As is the case in every market and business costs are key. Doing more with less or getting as much as possible from the resources you have are always important things to look at. When manufacturing is the market in question it can mean many things. So lets look at some of them.
Labor: Its easy to look at labor and one topic people often do. In manufacturing people are expensive and often hard to find. From a strictly cost perspective it makes the cost unstable and more of a variable that is hard to predict. Will someone show up today? Can they produce the output I need today? Will I need to hire soon? What if there is an injury? It can be maddening to deal with in general with some areas having it worse than others.
What can you do: Well you could cut staff but that leaves you unable to produce. Being more efficient with the staff you have is an option. If 2 people can have the output of 10 you save the cost of 8 extra positions. They say Henry Ford invented the assembly line, true or false I am not able to say. But with that in mind lets look at a Ford plant.
The Kansas truck plant produces the F-150 and in 2020 they built 787,000 F-150 trucks per Fords published figures. That plant is listed as having 6,900 hourly employees. The same plant also built an additional 150,000 Transit vans that same year. How did they do it? They are efficient with the staff they have. We have all seen the videos of car and truck assembly lines with the robots painting, welding and many other tasks. Rather than have 1,000 welders they can have a group of 10 people that control and operate 100 robots.
They answered the question of how can we get the output of 1000 people with just 10. Clearly these are not exact figures and I am just generalizing the number of robots but the point stands.
Material cost: Many companies buy pre-finished material. Some just get very high quality raw stock with both carrying rather high costs. You need raw material to manufacture things so you have to buy something like it or not.
What can you do: Don't buy pre-finished material would be an option. Or buy the lower cost material that is not as pretty. If you equip yourself to finish the material on demand you can save long term on material and be more flexible. Rework and defect removal should also be part of this topic. If you buy pre-finished and it gets damaged while in the building you have to fix it. There is a time and material cost to that. You also gain the ability to be more flexible where you get material. It may be one vendor has short lead times or lower costs but the material is not A+ quality. By having the ability to finish yourself you can deal with these types of issues allowing you to save on material. You also get the added bonus of reducing what ends up in your scrap bin for added savings.
General: Finishing in general tends to be an easy place to find savings. You can reduce labor while increasing volumes and lowering material costs. Its an area that can often be tough to staff or keep staffed. Automating finishing processes also allows you to clean up the work area and the facility as a whole sometimes as a bonus. Getting core products set to autopilot so you can plan and predict what you will produce helps reduce the headaches. You can then put that staff in other needed positions further improving the situation as a whole.
Any equipment purchase is one of the large costs that worry most. Good quality machinery is not cheap but nothing worth having is. The single purchase of equipment is more predictable allowing for it to be planned out over a period of time. There are the tax implications to these purchases that is above my pay grade to discuss but I am sure your accountant has already had that conversation. Having the predictable costs of new equipment and processes is less heartburn inducing than needing 10 new employees. The trick is to buy the equipment once, often times as I am sure we have all experienced that cheap option ends up costing more. Get good advice from someone with experience and keep an open mind to new ideas.
