| Topic : Cost cutting for manufacturing companies |
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Manufacturing & Engineering Professionals
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Activity:
41 views;
last activity : 10 24 2010 11:02:36 +0000
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Identify quick wins & simplify operations
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Cost Cutting in Manufacturing Industry
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adapt new technological changes
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Reduce Over Heads
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Mix of Quick Wins, Simplify Operations & Adaptation of new technological changes.
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Efficiency & output
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Think out of the box
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outsource small and less important operations.
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Companies should identify the opportunities available with possibilities of savings with minimum of investment and are sure of quick results. |
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The cost cutting in manufacturing industries mainly relates to the productive and non-productive elements. Cost cutting should be handled very wisely otherwise it would affect the efficiency and utilization of manpower, machine, and materials. What is required should be spent or in other words, what is the input will be the output. Hence better optimization shall be established. While employing cost cutting measures that should be communicated to all levels in the organization well in advance.
Thanks for the referral Ms.Isha Verma.
Japanese car Maker Toyota is able to capture the U.S and Europe Market by implementing Just-in-inventory method cost cutting measures. This connotes meeting customer's demand with minimum delay. It has reduced stock holding cost and it has direct impact on materials cost and hence , Toyota is able offer quality cars at lesser price.
R.V.Seckar
Pl do visit my blogs :http://rvsekar.blogspot.com/
http://rvseckarfema.blogspot.com/
Hello Isha,
You have analysed the causes correctly. I will just add that, in place of minimum investments, we should say, Miminum efforts. The methodology for cost saving may be summarised as below.
1. Critical analysis to identify "Non Value Adding" elements.
2.Priorate the non-value adding elements on basis of saving promised.
3.Priorate the measures of cost reduction on basis of efforts needed.
4.Merge both plans for time and cost effective plan.
5.Look for early gains. That will encourage to ove forward...
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Thanks Isha for choosing a good topic.I agrre with your ideas and would like to add my ideas as below.
Cost of Production = Cost incurred on RM + Conversion Cost(Process,Utilities,Cycle time,Qualty etc) + Overheads
Cost Of Raw Material:
RM resources should be nearer thus one will have a reduced logistics cost and time saved in procurement also cuts the cost down. Timely use of RM helps in minimising the invetory and helps in reducing the cost.Wastages while handling the RM should be minimised as to reduce the cost.Use the best qulaity of RM to produce the best.
Conversion Cost:
Process : While selecting a process flow, sequence the flow so that cross movement is reduced and at the same time look in to the possibilities of integrating or eliminating certain steps which has a direct imoact on the processing time. I mean reducing the cycle time will help a great deal in reducing the cost. Select best plant and machinery for the validated process.
Utilities: Integration of processes and utilitis plays a vital role and proper integration reduces the cost of productoin. Thinks of alternate sources of energy and cost reduced on energy shall reduce the cost of production.
Qualty : Set all quality checks at respective operations and produce the best at the first time. Avoid rejection and rework.
Resources : Optimise the resources and reduce the cost. One can reduce overheads thus can reduce the cost.
Above all strictly adhere to the quality procedures set to meet the objective.
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The word "Cost Cutting" fundamentally leads to a unscientific concept. Instead I would suggest to try to use the word "Cost Reduction" or "Cost Optimization". The basic idea of cost optimization should lead us to buy the RM at most competitive prices, manage inventory & WIP on JIT principles, optimize logistics, reduce wastage to minimum, seek ways of using the waste by recycling, invest a little on quality to gain more on cost and most important IDENTIFY BOTTLENECKS AND WORK ON ELIMINATING BOTTLENECKS.
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from IT 2 Mechnical changes each and every change is having high initial cost but it will increase your cost cutting in the future as it will reduce your labour cost as well as increase your production.
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Thanks,Isha for referral.The factory cost includes direct labor and direct material. Indirect labor and material are also integral components.Apart from these,there is one more component,which is termed as Over Heads.This allocation towards this component could be reduced by simple spin-off. |
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The mix of three are the best solution for cost cutting. Obviously the existing setup should produce the optimum & continous efforts are required to make it optimum.But manytimes things get stuck up because of adaptation of new technological changes. So parallely looking & adapting the new technological changes can further boost the cost cutting efforts. |
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Efficiency is the key to cut the cost.
If our workforce from top to bottom gets more disciplined then output (productivity) will increase that will contribute to cost cutting in a very positive way
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Its not always about profit, no company in history of business has generated constant profit.Business is like a game of Chess. Play it with your mind
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outsource small and less important operations so that emphasis can be given to more important things. |
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