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The recent business climate has been unpredictable to say the least. From Brexit to Covid-19 to the current energy crisis, all manufacturers are striving to operate more cost efficiently without compromising their production quality or quantity. However, the answer isn’t to lay off employees or continue using outdated technology in favour of modern alternatives to save costs.

Those approaches can actually cost you more in the long run - for example, outdated technology isn’t often supported and can cause you many problems, or it can impact employee morale; both can allow your competitors to overtake you.

Instead, try out these 10 ways to reduce operating expenses in your manufacturing business…

  1. Assess your facilities
  2. Prioritise ROX as well as ROI
  3. Improve from within
  4. Adopt lean production concepts
  5. Improve operational visibility
  6. Improve inventory management
  7. Optimise procurement
  8. Reduce energy consumption
  9. Automate wherever possible
  10. Consolidate data

1. Assess your facilities

operating expenses

A complete and thorough assessment of your manufacturing facilities should be one of the first things you do when tackling any issue. So, if you’re looking to reduce your operating expenses, examine your current processes and technology. Is everything working as efficiently as it could be?

It can also be easy for internal evaluators to only focus on a few areas and overlook the bigger picture. You can combat this by bringing in a third-party consultant for a second, ‘outsider’ opinion.

2. Prioritise ROX as well as ROI

It’s easy to make changes to your processes, such as upgrading your legacy solution, and only basing that decision on its potential Return on Investment (ROI). We’re not saying ROI isn’t important (because it is); instead we’re suggesting that Return on Experience (ROX) should also be considered.

So, when you’re looking for solutions that can improve your operating efficiency, always keep your everyday and end users in mind. Will it make your employees’ lives easier and will it improve your customer satisfaction and experience? If the answer’s yes, it’s worth investing in.

3. Improve from within

To improve your operating efficiency (and reduce costs overall), you need to get input from your employees on the factory floor. They’re the ones who know most about the everyday processes and can lend some valuable insights into what might work, what might not and what needs to be improved.

Getting your team’s input also helps you get their buy-in and boosts employee morale as they feel more valued.

Read more on why effective management techniques can help improve from within here.

4. Adopt lean production concepts

Lean manufacturing is all about minimising (or removing) work activities that offer little to no value to the manufacturing process. Applicable to all business areas and not just production, you can ‘trim’ your processes, reducing waste and improving efficiency (of all resources).

To maximise the benefits, Lean should become part of your company culture. So, effective change management also plays a huge role in its success to continuously boosting your bottom line.

5. Improve operational visibility

reduce operating expenses

Visibility of your processes is about being able to access accurate, real-time data whenever you need to and quickly pinpoint the areas that require the most attention. This data could be on any area of your business, from your asset performance and maintenance to inventory levels, current supply and demand and supplier certifications.

The more visible your operations are, the easier and quicker it can be to make changes to your supply chain - even at short notice. Creating a smart, connected factory is one way to ensure complete visibility and boost efficiency at the same time.

6. Improve inventory management

Inventory management is a perfect example of a process improving through automation. Here are some of the key benefits:

  • Reduces the chances of overstocking (leading to dead stock) or under-stocking
  • Allows better analysis and reporting
  • Provides full visibility on stock levels
Having more control and visibility over your inventory allows you to make better business decisions and ultimately reduce operating expenses. For more detail on inventory management, read our blog here.

7. Optimise procurement

It starts with supply chain visibility. Once your supply chain’s more transparent, you can look at optimising your procurement process. Internal measures, such as bundling suppliers, improving planning and specifications, should be prioritised over external.

Global procurement using low-cost country (LCC) sourcing can keep costs low, however, unpredictable events like Brexit and COVID-19 have shown that it might be more cost-effective and secure to find suppliers closer to home.

8. Reduce energy consumption

reduce operating expenses

Energy consumption is often second to labour costs when it comes to operating expenses. However, in 2022 it has come to the fore with the ongoing energy crisis in the UK and the rest of Europe. As a result, many businesses are doubling down on cutting costs and in particular their energy consumption. After running a thorough assessment of your facility (we discussed this earlier) you can begin to identify the areas for improvement.

Here are some ways to reduce energy costs without compromising output, quality or customer satisfaction:

  • Installing energy-efficient lighting
  • Overhauling or replacing old HVAC systems
  • Ensure to maintain and repair equipment regularly (including checks for air compressor leaks)
  • Training your employees to be more mindful when it comes to energy efficiency
  • Setting a schedule for when high-powered machinery should run (rather than having it on continuously)

9. Automate wherever possible

Work smarter by automating your processes and you can enhance quality, efficiency, throughput and become more cost-effective. During your initial assessment, look at which repetitive, manual tasks/processes can be automated.

As well as improving cost-effectiveness, the benefits of reducing manual processes include enhanced efficiency and productivity, reduced chance of human errors and improved safety. We discuss this in more depth in the next section.

10. Consolidate data

The more time your employees are spending looking for data, the more time they’re not spending on their other tasks. Tackle this by consolidating data into one location. For example, if you can bring financial process automation, budget control and financial planning and analysis into one place, it’s easier and more efficient to run your business across multiple geographies.

Combine this with automation and you’ll see your team productivity, operations efficiency and costs improve.

There’s more to improving cost efficiency…want to find out more?

The tips we’ve just discussed aren’t the only things you need to know when it comes to becoming a more cost-efficient manufacturing business. We haven’t discussed the specific technology that can help, for example.

In our guide to improving cost efficiency for manufacturers, we discuss all of the above plus the benefits of automation, predictive analytics, a connected ERP system, integrated CRM, AI and more. Interested?

Click the button below to download our free guide!

 

Are your manufacturing operations cost efficient?

 

For a real-life example of a manufacturer transforming their business operations and improving cost efficiency, click here.

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