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All manufacturers strive 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 However, the answer isn’t to lay off employees or continue using outdated technology in favour of modern alternatives to save costs.

Those approaches can actually cost you more in the long run - for example, outdated technology isn’t often supported and can cause you many problems, or it can impact employee morale; both can allow your competitors to overtake you.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

1. Assess your facilities

Reduce manufacturing 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 operational 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 operational 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 operational 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.

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

Benefits of operational visibility

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

Better inventory management can reduce the chances of overstocking (leading to dead stock) or under-stocking. It starts with improving operational visibility so you can make better business decisions and boost cost efficiency.

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

How to reduce business expenses

Energy consumption is often second to labour costs when it comes to operational expenses. After your thorough assessment of the facility, start making production decisions based on demand. This can help you save on energy costs without compromising output, quality or customer satisfaction.

Some easy ways to reduce energy costs include:

  • Installing energy-efficient lighting
  • Overhauling or replacing old HVAC systems
  • 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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