant with a huge margin. This will also come in handy in helping you operate in compliance with emerging requirements, such as ESG reporting for companies. Here are some useful tips you can use to keep energy-related costs for your manufacturing plant as low as possible. 

• Use LED lighting because they consume a minimal amount of energy. 
• Fix leaks in your industrial HVAC system. 
• Invest in energy-efficient manufacturing equipment. 
• Top-notch equipment maintenance to help cut down the cost of operations. 
• Schedule start-ups and shut-downs using programmable logic controllers. 

Whether your manufacturing plant is new or has been running for some time, it is paramount to always look for prudent ways to cut down costs of operations while increasing efficiency. The tips we have listed in this post can be very effective in getting you started. Other considerations you might include are automation, preventive equipment maintenance, and product line rationalization. Remember that no matter the method you select, it should be reviewed regularly to ensure it is delivering the targeted results.