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What Are the Best Tips for Reducing Manufacturing Cost?

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  • Written By: Alex Newth
  • Edited By: Angela B.
  • Last Modified Date: 25 November 2016
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Manufacturing cost is one of the biggest factors in determining profit and item price, and cutting this cost can both increase profit and lower item price. The amount of labor required for manufacturing should be analyzed, because it may turn out that some employees are not needed. A manufacturing plant needs supplies if it is to create items, but manufacturing cost can be decreased if strict supply management is used. A plant may be too large and its space may not be properly utilized, or it could be too far away from suppliers, both of which are situations that can increase costs. Downtime, from seconds to minutes, occurs regularly on a production line, and reducing downtime can increase output and limit cost.

Manufacturing plants sometimes have too many workers, and several may be unneeded. There are several ways to alleviate this problem, though the most direct is to lay off extra workers. Transfers also may work if the employees are better suited to another branch of the business that is understaffed. Such considerations can balance out work and increase output. Automated systems also may be of use by replacing human workers and reducing human labor costs.

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A necessary manufacturing cost is ordering items and supplies for production, but extra supplies are often ordered. To decrease this cost, the plant could analyze the amount of supplies truly needed, so less are ordered. At the same time, management should try to keep employee error ratio down, so fewer supplies are needed overall. Output also should be analyzed, because output that is too high for demand may leave the manufacturing plant with a lot of items that cannot be sold.

There can be several problems with a manufacturing plant's location or the building itself. If the building is too large and much of the area is going unused, then the business may be paying too much in property tax. This is part of manufacturing overhead and is considered a manufacturing cost. Repositioning the manufacturing plant so suppliers or common buyers can decrease shipping costs also reduces manufacturing cost.

Downtime is a common occurrence in a manufacturing plant. This can occur when a machine breaks down, while one area is waiting for an item from another area, a delay in production or from slow workers. To decrease this manufacturing cost, downtime should be analyzed and limited. For example, if an area is having trouble finishing an item, those employees may need extra equipment or training; though this may incur an extra cost at first, it is normally absorbed by higher output.

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