What Makes Up the Manufacturing Bottom Line?
What Makes Up the Manufacturing Bottom Line?
September 16, 2015
Manufacturers continually face pressures to reduce costs to maintain profitability, and new suppliers entering the market increase competition and put pressure on selling prices. Another factor affecting the bottom line is the strong dollar that makes it easier for offshore companies to undercut domestic companies. Review these ways to protect your manufacturing bottom line by adopting lean manufacturing processes.
- Continuous improvement: It’s essential that manufacturers continually strive to improve processes to reduce costs and improve productivity. The cumulative impact of small continual improvements is significant.
- Reduce wastage: Although some level of scrap is inevitable in manufacturing, each item scrapped represents a revenue loss and an increased material cost.
- Optimize production processes: Usually there are numerous small ways that you can speed up production through better organization of the facility.
- Manage inventory: It’s essential to reduce inventory as much as possible because holding costs are a significant drain. However, ensure that materials are always available and adopt just-in-time delivery techniques to supply materials at the time when they are needed. This requires careful planning, but it reduces overall inventory levels, material handling, cuts storage requirements and eliminates clutter on the factory floor.
- Labor productivity: Every minute you are paying someone to stand around waiting, you lose revenue. Similarly, using a highly paid skilled employee to do mundane work is very expensive. So carefully assess how your labor is utilized and continuously evaluate ways to increase the percentage of their time that’s productive and revenue earning.
- Cost management: Naturally it’s important that expenses are carefully controlled, so implement systems to monitor expenditure on a daily basis and cut unnecessary expenditure.
Many improvements achieved through lean manufacturing techniques are relatively easy to implement and usually inexpensive. Don’t neglect the contribution shop floor employees can make as they are well placed to identify improvements.
Inevitably, there’s a time for purchasing equipment that is more productive, but don’t underestimate the benefits of a continuous improvement process and its contribution towards the manufacturing bottomline.
