Cost-effectiveness is vital for all businesses, but especially for manufacturing. Companies can maximize their profits while minimizing cash outflows. It also offers important metrics for companies to measure their success in their cost-effective manufacturing goals. Cost-effective manufacturing should be a priority for a company interested in growth.
What Is Cost-Effective Manufacturing?
It’s when your company can manufacture products efficiently at a fair price to your customers. Cost-effective marketing is the process and the end product of working to improve processes, reduce waste of all types, and increase overall efficiency.
Previously, manufacturing was not efficient. From untrained or poorly trained workers to clumsy machinery, the process of making products was not as advanced. In the last 100 years, companies have made great strides in improving their processes to make better products, keep costs down, and make more products faster. When companies regularly invest time and money into overall improvements, it positively impacts a company’s bottom line.
What Is Your Cost Of Manufacturing?
Manufacturing now involves complex, high-level software systems that efficiently track and allocate costs. This means that managers can get real-time information on a company’s expenses for operations and margins on profitability.
To become cost-effective, you must first know what your current costs are, using this formula:
Total Manufacturing Costs = Direct Materials + Direct Labor + Factory Overhead
The number is your starting point. An accurate number is vital for competitively pricing your company’s products so you and your company can make educated decisions for your company’s production efficiency.
Once you have a number, you can begin implementing LEAN and other strategies to help streamline your processes, make your manufacturing more efficient, and find ways to safely reduce your manufacturing costs.
High-Quality Manufacturing Tips For Cost-Effective Manufacturing
One of the most prevalent methods for achieving cost-effective manufacturing has been available for more than 100 years. Now known as LEAN Manufacturing, it offers benchmarks for continual improvement in manufacturing to achieve optimal efficiency.
Created by the Toyota Production System in Japan, the focus is on maximum customer value with minimal waste throughout the production process. LEAN’s core concept is to regularly eliminate any wasteful activity while optimizing processes, creating more value with fewer resources. Using LEAN principles, manufacturing companies can become more cost-effective with:
- Identify and eliminate waste in any form, including the Seven Wastes of LEAN:
- Overproduction
- Transport
- Motion
- Inventory
- Waiting
- Over-processing
- Defects
Any one of these can lead to excess costs that can cost a company more money than necessary and cut into profits.
- Implement automation. While most manufacturing companies already have automation, its effectiveness can’t be understated. Robots and other machines that work side-by-side with human employees can improve efficiency for rote tasks, leaving humans to focus on more value-added work that needs their attention. This can also include Internet of Things (IoT) technology to let automation handle even more rote work for humans.
Incorporating automation also improves safety for humans, as well as decreases labor costs, and error reduction, reduces waste and downtime, and increases overall operational efficiency. Of course, companies must perform a return on investment (ROI) analysis to determine if the cost of additional automation will result in greater efficiency that leads to cost-effectiveness.
- Adopt and follow ISO 9001 Standards. As the globally recognized standard for quality management, ISO 9001 is the ultimate benchmark for improvement. It’s how companies can create, implement, and maintain a quality management system for any sized company in any industry. Its guidelines help companies design and implement the policies, processes, and procedures necessary to produce products and services for their customers to meet their needs and all regulatory requirements.
These are just some ways companies can implement cost-effective manufacturing.
Let Brown Industries Handle Your Contract Manufacturing Needs
Whether you need help fabricating a single component, a subassembly, or manufacturing a complete product, Brown Industries offers contract manufacturing for whatever your company designs.
