Manufacturing is a field that favors bigger players with deep pockets. It allows them to benefit from economies of scale in ways small businesses can’t. This is why small business owners who are in that field have to be very careful with how and where they spend their money. They often have to rethink their processes and use a little bit of ingenuity to be competitive, but they can’t allow the quality of their products to suffer. Let’s take a look at some of the ways small businesses can reduce the cost of manufacturing.
Carry Out an Audit
If you want to reduce your overhead costs, you need to know what these costs are to begin with. To do this, you will need to run a full audit of your key operating costs and your processes and then look at what could be eliminated or improved upon. You should look at things such as your rent, energy costs, insurance, building maintenance, and other incidentals.
Use On Demand Manufacturing
Nothing is forcing you to go the old-fashioned way of ordering large quantities of product and managing a large inventory. There are plenty of on-demand manufacturing services that will only create what you need when you need it and ship it directly to your customers.
This is an especially good option if you have a pretty wide selection of products. You won’t have to guess how much of a particular product your customers will want to buy or worry about inventory rotting in your warehouse taking up unnecessary space.
It will streamline your operations and outsource most of your supply chain logistics as well. You’ll then be able to redirect your attention to things that matter like marketing, customer service, after-sales service, and research & development, among others.
Shop Around for Suppliers
You need a diverse set of suppliers and to shop around for the best deals for the various raw materials and/or parts that you need. If you’re on the market for something like a photo transistor, for instance, or any type of electric or electronic component, know that there are tons of suppliers online that will get you those for cheap.
Don’t assume that you have to go with one supplier for everything. Let them know that you can get a better deal elsewhere as it might push them to readjust their prices.
Also, know that you can get a supplier to lower their prices by striking an agreement with them. You might not be able to buy in bulk to get a discount but signing up for a long-term agreement could get you one. Look at what that the discount would be and if it would be worth being attached to one supplier for that specific material or product for a long period.
Cut Your Selection
If you feel like you have too many products, then you could consider getting some of them out of your selection. There is no need to have tons of different products just for show. Look at what products are bringing the most profits and let go of those that are stalling even if you are attached to them.
There are multiple ways that you can reduce your manufacturing costs even if you’re a small business. Start by having a clear view of where you are spending and possibly wasting and take the steps necessary to correct the situation.
Image Credits: Florian Olivo