Tips for Keeping Production Costs Low in 2020

Keeping costs low is a common challenge for product-based businesses. In addition to overhead costs, the manufacturing process can be costly. Fortunately, this often complex process creates ample opportunity for streamlining and improving margins.

Playing with pricing isn’t always an option, but fortunately, there’s usually a way to cut expenses. Here are some helpful tips for keeping production costs low in 2020.

Put Sustainable Practices in Place

There is a multitude of benefits to putting sustainable production practices in place. While the cost-saving implications are the most obvious, shifting to eco-friendly production practices can also boost profits. The millennial generation has the most buying power in the world right now, and one of the biggest influences on which company they choose is eco-consciousness. 

Take a high-level look at the production process to discern where sustainable practices can be implemented. This opportunity could range from choosing a sustainable energy supply to minimizing waste. On a broader scale, businesses can look at their overall carbon footprint and explore ways to bundle shipments and cut back on consumption. 

While many sustainability initiatives are costly to implement, they ultimately pay for themselves in savings.

Get Innovative with Suppliers

Consider re-evaluating your suppliers to find the best possible deal. As time passes, new supplier businesses open, and innovators come up with new solutions. Trucking companies, for example, are cutting costs by switching to aftermarket Caterpillar parts to meet demand and keep costs low during the COVID-19 pandemic.

Keep in mind that the cost on an invoice shouldn’t be the only consideration. Talk to suppliers about different payment options, such as early-payment or cash payment discounts. Many suppliers will offer rebates for certain order thresholds when purchasing supplies in bulk. Explore the options, and you’ll likely find a simple way to save.

Conduct an Efficiency Audit

In the world of business, time is money. In product manufacturing, this translates to working smarter, not harder. Dedicate time to conducting an efficiency audit in all processes across the board. This exercise is especially crucial in adapting to the new normal in 2020 and beyond.

Outline where processes can be streamlined and remove steps that don’t need to be there. Remember to look at what employees are doing as well. Everyone is familiar with seeing one construction worker dig a hole while others watch and wait to be tapped in. Consider what tasks in your business are comparable and how you can ensure everyone is productive at all times. 

Re-Evaluate Supply Chain Timing

In addition to considering how to save with vendors and once supplies get to your business, it’s also vital to look at the steps in between. The supply chain is a complex process that offers plenty of room for improvement.

One consideration when evaluating the supply chain is timing. Perfecting the timing can help cut back on storage and inventory costs. Put a transportation management system in place or work with a consultant for an expert view on how to streamline your timing. Businesses should also look at the supply chain from when products leave their facility, striving toward a Just-in-Time manufacturing strategy.

Focus on Employee Engagement and Retention

While the cost of labor has a direct impact on production costs, there’s a more subtle, indirect impact as well. This underlying waste comes in the form of turnover and a lack of employee engagement. 

Take the time to ensure your employees know how to do their jobs well and have everything they need to succeed. Offer opportunities for new training and skills development as well as internal advancement within the company. Employees who are happy work harder, make fewer mistakes, and stick around longer.

With these strategies, you can cut production costs in 2020 and start to recover from the challenges brought on by the global pandemic.

Anzhela Sychyk

Anzhela is a seasoned business journalist with a keen eye for spotting industry trends and a knack for explaining complex financial concepts in a clear and accessible way. With over 15 years of experience covering the world of finance and economics, Anzhela has established herself as a respected authority on all things business.