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Manufacturing Costs

How to Cut Down Costs in a Manufacturing Industry

Running a manufacturing company can be challenging, especially when dealing with the high costs of production. It would help if you continually look for ways to optimize profit margins, increase your bottom line and cut back the cost of production to scale up. 

Cutting costs is not always easy because you don’t want to compromise the quality of the production processes affecting the entire business. Here are four ways to save money when running the business

Take advantage of Government Incentives and Tax Credits

Manufacturing industries take advantage of government incentives and tax credits by understanding the measures that support their effort. The incentives may come from the state government, federal government, or both.

The incentives and tax credits go to companies that manufacture particular products or re-invest in their facilities. Additionally, governments invest in businesses that are creating jobs and helping the economy thrive.

Two tax credit policies affect manufacturing companies: The research and development (R&D) tax credit and the investment tax credit (ITC). Both of these policies were put in place by the government to incentivize R&D investments. 

If you’re in the engineering or manufacturing industry, get an experienced consultant to take you through the R&D Tax Relief Engineering opportunities you can take advantage of, growing the business.

Consider Lean Manufacturing Processes

With rising costs, you need to find ways to cut down costs. One way is to use lean manufacturing. Lean manufacturing is a business management strategy that focuses on how an organization can streamline its processes and produce the same or more products than before with less time, money, and resources.

It relies on a set number of production equipment and a well-organized workflow to focus on what it does best – product development, employee training, and continuous quality improvements. Lean manufacturing is achieved through five main steps:

  • Identifying wastes
  • Eliminating wastes
  • Reducing the time spent on non-value adding activities
  • Improving workflow 
  • Fairly distributing tasks

Reduce the Cost of Human Resource

Probably the most crucial and costly expense is the cost of maintaining the workforce. You can choose to reduce the number of workers without compromising on quality processes or overworking the existing ones. You can also choose to

  • Outsourcing the work to other countries or companies where the labor cost is lower
  • Invest in automation and robotics, so you don’t have to hire so many people
  • Hire temporary workers only when needed rather than hiring full-time workers

The faster a company can produce its product, the less it spends on labor costs. The fewer people involved in a project as automation takes over, the fewer total hours it will take to complete the said project and the less money spent on wages. 

Lowering Energy Consumption

It’s essential to have an energy audit to understand the usage and wastes. Implement the audit suggestions such as investing in energy star equipment and appliances and taking advantage of renewable energy sources. Also, sensitize your workforce on the importance of saving energy and keeping an efficient, safe workplace.

There is always room for improvement in reducing costs in an industry as competitive as manufacturing.



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