You have to maintain a vision of the whole chain of production to find opportunities to save costs in manufacturing.
- TIP: Cell manufacturing is a grouping of all your people, materials, and equipment in making a product to reduce over-production, equipment needed, and labor down time.
- Step 1: Remove products that lose money rather than subsidize them with revenue from better movers. Free up valuable resources by applying efforts to saving costs elsewhere in the chain.
- Step 2: Resupply parts and materials instead of ordering and manufacturing in response to forecasts. Cut down on inventory errors and late deliveries while you're at it.
- FACT: During hard economic times in 2008, Toyota, rather than slash jobs to save costs, decided to improve and paint plants, train workers, and keep everyone on payroll -- at a cost of more than $50 million.
- Step 3: Use lean engineering to double labor productivity and cut scrap. Set up a tight sequence so the product will flow smoothly with no waste, and therefore no lost revenue.
- Step 4: Post reasonable incentives for preferred suppliers and stick with that base.
- Step 5: Reduce design costs through strategies for customization and derivative products along the way. Product development determines 80 percent of product cost, and design efficiencies have the potential to lower costs and raise profits.
- Step 6: Simplify your objectives and establish the value of the product by paying attention to customer satisfaction. Eliminate all steps in production that do not create that value.
- TIP: Creating quality can use up 15 to 40 percent of revenue.
- Step 7: Manufacture product lines based on a limited number of standardized parts. Eliminate parallel lines of parts and reorganize supply lists to make it easier to source for customers. Obtain feedback and constantly improve your attention to detail.
- Step 8: Identify and measure the cost of the organization's major cost drivers. These will not always be obvious and are neither direct material nor labor costs, but will be obvious to the company's experienced managers.