Manufacturers who are committed to customer satisfaction find ways to reduce costs without cutting product quality.

Lowering manufacturing expenses is a key component to becoming more competitive in your industry. A more flexible budget allows you to focus your efforts on expansion, but at what cost?

Maintaining quality is necessary to continuing growing without putting your company at risk of effacement.

Learn more about common manufacturing costs and how to offset them below!

Reducing manufacturing costs while maintaining quality

What are common costs involved in running a manufacturing facility?

Manufacturing can be an expensive venture without planned structure and limitations. Here are some common costs manufacturers have to pay to maintain operations:

• Labor: Direct and indirect labor play a part in manufacturing costs, as well as human and robotic labor. Direct labor is the work performed in the production process by employees and industrial equipment, while indirect labor is done by workers who support production, such as security.
• Energy: Overhead costs in a manufacturing facility can be expensive, depending on the size of the warehouse and the operation.
• Quality control: QC, or the lack of it, can be detrimental to a company’s finances. If thousands of products leave the warehouse with a defect, that can lead to a large sum in recall costs. Even catching the defect in-house can be costly depending on how many products and materials were wasted.
• Repairs: Equipment repairs can create a serious dent in your monthly budget, especially for large equipment like industrial robots, CNC machines, 3D printers, and the like. These expenses are mostly avoidable, as we’ll explain below.
• Rental space: Square footage adds up quickly: in 2019, the average rent paid per square foot was $6.39. More than 64% of warehouses in the United States are over 25,000 square feet, meaning rental costs exceed $150,000 for most manufacturers.

This is just a starting point of all the costs manufacturers must account for, and varies greatly depending on industry, company size, and strategy.

How cutting quality stunts growth

To reach the next level of growth, manufacturers need to cut expenses and reallocate spending toward expanding production.

However, cutting costs can also mean cutting quality.

Reducing the quality of your product to save money can destroy your company. For example, a shampoo manufacturer decides to seemingly increase the amount of product by 25%, but the product quality is reduced because the increase was due to adding more water to the formula.

Longtime customers will know when product quality falls, causing a drop in demand. If they leave reviews that say as much, you may lose potential customers as well.

Additionally, trimming expenses by underpaying your staff will only lead to trouble. You’ll lose your high-quality staff by not offering them the salary and benefits they deserve and attract lower-quality talent. This could lead to human error during production which can end up being more expensive in the long run.

That’s why it’s necessary to consider quality when reducing expenses. Maintain your company’s good image and preserve your best talent by upholding your current standards of quality.

4 ways to reduce expenses without compromising quality

Use these tips to cut manufacturing costs without compromising quality.

1. Implement lean strategies

Lean manufacturing is key to a successful business. By using lean techniques such as cellular manufacturing, Kanban, and 3P, you can reduce energy consumption and material waste without lowering production quality.

Check out our sister company, NRTC Automation, for a blog post on lean manufacturing to start implementing these ideas into your operations.

2. Keep a maintenance schedule

As we mentioned above, repairs are costly. Just like your car, when you let equipment run without maintenance, it can lead to expensive parts replacements and other repairs.

Stay on track with your budget by maintaining your equipment. Check the manufacturer’s recommended maintenance schedule and add that to a centralized calendar so your team knows when it’s time for another round of check-ups.

3. Adopt automation

Automate repetitive work, such as welding and material handling, to save money without reducing quality. For this kind of work, industrial robots are far less expensive than human labor: for example, in computer electronics manufacturing, human labor costs $24 an hour, whereas robot labor costs $4 an hour.

Plus, your employees won’t have to work in dangerous conditions that put them at risk of injury or worse, saving them from a lengthy recovery and protecting your company from expensive liabilities. By adopting automation, you can shift your staff to more meaningful and intellectually stimulating jobs that will improve their quality of life at work.

4. Simplify operations

Finally, easily cut costs without affecting product quality by simplifying operations. One way of doing this is to outsource parts production. You’ll save money on warehouse space, labor, and overhead while focusing your efforts on the main operation.

NRTC Automation offers Service Parts Manufacturing so you can save time, money, and resources. They will create a custom work cell specifically for your production needs and develop parts for as long as you need. Visit their website to learn more about outsourcing your parts manufacturing.

Enhance your bottom line

As you can see, growth in manufacturing requires strategic thinking and a commitment to customer satisfaction. It is possible to reduce production costs with the methods we listed above without compromising product quality.

Get started on automating with iGAM today to become competitive in your industry.

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