It doesn’t matter if you have cool ideas for products if they are expensive to produce. The whole point of getting a product manufactured is to make a profit while keeping production costs down. If done successfully, reducing costs can ensure the continued existence of your company while simultaneously spurring growth and profitability.
There are various ways companies reduce their expenditure when it comes to manufacturing a product. It is a trial and error process that takes a lot of experimentation to get right. However, there are some tried and true methods that people have figured out to have a high degree of success. Here are some of them.
Use Standard Components
Using custom components, as opposed to standard components, is one of the factors that makes the cost of producing a product rise. Using standard components does not mean that the importance of product quality should be forgotten. What this means is that if less expensive components can be used without sacrificing quality, it would be prudent to use those instead.
Also, the beauty about standard components is that they can be purchased in bulk. Many suppliers offer discounts on bulk orders, which can bring down the cost of production even more. This is one of the biggest advantages of standard components as opposed to ordering from the custom-made components industry.
Increase Worker Efficiency
Sometimes, when companies need to reduce costs, they either start cutting their staff or reduce the wages of workers. In the end, the job satisfaction of highly-skilled employees is reduced as well, which can cause them to leave. What is worse is that these companies end up keeping or employing workers that are unskilled, rendering their cost reduction efforts irrelevant.
The more effective solution would be to increase worker efficiency through further training so that the average time it takes to produce a single unit is reduced. Another thing would be to let employees in on the cost reduction plan and asking for their input as well. This has the added benefit of making them feel more valued, which can also increase efficiency.
When you overproduce, you need to store the extra units somewhere. This can be costly, especially when they are stored for an extended period of time. You have to factor in the cost of storage, insurance and other additional costs. This is not only a cashflow stopper, but a working capital reducer as well.
To avoid over production and incurring overhead on storage costs, you need to pay attention to the demand and respond accordingly with the right amount of supply. Doing this can also prevent you from under producing your product and dissapointing your consumers. (as you know, disappointed consumers have no problem going to your competitor).
Consider Investing in Technology
Technology has come a long way, and through the internet of things (IoT), it has made machinery smart and super efficient. With IoT constantly providing management with relevant data, they can be in a position to make informed decisions that can increase system and worker efficiency, reduce power consumption and avoid costly downtime.
Although the initial cost of technology can be high, the long-term saving benefits are worth the investment.
Having great product ideas is what allows us to create companies and ensure their continued existence. But the most important thing is ensuring manufacturing feasibility so that you have a quality and affordable product for consumers to enjoy. While there are other ways to keep production costs down, the above-mentioned tips should be of great help.