When you’re in charge of a company that makes physical products, you run into problems that ecommerce brands and those in service industries just don’t have to deal with. A software company, for example, does not have to make sure that their warehouse is big enough, but also secure and temperature controlled. A marketing agency doesn’t have to make sure their products get to consumers in a timely fashion - undamaged. When you’re dealing with actual objects, there are some particular challenges that must be overcome.
This can be especially frustrating when you’re trying to cut costs, either to prevent lay offs or to allow for scaling. While an online-only business could easily switch providers, if you were to do so, it would require a much more established relationship and hammering down of logistics.
But if you’ve realized that your business needs to cut costs - or been told by a superior - don’t give up. Just as there are challenges with your line of business, there are also unique strategies you can employ to get the same amount done, for less.
Here are 4 ways to cut costs for your manufacturing business:
Invest In The Right Tools
Yes, the first tip is to spend more - but wisely. A major reason why many companies have trouble with their budget is because their processes aren’t as efficient as they could be. Take the time to walk through each of your team member’s days, and look for ways that they could work faster. It’s important to note that the key here is to look for ways their process could be improved, not to simply ask them to get more done in a day with no other changes other than motivation.
For example, could your warehouse be more efficient if they used different methods or tools to secure and pack the product? If you have a variety of products, could you organize them by SKU in a more intuitive or useful way?
Even if the change is a small one, a few minutes every day will add up to hours over time - which will result in your employees being able to get more done in the same amount of time, saving thousands of dollars.
Negotiate With Vendors
It’s common to assume that prices are fixed, especially with business to business relationships, but the truth is actually the opposite! Take some time to research other options for vendors and look at price points. Even if you’re happy with your current vendors, let them know you looked and ask if there’s anything they can do to help you justify staying with them, instead of going to a cheaper competitor. More often than not, a deal can be struck that will please both of you - such as in the case of a discounted contract that last longer.
Outsource - Or Automate - What You Can
While skilled labor is extremely valuable, there are likely several areas in your company that could be outsourced or automated. If you have a fleet of pickers that spend most of their time walking, consider implementing an automated solution that allows your humans to do the actual thinking: making sure the product is properly packaged, labelled and shipped. Similarly, look for functions within your company that can be outsourced, such as data entry.
Insure Your Goods
If you’ve ever lost a package or had it damaged before it reached your client or customer, you know how incredibly expensive it can be - especially if damages happen multiple times. While yes, this is a tip that requires you putting some money down, it’s one that could save you thousands in the future. Look for insurance for those operations that are most likely to cause you damages; shipping, packaging, and heavy machinery are usually the top offenders when it comes to Murphy’s Law.
If you’re looking to lower the cost of your hardware company’s production, but can’t find any big moves that will save you cash, take a look at making several small changes - the savings will add up.