11 Ways to Cut Costs in Manufacturing

Author: Paul Henriques in: Implementations
Management

July 21, 2023

11 Ways to Cut Costs in Manufacturing

Finding the best way to cut the costs is a topic that is never far from any business owner’s mind. In manufacturing, it has always been a critical component. Lately, the global markets are taking a turn, where a new normal for supplies and demand seems to have set in, with inflation and interest rates cutting demand and global trade turmoil changing supplies. Because of this, manufacturers have been looking for even more places to cut costs so they can maintain their profits while competing for cost-conscious customers.

One of the better ways to cut costs is to increase automation. Adopting automated systems, such as an all-in-one Manufacturing ERP (MERP) that includes MRP, DCP, MES, QMS, WMS, and other systems, can help your firm cut costs while finding better productivity, quality, inventory control, and resource management.

Cutting Staffing Costs

For the most part, cutting costs isn’t about removing one thing or underpaying for another, but rather about using what you have more effectively. Some of the areas where companies are finding savings include:

  • Better Scheduling – A better MERP will have an MES that can help you with automated scheduling and dynamic rescheduling to ensure that you have the required materials and tools available when the right staff are onsite. This will help you avoid both excesses and delays that maximize your productivity.
  • Less Data Errors – Having an all-in-one MERP will cut down on the number of times the same data has to be inputted, since you no longer have multiple systems to handle but just the one. This means less errors on data entry and less errors when transferring data between systems. Also, by having that accurate information entered only once, your MERP will communicate the correct data throughout its many modules, such as DCP, QMS, MES, etc., which means your management team can make better decisions.
  • Lower Labor Costs – As labor continues to be one of the largest costs, it is imperative that you get the most out of each hour of staff time. With real-time data capture from your production floor, you can quickly find out which processes are running within allowed variances. And with better scheduling and DCP, you can minimize the added overtime paid and the hours lost from poor productivity due to poor training.

Cutting Inventory Costs

As taught by Lean, one of the first stops to cutting costs is inventory management. Some of the areas where companies are finding savings include:

  • Less Inventory One of the simplest steps to take, though implementing it can be more complicated than just cutting the amount of supplies you order. To have less inventory yield lower costs, you need to find the best order quantity and have that information shared with your MRP.
  • Faster Warehouse – Adding smart-scanners and other automated tools to your warehouse can also help you improve tracking and monitoring of inventory, which can cut your loss rate and excess inventory.
  • Less Expediting – With all your information in a single MERP, you will have a better view of current and upcoming material requirements and trends which will help you avoid creating rush orders or last-minute purchases that offset your expected costs.
  • Pull-based Production – With new MERP systems, having your forecasts and production in one system, you can easily establish a pull-based system, where you are not making parts based on assumed demand but on actual forecasts so that you are not losing time producing parts that won’t sell.

Cutting Tool Costs

Another area where costs are often higher than they need to be is in how the tools are organized and run. Some of the areas where companies are finding savings include:

  • Better Monitoring – By adding smart machines, or shop monitors to older ones, you can improve your real-time machine reporting to your MERP. This can help you detect upcoming failures early by monitoring important factors (like speed, temperature, vibration, etc.). With that type of early warning system, you can correct the machine and reduce your rejects, scrap, and waste by up to 95%.
  • Smarter Maintenance – One of the benefits of shop monitors discussed above is that by monitoring various factors on the tool, you can begin using not just preventative maintenance, but predictive as well, where you can action a tool when certain values fall outside of acceptable limits. This can cut down on unscheduled outages by up to 45%, which also cuts the needs for expensive emergency repair bills.
  • Improved Nesting – Improving your nests and nest scheduling can only be done with a better MERP that understands the needs of manufacturers and how nests are scheduled and run. Smarter nesting that is integrated into your manufacturing ERP results in significant improvements, such as a 60% decrease in labor costs and 50% increase in production.

Cutting Costs with Better Training

An often-overlooked place to cut costs, perhaps because it can feel like you have to spend to see a return, is in staff training. Where automating processes help you save, it is also important to invest in regular training for your shop floor workers. Having better trained staff can help you reduce costs for repairing and reworking part, it can decrease the number of safety incidents, and improve productivity.

By ensuring your staff are up-to-date on the latest technology and techniques available to your type of business you can improve your competitive edge. Staff will also notice your investment in their future in the company, which will raise their satisfaction in you as an employer leading to higher staff retention. This, in turn, will cut recruiting and onboarding costs.

Finally, improving staff training leads to more cross-trained individuals, which can help you decrease staffing issues, since more than one person will have training on performing crucial tasks.

Conclusion

Building resilience and competition into your manufactory is no longer just about doing it right the first time. It also requires an investment in staff and technology to provide the knowledge and tools to improve your operations.

Replacing many of your management systems with an ERP built by manufacturing and for manufacturing, an MERP, is a crucial step in cutting costs and strengthening your corporate performance and capabilities.

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