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Jennifer Chen

July 8, 2019

10 Manufacturing Cost Saving Ideas You Need to Try in 2019

10 ways to cut costs for manufacturing companies that you can start acting on today.

When thinking of cost-saving tactics, many manufacturers may instinctively focus on making large cuts, such as laying off employees or putting off investments in new technology. There are, however, numerous other tactics that will not only help cut your costs, but also increase efficiency and position your company for the future.

Here are ten ideas you can start acting on today.

1. Replace Your Business Phone System with a Cloud PBX

You’ve likely heard of cloud PBX systems, aka VoIP phone systems, and perhaps you’ve had your doubts about them. You don’t want to deal with the transition, you’re concerned about the reliability, and you’ve already invested significant time and money into your existing PBX system.

These may have been legitimate concerns when VoIP systems first started becoming mainstream a decade ago, but today, VoIP technology is relied on by companies small and large. If VoIP is reliable enough for hospitals, emergency hotlines, and police stations, it’s surely reliable enough for you.

Now let’s look at a few of the opportunities for cost savings a cloud PBX can bring.

eliminate maintenance fees and licensing fees
Companies save 30 to 50 percent per month on telecommunication expenses with a cloud PBX.
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By upgrading to a cloud PBX, you also upgrade your functionalityimprove your team’s productivity, and thus . With features like automated attendants, intercom and paging, and integrations with other business software applications, your teams will have more powerful tools to manage their workflow.

Take Versa Products for example, who was able to integrate Telzio with Zendesk to optimize their customer service processes.

A Cloud PBX also cuts costs by consolidating services and locations. You no longer need rollover lines, hardware, or a separate phone service, and you can manage all locations under a centralized system online.

To recap, a cloud PBX helps cut costs in 3 main areas:
  1. Eliminating hardware, maintenance, and licensing fees
  2. Upgrading functionality and improving productivity
  3. Consolidating systems and locations

Related: Business Phone Systems - Everything You Need to Know

2. Recycle by Selling Excess Materials

Scraps are inevitable in the world of manufacturing. Take a moment to think about what your company does with excess material. Do you usually send it off to a landfill? What if you sold excess material to vendors instead? Not only will this earn your business some extra money, but you will be contributing to creating a more sustainable future through recycling.

One man’s trash is another man’s treasure. - Yotam Ottolenghi

You could sell off any type of excess material, including electronics, batteries, or metal. If you would rather not be in charge of selling company scraps yourself, you could choose to find a liquidator to handle it.

3. Seek Knowledge From Employees

Communicating with factory staff is essential for the creation of new cost-saving tactics and ideas for company growth. Employees who are working on the field will have valuable insights that you will not be able to find anywhere else. They are the ones who are constantly handling and using the company processes, so asking them for their input in regards to how to improve company systems can really help generate value.

Arrange a sit down with your team and ask them about ways that the company could improve. Keep a record of their proposals, in order to pass down significant information to the future generation of factory employees, and in order to develop new effective company strategies.

To enhance the workers’ incentives for sharing their valuable input, you could reward them with a percentage that they can obtain through the savings that are made thanks to their input. It is a great way to encourage your employees to go that extra mile and to really take the time to think of tactics that the company to its benefit.

4. Outsource

managed IT provider
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Another responsibility you can outsource to experts - marketing, social media, and even customer service. With a flexible communication solution like Telzio, you can easily create users for remote workers and provide them with the ability to make and receive calls on your business number from any location.

Related: Pros and Cons of Outsourcing IT Management

5. Cut Down on Material Costs

Material costs take over a great portion of your business’s total manufacturing costs. There are a number of ways that you can minimize material costs. One way is by making sure that raw materials are always bought in bulk. Sellers will typically provide customers with quantity discounts; take advantage of this and start saving instantly.

Something else you want to think about is whether your manufacturing business is using more materials than necessary. Take the time to review your processes along the entire factory chain, in order to spot material waste that can be deducted. You can look for material waste in

  • production,
  • sourcing,
  • transportation and distribution,
  • internal movements, and
  • permanent / temporary storage.

By eliminating and preventing the future purchase of excess materials, you can reduce waste and costs at once. Always make sure that your materials handle appropriate batch sizes, and that they meet appropriate specifications.

You can look at the costs that your company is spending on indirect materials as well. For example, if you are a wood furniture manufacturer, indirect materials will include the glue or the nails that you are using for manufacturing processes. Try purchasing indirect materials in bulk as well. By eliminating costs that can be avoided but in direct and indirect manufacturing materials, you will cut expenses immediately.

6. Prioritize Preventative Maintenance Strategies

It is critical that your company develops a preventative maintenance strategy. The last thing you want is spending time and money on failed machinery that could have been avoided in the first place. Taking the time to implement preventive and predictive maintenance can go a long way, and can to a great extent save your company from future spendings.

In essence, your goal should be to avoid as much downtime and profit loss as possible. You can do this by focusing on the:

  • regular replacement of filters or spare parts,
  • correct and consistent machinery lubrication,
  • technical cleaning, and
  • regular detection of vibration anomalies, especially in rotating machinery.

Preventative maintenance strategies are an important oversight and auditing process that should be formalized and implemented to cut risk and costs.

7. Improve Logistics

Your company’s logistics department should be a major component when looking for manufacturing cost saving ideas. Inbound logistics can greatly increase factory throughput. One way to really strengthen your logistics, and more specifically your communications department, is by implementing a cloud communications solution.

Just like how equipment monitoring via the cloud enables smarter operational decisions, a business communications, customer engagement and collaboration platform, creates more visibility across a business and supply chain—connecting employees with suppliers, customers and helping teams work better together. - RSM

With a Cloud PBX, you’ll be able to streamline your company’s entire communication platform to make meaningful connections no matter where your employees are. Whether they’re out making a delivery or out on the factory floor, making and receiving calls has never been more efficient.

The right communication system will help to strengthen your company’s customer serviceinventory management, , and purchase orders. Look for a communication system with a developer API, and easy-to-implement integrations through applications like Zapier.

Through integrationsmake sure all your business applications are working together, you can . For example, you can create an alert when your inventory runs low, and send an automatic text message to your inventory manager to notify her when this happens. You can create an alert everytime a new purchase order is placed, and send the notification through to slack. The possibilities are endless and can be tailored to your specific business needs.

Related: How to Set Up VoIP Integrations Using Zapier

8. Utilize Smart Manufacturing Technology

Technology is constantly evolving and offering new ways of making tasks more efficient and more effortless to complete. Consolidating and automating manual processes has shown to provide manufacturers with a tremendous ROI. As the ease of use rises and the cost of automation declines, automating manual processes have become more popular than ever. Small and medium-sized businesses (including manufacturers) are not too small for big data.

As a matter of fact, information technology today is constantly transforming the global manufacturing economy by digitizing every facet of modern manufacturing processes, a phenomenon known as “smart manufacturing.” By taking advantage of smart manufacturing technology, businesses can greatly increase product quality, and cut company costs tremendously.

Smart manufacturing systems include cloud-based computing, robotics, and automation. Cloud-based computing can help you manage your business with better intelligence, and can help to create a secure and performance-centric digitized system, while robotics and automation can eliminate costly manual processes.

Cloud technology has to do with accessing company data and services in the cloud, from any device that is connected to the Internet.

Enabling greater supplier quality management, visibility, better manufacturing scheduling, workflow optimization, fulfillment and customer deliveries are just a few of the areas where cloud platforms are contributing to manufacturing’s growth. - Forbes

Did you know that manufacturing is being led by executive management to become 100% cloud dependent by the year 2020? As more and more manufacturers are recognizing the tremendous benefits that cloud systems can provide businesses with, more manufacturers are seeking to digitize and transform their companies.

Cloud manufacturing—the provision of infinitely scalable computing resources as a service over the Internet— offers powerful abilities of resource aggregation and on-demand services. It pools different kinds of resources into the cloud through the Internet and the Internet of Things, to create a fully shared virtual resource pool and a network of manufacturing capabilities in the cloud.

Cloud computing provides manufacturers with professional and customized services that bring greater speed and accuracy to manufacturing operations. The number of manufacturing businesses that are digitizing their manufacturing systems are only expected to grow further. So in this age of rapid digitalization, failing to get on board with cloud computing could actually compromise operations and reputation alike.

We can’t talk about modernization with touching on the subject of robots. Collaborative robots, also known as “cobots,” are more intelligent than ever in our current time and age. Cobots have the ability to safely interact with workers and help with repetitive and hazardous tasks. Not only can this help to cut down on labor costs, but it also helps to create a safer working environment for your employees.

Related: The Great Communication Technology Revolution

9. Invest in Quality Equipment

When purchasing manufacturing equipment, it is important that you think of it as an investment, rather than as a company expense. By investing in good quality equipment, you are ultimately saving your company both time and money. If you buy equipment with a short life-span, it will be more costly and time-consuming to replace or repair in the future. Take a look at your current company equipment, and weigh out the pros and cons. Decide whether or not replacements will be beneficial to your company’s productivity rates.

Using outdated equipment is not worth your factory’s downtime. Consider flexibility, material waste, product quality, production speed, and potential volume growth, when replacing equipment and making new investments. Remember, return on investment (ROI) is key to cutting down costs in the long run.

The next thing you will want to think about is your equipment’s maintenance. Schedule a certain time every month, for example, to check for signs of wear, and clean add lubricants to equipment to sustain equipment maintenance. Consistent and regular checkups on equipment can be valuable to your company and can help to prevent future equipment damage.

10. Cut Down on Energy Consumption (And Go Greener)

Often times, manufacturers will overlook energy reduction tactics, as they have a reputation of adding additional company costs, rather than cutting company costs. This is a common misconception and is only true when looking at immediate costs. Just as in the case of purchasing equipment, manufacturers should think of energy conservation tactics as an investment that can help to cut down company costs in the long run.

Energy conservation tactics may be pricey in the beginning; however, they have been proven to save future company costs tremendously. There are numerous ideas that your company could utilize to go greener and reduce costs.

For starters, your company could create an energy management team that can help handle expenses and cost-savings in regards to energy consumption. Implement a continuous improvement strategy that will help to ensure that you stay on track with company savings.

You could also replace costly heating, ventilation, and air conditioning (HVAC) systems, and begin your cost-saving journey in regards to energy consumption in that way. You could even optimize air compressors and fix leaks, or install energy-efficient lighting. The list goes on and on, just make sure that you always consider how each tactic will reduce costs in the long term.

Because “going green” is a growing trend in the manufacturing industry, cutting down on energy consumption can boost your company’s reputation and can help to attract loyal customersbetter employee talent and .