6 Cost-Cutting Initiatives to Consider as the Manufacturing Economy Contracts
The upcoming year is going to be a big one for the manufacturing economy. There’s a good chance economic contraction will lead to recession, and even if it doesn’t, industry headwinds are blowing hard. It’s a good opportunity for manufacturers to make cost-cutting a priority, before it becomes a necessity. There are more opportunities than it may seem, and plenty of ways to manage costs proactively across the full scope of operations.
Cutting costs is often seen as a last resort — something companies do when there’s a panic. But the fact is, if you’re overpaying or wasting money, it’s prudent to address these things regardless of the industry’s health. Why pay more than necessary?
Some of the most overlooked areas of your operations are rife for cost-cutting initiatives. Here are 6 simple ways to tackle costs and uncover hidden savings without disrupting your operations or the quality of your work.
- Procedural optimization 💡. It’s impossible to think about cost-cutting without paying mind to lean manufacturing processes. Could you be doing something better or eliminating waste from your processes? Chances are, yes. It’s important to look at your processes from an optimization standpoint. This is a cost-cutting initiative in and of itself.
- Inventory management 📦. Look at how much money you have tied up in inventory. Then, look at your inventorying practices versus component usage and inventory turnover. Do you need to manage a big inventory, or could it be smaller? Less cost-cutting and more cash management, inventory optimization is always worth investigating.
- Optimize maintenance schedules 📅. Being more proactive and taking a condition-based approach to manufacturing is a major driver of cost savings. Nothing jacks up the budget like unplanned downtime or major maintenance issues. Tackling these head-on with an optimized maintenance schedule has rippling cost savings across operations.
- Diversify supply channels 🚚. Having a diverse supply channel is a great way to ensure you’re getting the best costs on components and the best possible delivery timeframes on essential parts. Building out partnerships with multiple reputable suppliers and vendor partners can substantially lower costs and help avoid cost impositions.
- Invest in better tools or software 💻. Sometimes, to save money, you need to spend money. If there’s better software or tools out there that can help get the job done faster or better, an upgrade or investment might be warranted. Upfront costs can equate to prolific back-end savings.
- Negotiate terms 📝. Looking for the most direct way to conserve costs? Negotiate better terms across the board! Talk to suppliers, vendors, customers, and partners to secure better terms — whether it’s lower rates, better net terms, or more business.
Evaluating costs and striving to lower them is good practice, regardless of the state of the economy. While cost-cutting is sure to become a priority for more companies as economic contraction continues, getting ahead of it now could help your business weather early turmoil should contraction turn into recession.