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Manufacturing costs can be divided into materials, labor, and overhead. Each of these areas offers opportunities for cost control. it is important to keep detailed and accurate records if you are serious about cost control in your manufacturing operations. Your paperwork and records will offer you insight into potential ways to cut your manufacturing costs by providing data you can use to track costs and improvements.
Materials Cost Control
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To control the cost of materials, make sure you are getting the best possible prices, and also be conscientious about reducing and eliminating waste. Check with a variety of suppliers to find the best prices for your manufacturing materials. Buy in volume when you can, as long as you have the space to store your inventory, and as long as you have enough capital that you can keep some tied up in extra stock. Control waste by tracking mistakes and developing strategies to avoid similar errors in the future, and also by developing processes that use your materials in the most efficient ways, such as finding ways to use the most of each piece of metal, cloth, or cookie dough.
Labor Cost Control
To control the cost of labor, look for ways to improve worker efficiency. Keep track of how much product your operation produces per person per hour, and look for variables that correlate with increased productivity, such as the number of workers on the floor at once, or the particular workers participating in a manufacturing process. Learn your workers' strengths and skills, and schedule them for positions that make the optimum use of their abilities. Look for bottlenecks in your manufacturing processes, or steps that take longer than others, causing backlogs of work. Rethink your staffing arrangements to alleviate these bottlenecks by moving workers to the areas where they are needed most, or scheduling worker breaks during periods when work is backed up elsewhere in the production process.
Overhead Cost Control
Cut overhead costs by using your facility as fully as possible, and looking for ways to save energy. Schedule a night shift if you have enough orders, rather than taking additional days or weeks to fill them. Consider sub-leasing your facility to another business during times when your business is not operating. Audit your energy use. See if you can affordably replace energy-guzzling equipment with energy-efficient alternatives. Turn off machines and lights when they are not in use.
Devra Gartenstein founded her first food business in 1987. In 2013 she transformed her most recent venture, a farmers market concession and catering company, into a worker-owned cooperative. She does one-on-one mentoring and consulting focused on entrepreneurship and practical business skills.