by Lina Martinez

If you would like to make sure that you turn a profit in your manufacturing business it is important that you focus on managing and reducing costs every time you look at your value chain. From eliminating waste to finding the right product management and distribution channels and choosing the most suitable suppliers, there will be a lot of things to pay attention to in order to keep your costs low and your profit level. Below you will find a few tips on how to get started with monitoring the costs in your manufacturing business.

Raw Materials

Capture.JPG

Image via PxHere

First, you will have to calculate the cost of raw materials needed for creating a product. If you are choosing the right suppliers, who are flexible and offer the right size of sheets and batches, you will have an easier job working out the costs. At the same time, you might need to process and store the materials before you would be able to manufacture your product, and this will also cost you money. List all the materials, chemicals, and treatment services you need to turn the raw materials into finished products, and take steps to eliminate waste.

Resource Use

Wastage doesn’t only happen when you are using raw materials and create products you can’t sell. You might also be wasting resources. If you would like to monitor your use of water, gas, and energy, you will need to find a way to measure everything. Investing in Flow Meters will pay off long term and help you work out the total cost of production and set your prices at the right level.  

Employee Costs

Capture2.JPG

Image via Flickr

Human resources will also be one of the elements you will have to calculate the cost of if you would like to reduce your manufacturing expenditure. Look at the rotas and the staff levels and work out how much overtime you are paying. If you constantly have to hire temporary workers, you will need to make sure that you are allocating them to the most productive tasks, so you stop wasting money and start using your resources in the most effective way.

Storage, Distribution, and Logistics

It is also important that you work out how much it costs you to get the finished product to your customers and store it securely. If you don’t have a just-in-time supply chain management approach, it might be time to look through the product life cycle and work out how you can reduce the time between different processes and the cost of delivery.  Shop around for services that offer flexible delivery times and storage facilities, and make sure that you take into consideration the cost of storage and shipping when pricing up products.

Manufacturing businesses can be successful if they know the exact cost of production, delivery, and storage. If you haven’t looked through the costs yet and don’t know exactly how much it costs your company to manufacture certain items, you might be undercharging your clients and losing money.