15 Ways to Reduce Manufacturing Costs

Unlike many modern businesses, manufacturing cannot be conducted with a smartphone in an entrepreneur’s bedroom. Instead, the manufacturing industry requires physical premises, materials, machines, and staff on-site. These requirements generate plenty of value for workers, consumers, and business leaders alike, but they also incur unique costs. Throughout its history, manufacturing demanded plenty of investment. Smart optimisation and efficiency tactics found ways to reduce manufacturing costs while maintaining high output and quality. This drive for cost efficiency remains true to this day, and the following 15 tips can help you reduce manufacturing costs for the future.

reduce manufacturing costs

1) Crunch the Numbers for Ways to Reduce Manufacturing Costs

Knowledge is power, particularly when it comes to discovering ways to reduce manufacturing costs. Tracking, logging, and comparing your costs helps you find out where you’re wasting money and where some short-term investments could generate long-term savings.

Comparing one month’s spending to the rest of the quarter, and one quarter’s spending to the rest of the year, also helps you identify which costs are increasing and decreasing. From there, you can intervene in worrying trends and plan for sustainable finances going forward.

2) Break Down Your Spending Patterns

Segmenting your manufacturing costs into different categories helps you decide which are necessary and which are disproportionate. This process reveals ways to reduce manufacturing costs.

Manufacturing requires different types of spending, from labour, to capital, to materials, to overheads. When you adjust your spending on each category, you’ll discover what you can live without, and what you can reduce while maintaining your standards.

3) Conduct More Market Research

Competition drives industry, and you can learn plenty from your market, your partners, and your rivals. Look into the industry standard for things like material costs, utility usage, and production times. If you find yourself below average, find out what’s holding you back, and work to fix it. If you find yourself average, or even better, you can still work harder to reach your ideal efficiency.

4) Audit Your Equipment

Most manufacturers have plenty of capital tied up in their equipment, and the right investment can make or break a business. Finding the right investment involves understanding the two extremes, and navigating between them to find the perfect solution for you.

On the one hand, you have the company that never invests in new equipment and sticks with their old machines until they’re rusty, faulty, dangerous, and broken. On the other hand, you have the company that invests in all the latest manufacturing fads, which become immediately out of date and cost too much to keep the company afloat.

Regular, smart investment supports cost efficiency, and each business finds a unique approach to suit their firm.

5) Implement an Effective Maintenance Schedule

During your expenses audits, you might find you’re spending far too much on replacement parts, product recalls from faults in the manufacturing process, or expensive shutdowns and emergency breakdowns.

These issues all stem from unsatisfactory maintenance and servicing strategy. In their efforts to cut corners, some manufacturers slack on servicing. This incurs more costs than it’s worth, and protocols like regular CMM calibration and servicing deliver ways to reduce manufacturing costs and boost efficiency.

6) Optimise Your Processes for Ways to Reduce Manufacturing Costs

The best manufacturing processes emerge from regular audits to check they’re efficient and up-to-date. Since Henry Ford revolutionised the production line, manufacturers across the world break their production processes down into component parts and see what’s necessary and what could be improved. Ask yourself, is every stage of your production process essential, and appropriately budgeted? Answering this question could reveal several ways to reduce manufacturing costs.

7) Maintain Staff Efficiency

Like the machines they often produce, manufacturing businesses achieve peak efficiency when every component co-operates. There’s efficiency to be gained from the stockroom to the boardroom and from the loading bay to the manager’s office.

Maintaining staff efficiency among manufacturing workers doesn’t have to revolve around punitive measures and penny-pinching. In fact, incentives drive productivity and reduce costs over time. Happy workers often make cost-effective workers, so work with your team to improve your business together.

8) Improve Staff Training

Implementing staff training also helps reduce costs by increasing competence, efficiency, and safety. If you find your business spends too much on wasted materials and workplace accidents take a toll on health and margins, investing in upskilling can help streamline your costs.

9) Find Ways to Reduce Manufacturing Costs by Reducing Churn

Staff training also helps reduce churn, as it shows the team that they’re worth investing in. Churn saps businesses expenses, as companies pay out severance costs, recruitment costs, hiring costs, and onboarding costs, all of which also expend precious time. Thinking long-term with your workforce promotes long-term financial stability for businesses and workers alike.

10) Shrink Your Footprint

Shrink Your Footprint

We’re not talking literal footprints here, as large protective boots often prove essential for a manufacturing workplace. Instead, we’re considering your ecological footprint, which can align closely with manufacturing expenses.

Streamlining your energy costs, from operational usage to lighting and heating, helps protect your finances and the environment. Green innovations also bring indirect savings in the form of government grants and subsidies, and more favourable deals stem from ethical PR.

11) Compare Your Incomings and Outgoings

Alongside your environmental output, evaluate how much product and how much waste your business produces. Auditing the differences between what enters and what leaves the premises unlocks different ways to reduce manufacturing costs. If you’re producing disproportionate amounts of waste, try to find ways to curb your castoffs with more precise manufacturing. Alternatively, turn your costs into profits by investigating whether there’s a market for any of your by-products.

12) Negotiate Utility Rates

Cutting down your utility usage is one of many ways to reduce manufacturing costs. It’s also well worth speaking to your provider directly to see if they’ll budge on any of your rates. Maintaining lines of communication with them, and their competitors, helps maintain an optimised budget.

13) Negotiate With Suppliers

Similarly, conversations with suppliers help keep costs reasonable, particularly if materials constitute a large chunk of your expenses. Suppliers often value long-term, bulk purchases more than smaller, short-term deals, and their rates reflect that value. Exploring bulk-order deals and partnership programs opens a new avenue to efficient manufacturing costs.

14) Explore Alternative Materials For Ways to Reduce Manufacturing Costs

Even if you’re happy with your current material choices, there’s rarely any harm in seeing what else is out there. Industries always come up with new extraction, production, and refinement options, so you might well find an innovation to help you cut costs without compromising on your values. Even if you don’t see anything you like, the options can come in handy when negotiating with suppliers and buyers, to improve your deals.

15) Digitise and Modernise From the Offices to the Production Floor

Modern manufacturers no longer need to use pens and paper to sketch down new ways to reduce manufacturing costs. Similarly, digital innovations in administration, resource planning, learning management, resource management, time and attendance, and manufacturing itself can all help streamline your business. Some cost reduction strategies involve cutting back on your existing expenses. Others, like smart digitisation, involve spending wisely to future-proof your firm.