Published On: Tue, Mar 19th, 2019

How to Reduce Costs and Boost Profits In Your Production Process

There’s much potential in producing your own goods, be it to sell to individuals yourself, or to sell to other businesses, who will then sell it to the public. However, while the opportunity to make money is there, there’s no getting around that running a factory can be expensive work. You need machines, staff, materials, and so on — it’s all in your hands. The best way to make the process more financially manageable, therefore, is to find ways to cut those costs down. But how do you achieve this goal? We take a look at some handy methods below. Incorporate the suggestions into your operations, and you’ll find that you’re able to cut your expenses — and boost your profits — by a not-insignificant amount.


Identify Your Weak Spots

You can’t figure out where you need to go until you’ve figured out where you are. So take a look at your company with a critical eye, and make a note of your strong and weak points. It’ll, of course, be the weak points that help you the most — you might just figure out that you’re making a fundamental error that is holding you back in one way or another. If you don’t know what you’re looking for when it comes to performing an analysis of your factory processes, look at hiring an outsider to perform the task for you. They’ll be able to point out things that you otherwise wouldn’t have noticed.

Refine Your Goods

You’re in the production game to make money, so it’s important that you’re not using too much of your resources to make items that have a low return on investment. The emphasis should be on maximizing returns across the board. It’s less about reducing costs, more about spending money in the right areas, and ensuring that you’re making the most of your factory’s potential. There’s little point allocating too much space to make products that’ll only earn you $1, when you could be making goods that’ll earn you $3. Take a look at what exactly you’re producing in your factory, and whether those items are really making the most of your infrastructure.

Employee Efficiency

If your employees are working to a high standard, then your business is going to do well. If they’re not, then it’s going to struggle. That’s really all there is to it! As such, you’ll want to ensure that your team has everything they need to work well. While most business owners know that they need to provide their staff with the tools they need to perform well, many forget that one of the biggest factors, when it comes to employee success, is that they feel motivated, inspired, and happy. As such, it’s good practice to avoid treating your staff like worker drone bees! You’ll find that they’re willing to work their best if you reward them, get to know them on a personal basis, and provide the framework for them to grow. Also, while you’ll want to keep your staff, there will be certain aspects of your process (say, sticking on labels) may be able to be automated.

Your Materials

It’s important that you’re making savings in the right areas of your processes. It’s about ensuring that you can do things cheaper without compromising the quality of your products. This, however, can be possible — it’s unlikely that every component in whatever it is you’re producing needs to be of the highest quality. Sometimes, you can settle for ‘good enough’ rather than ‘great.’ So take a look at your materials — are you paying too much for them? Is there a cheaper option that wouldn’t affect your final product? Can you buy them in bulk, and make savings that way?

Packaging Decisions

You’ll need to transport your goods from wherever they’re going in something, but depending on where they’re going, it’s possible that your packaging doesn’t need to be game-changing. Take, for example, if you’re selling your goods via an online store. If the purchase has already been made, you don’t need to impress them by wrapping up your product in fancy boxing and the like. That’s only important when you’re selling your items in a store, an area where you need to grab a person’s attention. While there are advantages to having high-end packaging even if it’s not necessary, if you’re trying to cut expenses, this might be the first place you’ll look.

From A to B

You’ll need to get your goods out of your factory and to wherever they need to go, but is it possible that you’re paying too much? Competition between freight transport companies is pretty strong, and that means that you’re in a strong position to negotiate how much you’re paying. Even if you’re happy with the company that you’re currently working with, you can still try to lower your rates. Look at getting quotes from other companies, and then use it as evidence to have your costs lowered. Most companies will be more than willing to discuss how much you’re paying if they know that cheaper services exist.


The Machines

One of the most significant costs your factory will incur will be the machines that you’re using. It’ll cost a lot to buy them in the first place, and then keep them updated. It’s possible, however, that you don’t need to spend quite as much on your machines as you might think. For example, you can look at buying your machines second-hand, or selling your machines to another factory when it comes upgrading. However, if you are going to buy second-hand machines, then you’ll want to take steps to ensure that they look and feel like new. Make sure they’re serviced and clean before purchasing. You’ll also want to work with a company that can remove laser etching so that your machines aren’t stamped with the logo of another company. You may want to repeat these steps when it comes to selling your machines — you’ll get more money for them if they appear to be in an “as new” condition.

Energy Reduction

There’s a simple way for most companies to reduce their costs, yet many overlook it. How much energy are your work premises consuming? If you don’t already have an energy policy at your site, then it’s likely that you’re using more heat, light, and water than necessary. Think up ways to reduce your energy, and trial your new policies for a month — you’ll likely see that your bills are cheaper.

Unused Materials

There’s a problem with the production process — there’s always a lot of unused materials that end up getting thrown away. However, it’s likely that you’ll be able to make money from your unused goods, no matter what they are. There are plenty of places where you can get paid for scrap metal, for instance. Of course, you’re not going to get anywhere as much for your scrap goods as you will your finished product, but it will help you to at least minimize wastage.

Stop Paying Rent

Wouldn’t it be nice if you didn’t have to pay rent for your building? Well, perhaps you don’t. While in the early days of your manufacturing you’ll probably want to lease a space rather than own one, the alternative could be the better long-term option. Once you’ve figured out that you have a viable business and you’ve had a chance to build up your capital, look into either buying or building your own factory. Of course, it’s going to be a massive expense, but it’ll pay off eventually — and don’t forget that you’ll also be increasing your company’s assets. When you’re renting, all you’re doing is paying someone else for something that you could have yourself.

Lease Out Your Space

Once you own a space, you’ll be able to make money another way, too — by renting out the space to other companies. There are plenty of businesses who only need certain aspects of a factory. Once you’ve got all the equipment, you’ll be able to make those services available. This may be possible when you’re renting your space, but you’ll want to check the term and conditions of your lease beforehand. Also, remember that you’re not necessarily limited to production-based jobs. Depending on where you’re located and what the exterior is like, you may also be able to lease out the space outside the factory for rentals too. These types of buildings usually have a lot of space, and if they’re located in an area that doesn’t have many large spaces, there may be interested.

New Methods

There are always new ways of doing things. There was a point when no-one was talking about saving money on energy costs, or the LEAN system, or anything else. Those ideas were eventually introduced and then adopted. So make sure you’re keeping up to date with the latest practices, especially when it comes to figuring out the most efficient way to operate — you may eventually come across something that allows you to reduce your costs and boost your profits.