Product Cost Reduction in Manufacturing: 5 Ways

Every manufacturer is looking to reduce product costs involved in the manufacturing process, but many do not want to sacrifice their product design to save money. The part you may be overlooking is that there may be features of your product that do nothing to offer value to customers, and are costing you a load of money. In this article, we go over exactly what you need to look out for in your product design, and what you should eliminate for product cost reduction. Luckily, there are other smart ways to reduce the amount of money that is spent on manufacturing as well which do not involve product design and we want to shine some light on these tips too.

What Can You Do To Reduce The Cost of Manufacturing?

  1. Lean manufacturing: This method is widely used in the manufacturing world, and it is one of the best ways to gain maximum manufacturing cost savings. To put it in simple words, lean manufacturing is efficient production that maximizes productivity while minimizing waste. The waste can come in many forms: time, overproduction, defective products, too much spent on features that customers do not care for etc. There are 5 different components of lean manufacturing which directly translate to product cost reduction, including:
  • Defining value: This is a customer-centric approach. Manufacturers need to define what value means to the customers and focus their efforts on manufacturing a product with the valuable features and nothing excessive that will give a poor return on investment. 

  • Mapping the value stream: Going along with the first point, you now need to decide what route to go to provide a valuable product for the customers. The best way to do this is to first map out all of the processes that will be involved, and then separate the different features of your product into two categories: not valuable but necessary and not valuable and unnecessary. Here’s an example. The cord of a hair dryer is not something that adds value to the hair dryer so the customers naturally do not care about it. However, it is necessary (unless you are going for a cordless hair dryer) for functionality purposes. The features that customers will care about may be the size of the hair dryer, the different buttons that perform various functions, etc. Any extra design on the hair dryer that will do nothing to give customers a good experience with the hair dryer should be eliminated. 

  • Creating flow: After the features of your product have been finalized, you want to balance out the production process to make sure the product is developed efficiently. All of the employees should have a clear idea of what to do. That is essentially what creating flow means.

  • Establishing pull: Since excess inventory is a huge problem that manufacturers often face, it is crucial to have a pull-based system. This is to ensure that you will have all of the materials you need in just the right quantities and the products can be manufactured in time. 

  • Pursuing perfection: They say perfection does not exist, but if you have the mindset of pursuing perfection, you will not be too far off from it. If every employee strives towards perfection and finds different ways to keep improving their product and process, manufacturers will have outstanding results.

  1. Implement smart manufacturing processes: Smart technology has taken over practically every industry such as real estate, healthcare, and now manufacturing. There are endless ways to incorporate smart technology to improve the manufacturing process, including self-driving vehicles for material handling, IoT sensors, and other smart factory monitoring technologies. Smart technology is an attractive option for many manufacturers as there is already a labor shortage. With smart factories, you can have smart technology take over repetitive and mundane processes while employees can work with more complex processes. This can help you cut your manufacturing costs while improving productivity and efficiency. 

  1. Examine your supply chain management software: A good manufacturer will track every step of the process, as well as all of the costs associated with production and availability of resources. A good supply chain management software is an all-in-one solution to keep track of everything. Here are some of the key features of a good supply chain management software. Organization is key to reduce extra unnecessary costs and excess inventory. 

  1. Reduce energy costs: Examining the current energy consumption costs is another good route to go when looking for ways to reduce cost of manufacturing goods. Do you need to upgrade any equipment? Have you installed LED lighting? Is there equipment running when it is not necessary? Ask yourself questions like these and take appropriate actions. 

  1. An employee scheduling solution: An overlooked tip is that of employee scheduling. Since manufacturing is done in a dynamic environment, and employees do not have regular 9-5 jobs, It is critical that the employees are on-site when needed, and they know exactly what their function is. Otherwise, it can result in MAJOR costs as processes can go wrong. An employee shift scheduling solution allows you to assign shifts so you can track exactly who will be at the site and what their job function will be. These solutions can also have a feature for self-scheduling which employees really like. 

Manufacturing processes are making a positive shift to produce more in less time, while saving costs. The best way for you to optimize production with product cost reduction is to utilize both advanced technologies and simple methods to produce smarter while meeting customer demands. 

Sunvera can help you implement the right software solution for your business while helping you reduce costs and improve operational efficiency. Contact us for a FREE 2-hour consultation. 

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