10 Simple Ways for Manufacturers to Cut Costs in 2023

As a manufacturer, you’re always on the lookout for potential savings.

Surely you have many cost-cutting measures in place — but do you really know where the money is going? Do you have a sense for your operational inefficiencies and materials waste?

Is it possible there’s more you can be doing to optimize and save?

No matter what you’re doing today, there’s always room for continuous improvement tomorrow.

Here are 10 of the most effective and innovative ways you can be a frugal manufacturer without compromising on quality or your unique competitive market advantage.

1. Digitize Your Workforce

Go paperless!

I know, I know, it’s obvious – but that’s why it works.

And chances are, even if your company has undergone significant digital transformation, there are still some paper resources floating around.

Unlike the antiquated processes of the past industrial revolution, digital work instruction solutions make it possible for manufacturers to not only deliver guidance digitally, but also track production progress, facilitate communication, and get full visibility.

Electronic work instructions cut costs from many areas you may not have assumed were being wasteful:

• Reducing defects via real-time traceability markers
• Increasing productivity with reliable and effective training
• Accelerating & improving accuracy of operational decision-making
• Reducing training time through capturing tribal knowledge
• Strengthening your workforce by minimizing the skills gap

Digitization may feel like slogging through an endless pile of data, but with programs like VKS Lite for example (which also has a free trial!), you can upload your old Microsoft Word documents into interactive formats painlessly.

2. Reduce, Reuse, and Recycle Waste

Waste is a normal output of any manufacturing organization. It’s a fact of life for manufacturers, and it can be costly. Plants that don’t have tight quality control processes in place, or those that rely solely on the human eye to catch flaws, are frequently plagued by post-production defects and excess scrap material.

And all of this “extra” effort and material waste is a drain from your profits.

This is where the Smart Factory rises from the ashes of its antecedent (cue triumphant music).

The development of IoT technologies in Industry 4.0 has made it easier than ever to take action on breaking your production cycle bad habits:

• Monitor product quality and identify defects using sensors and automated calibrations
• Send out real-time alerts when something goes awry or a machine breaks
• Minimize faulty output by catching errors immediately before those errors translate to defects later along the line

3. Continuously Improve Your Workforce’s Health & Safety

Manufacturers commonly deal with dangerous workplace situations due to the skilled work required, like welding and other hands-on applications, handling dangerous chemicals, or operating powerful and large equipment.

Most manufacturers are fully aware of this reality, but it’s rarer to see facilities investing in their safety SOPs.

Think about it: does your workplace have one or two visual signs reminding workers to wear their hardhats and safety goggles, or does your workplace invest in ultra-effective safety SOP reminders embedded into task-specific work instructions on the line?

Having an unhealthy or injury-prone workforce is a surefire way to drive up costs. With a high absenteeism rate, productivity takes a hit, as do the company’s finances, not to mention morale.

An unhealthy or injured workforce impedes the functioning of assembly lines, as manufacturers are either faced with a workforce that’s operating at partial capacity or forced to bring in temporary workers who may not have the skills or specialized experience to perform required tasks up to par.

Add to that costly insurance claims associated with on-the-job illness and injury, and you’re looking at a significant financial liability for the company.

We’ve seen this trend writ large during the spread of the COVID pandemic. Under such conditions, it’s no longer sufficient to adapt to problems as they come up. Modern plants need to be proactive with health and safety if they are to survive the struggles of labor shortages and skill gaps in the workforce.

Here are some tech solutions that can drive your safety protocol forward:

• Equip workers with sensor-enabled wearables so they can be cautious when too close to a dangerous machine
• Connect employee data to identify and isolate outbreaks of contagious illnesses like airborne viruses
• Flag near-misses in the plant and be alerted should an environmental hazard arise (e.g., an otherwise unnoticed gas leak)

4. Coordinate Your Supply Chain

If your company’s supply chain processes and protocols are not actively monitored and managed, then your bottom line is most certainly taking a hit.

Take carrying costs, for example. Maybe you’re keeping extra supply on hand to respond to market fluctuations and variations.

And we don’t blame you – supply chains have been highly unpredictable on a global scale the past few years as political pains and health conditions proliferated. Sure, the buffer of surplus inventory may offer some degree of comfort—but it comes at a cost, literally.

Smart Factory technologies don’t just coordinate your own plant operations, they also can adjust your output with accurate predictors of the greater market.

This way, manufacturers can ensure they have just enough inventory on the shelves with perfectly timed reordering processes.

It’s as simple as machine sensors that transmit data that triggers critical actions instantaneously. With broader, global-aligned Smart technology applications, supply chain managers can track assets in real-time, monitor events across the supply chain and make cost-effective inventory-related decisions quicker than the competitors.

5. Seek Savings (But Don’t Scrimp!)

Tech is not your only path to supply-chain savings; you may need to tap into your negotiation skills to ensure you’re getting the best price for raw materials.

In other words, take nothing at face value.

Tactics you might try include asking for prepaid freight or favorable financing terms. If that doesn’t work, consider doing a cost-compare with other suppliers. Use competitive pricing as a foothold to negotiate better deals with your current suppliers or suppliers of choice.

There are many tactics you can take when it comes to negotiating with suppliers. Relationships are fluid; thoroughly understand your contract terms and conditions, and don’t be afraid to redefine your existing supplier relationships for more mutually beneficial outcomes.

As you may have guessed, this fifth idea comes with a huge caveat: be wary of weakening your existing supplier relationships. Especially as the manufacturing world moves towards a greener, safer, and more worker-aligned future, people have less patience for sneaky tricks or doublehanded business ploys.

Be honest about why you need to seek discounts or more favorable arrangements, and chances are your most reputable supplier will help to find a more favorable solution for you both.

6. Cut Energy Costs With Smart Technology

While technology plays a crucial role in improving business operations and keeping workers safe, its wide-reaching benefits can also be seen on your utility bills.

Think about the everyday functioning of your energy-consuming facility—you’ve got heating, cooling, lighting, and the powering of equipment, etc.

By making even slight improvements to each of the above processes, you’ll take a significant chunk out of your energy costs.

For example, you can:

• Install smart thermostats and sensors to manage your heating and cooling functions
• Find leaks in your air system using ultrasonic detection equipment
• Upgrade to more energy-efficient manufacturing equipment
• Use Smart technology to power down equipment when not in use

There are so many ways you can chip away at your energy consumption to cut costs.

An added bonus? You’ll also shrink your carbon footprint to the benefit of the planet, for which you may be able to snag a government subsidy or two.

7. Implement New Protocol Strategically and Diligently

Your workers are the ones using the machinery, tools and processes — and they’re the ones who are seeing, first-hand, how smoothly (or not) things are going.

All too often, strategic decisions are made at the top without collecting input from the front lines. Your workforce can bring unique and valuable perspectives on the bigger picture of your production processes.

Sure, the black and white data is critical. But human input from those who are most intimately familiar with what takes place every day cannot be replaced by an algorithm or a graph.

When implementing new SOPs – especially those suggested by non-management – have patience and take your time, being sure to test and tweak as you go. An improvement in one area of an assembly line might adversely affect another assembly process later on. The careful balancing of different work stations’ stress points is necessary for a successful factory.

The fact is, your factory floor workers know where the operational waste is happening, and they’ll likely have recommendations of where improvements can be made.

Additionally, by involving them in more strategic company discussions, you’ll improve morale, engagement, and, ultimately, productivity — all of which translate to bottom-line growth.

8. Be Proactive With Preventative Maintenance

Despite the adoption of IoT in manufacturing facilities, many still take the if-it-ain’t-broke-don’t-fix-it approach to equipment upkeep, guided by a schedule-based maintenance strategy.

However, the largest manufacturers can lose up to $1 trillion/year in unplanned downtime like machine failures. When this happens, manufacturers are forced to take a reactive (and costly) approach to machine repairs.

Even one unplanned malfunction means unplanned downtime, production delays, and — yes, a hit to your bottom line.

By adopting a predictive approach to maintenance, powered by sensor-equipped machines that can detect when machinery will fail before it impedes business operations, manufacturers can actualize several cost-saving benefits.

According to Deloitte Analytics’ paper on Predictive Maintenance, using advanced analytics to predict failures can increase equipment uptime by up to 20%, saving you large amounts of expense and time.

9. Automate Repetitive Manual Processes

There’s no replacement for the human worker in a manufacturing facility. However, there are some repetitive manual processes that can be replaced or consolidated with automation. As technology improves, more and more opportunities for automation are being discovered.

Automating manual tasks has many benefits that far exceed the costs of AI upgrades:

• Higher safety conditions for workers no longer completing perilous tasks
• Enshrining tribal knowledge in automated protocol
• Less human error which can lead to errors and defects
• Greater worker engagement and skills-sharing in other production areas
• Less physical stress on workers’ bodies mean healthier and more stable workforce

Not only will you save money with more efficient processes, but you’ll also optimize your workforce by re-allocating them to tasks that actually require human attention.

10. Track KPIs with Real-Time Data

Measure twice, cut once – this old saying aims to reduce your risk of making a mistake and, ultimately, of wasting materials.

Now, apply that principle of measurement to your manufacturing operations. When you measure your various processes across the facility, you can monitor, analyze and course-correct before costly mistakes are made with key performance indicators.

Identify the variables within your manufacturing process that would benefit from ongoing performance measurement. They might include:

• Production volume
• Production costs
• Machine downtime/unplanned downtime
• Defect density
• Rate of customer returns
• On-time delivery
• Asset turnover
• Unit costs over time

Only when you measure and track will you learn what you’re doing right, what you’re doing wrong, and which changes are urgent to your overall goals.

There’s no one-and-done solution or quick fix that will result in dramatic cost-cutting and profitability. It’s a series of actions that, when taken together, can have a significant impact on your organization’s financial health. With technology advancing more rapidly than ever before, new opportunities for business optimization are emerging constantly.

It’s all about being smart, being innovative, being open to challenging the status quo, and partnering with others to ensure a holistic approach to keeping your costs down and profits up as a modern manufacturer.