5 Ways To Control Manufacturing Costs, And Get More Sustainable In The Post Covid-19 Era

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As we make the shift into post Covid-19 manufacturing, many manufacturers who never saw a slowdown in their product demand, such as hand sanitizer and other PPE manufacturers, are looking toward a more sustainable product. Those manufacturers who are fortunate enough to have orders to fill and employees returning to their jobs are also looking at the processes and practices that they have in place, as most have found holes in their original disaster recovery plan through the pandemic. 

Going forward, the concern in manufacturing is controlling costs. As supply chains reopen, some are finding that production costs have skyrocketed because of their original raw material contracts being voided, or their suppliers are no longer in business. Although there are many skilled employees out of work, in some areas, returning to a physical job site simply isn’t safe, or a lack of child-care has postponed their ability to return to work. With these factors driving manufacturing cost upward, it’s important to regain control of costs and develop a sustainable business model that has post Covid-19 provisions. 

Automate Manual Processes

Even with the rise of AI, there are still countless manual processes that are performed in manufacturing facilities that could be automated. Most times, it is the initial capital required to install automation that prevents manufacturers from moving forward, but as many manufacturers have discovered, automation in many facilities is now an absolute necessity. 

By installing machines and software that have the ability to scan product into inventory, overhead cranes to move the product into rack systems, and ingredient feeders to select and pipe material into production lines, many of the old manual processes quickly become obsolete. What manual processes could be automated in your facility, and would a cost benefit analysis show it is well worth the initial capital?

Cut Your Facility Overhead With A PM Program

Maintaining any facility is a large portion of a manufacturer’s overhead expense. Between maintenance parts and labor, it can be an astronomical figure, depending on the size of the facility. By developing a solid preventative maintenance program, maintenance costs can be cut by, on average, 18% by using preventative maintenance, versus reactive maintenance, to keep a manufacturing facility running.  When combined with the energy savings that a well-operated preventative maintenance program can provide, that number can actually double in overall savings. 

Revamp Your Raw Materials

With 60% of US small business closures permanent, you may have found that your supply lines need revision, and new suppliers developed. While doing so, one of the largest savings that can be found in the purchase of raw materials is the cash discount that some suppliers offer in return for cash payment. Other suppliers offer a discount, typically around 2%, for contracting with the supplier for your bulk material. Over time, 2% of your raw material cost can become a huge figure. Look into the discounts that your suppliers offer and take advantage of all the discounts that are in your contracts. 

Buying in bulk may save you a great deal of money upfront, but don’t forget the costs that are associated with housing bulk raw ingredients. In some cases, it may not be cost effective to house a bulk amount of ingredients, especially if you’re not equipped with racking, storage, and security. Otherwise, the costs of shrinkage and product loss can quickly become overwhelming.

You should also reduce scrap material with recycled and reusable packaging to leave less of a footprint on the planet. Not only is it more environmentally friendly, it is also a responsible move in connecting with your consumer base. Most consumers would much rather purchase goods from an environmentally responsible manufacturer than a manufacturer who sheds thousands and thousands of tons of trash annually.  

How Is Your Labor Stacking Up?

Although many processes are going toward automation, that doesn’t mean that the need for both skilled and unskilled labor isn’t there. With the unemployment numbers at an all-time high in many places, and recent graduates who are entering the workforce, yet could not find entry-level positions because of the pandemic, there are lots of ways to improve labor efficiency to control your labor costs. 

By placing your employees in the positions that best suit their individual strengths, and by utilizing any production downtime to ease labor costs, like taking breaks during scheduled downtime, you can cut your labor costs without layoffs. Controlling overtime costs is a huge factor in labor cost reduction, so ensuring that employees are following their schedules as written is an effective way to manage labor costs, as well. 

Monitor And Manage Energy Consumption 

An area that affects both cost and sustainability that is often overlooked is energy consumption.  Something as simple as turning off lights and machines when a production area isn’t operating can reduce energy consumption and costs. Perform an energy audit on your facility to see where your opportunities for reducing energy consumption lie, and put the results of the audit to work for your facility. It may seem like a small contribution toward sustainability, but it is a step that begins paving the way for a more environmentally friendly manufacturing facility to emerge. 

About the Author

Talmage Wagstaff is Co-Founder and CEO of REDLIST. Raised in a construction environment, Talmage has been involved in heavy equipment since he was a toddler. He has degrees and extensive experience in civil, mechanical and industrial engineering. Talmage worked for several years as a field engineer with ExxonMobil servicing many of the largest industrial production facilities in the Country.

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