Where Should Manufacturers Invest To Reduce Future Operating Costs

Manufacturers that want to stay competitive on the market often find themselves in product pricing wars but the key to profit is often closer to home. For one thing, operating costs are a common major expense with the average organisation spending a huge chunk of their revenue on things like energy consumption and administration. Fortunately, a large-scale company-wide overhaul is not always mandatory and simple adjustments can reduce overall operating costs.

For manufacturers that are considering areas to invest in today with a view to reducing future operating costs, here are five cost-saving ideas that ultimately add up significantly.

1) Technology and Automation

There are a host of options for technological applications in every department imaginable in today’s businesses. Users can access several cloud-based solutions at a fraction of what they would have cost not so many years ago. These applications can automate many repetitive administrative business functions. In addition, these solutions cost much less than employing human resources. They also save hours of daily manual effort and eliminate human error as well.

Several solutions for administrative processes are available for roles like inventory management, accounting, invoicing, payroll, HR, and more.

2) Lean Management

Lean management is a business approach built on the concept of continuous improvement in organisational processes through long-term and systematic incremental changes in order to improve efficiency and quality.

The lean management principle has its roots in manufacturing and has proven to be a valuable cost reduction technique that can be applied to every area of an enterprise - from manufacturing to operations and even marketing.

Manufacturers in Europe are paying more attention to this philosophy in view of current economic conditions in the region and they can hope to achieve the following by going lean:

• eliminate those steps in their business processes that add no value to the customer,
• improving the elimination process on a continuous basis until the waste is reduced to an absolute minimum.

3) Maintenance Management

In the bid to reduce operating costs, adequate and timely maintenance cannot be overlooked. The days of viewing maintenance as just a cost are long gone as asset maintenance is now a core corporate strategy that determines the health of the assets in any manufacturing facility and contributes to the eventual profitability of a manufacturing enterprise.

A well-executed maintenance strategy is essential for tracking, measuring, and improving the operational efficiency of a plant’s buildings, equipment, and systems. There are several maintenance strategies that manufacturers can choose from such as Reactive, Preventive, Corrective, Total Preventive Maintenance, and Predictive Maintenance.

Many organisations choose to use a mix of these strategies. However, predictive maintenance (PdM) is at the forefront of maintenance today. Instead of servicing or repairing equipment to traditional calendar-based schedules, predictive maintenance aims at forestalling equipment failure by monitoring an asset’s running condition and prompting service personnel for maintenance intervention before failure occurs.

Predictive maintenance works with a number of core supporting tools to automate the process including IIot-enabled sensors and Computerised Maintenance Management System (CMMS).

When properly implemented predictive maintenance helps to achieve:

• increased asset lifespan
• better planning of work activities
• reduced downtime
• better workforce management

4) Energy Optimisation

Energy consumption is by far one of the most critical concerns for manufacturers worldwide. On page 6 of this study of European manufacturers by the REMake Project, it shows that up to 50% of their manufacturing costs are spent on raw materials and energy.

The Energy Efficiency Directive is one of the most important laws that seek to boost energy efficiency. The target is to cut energy use by 20% by the year 2020. Large enterprises are required to carry out energy audits or as an alternative, they can implement energy management systems.

For the manufacturing sector, these systems are called Factory Energy Management Systems. They use IoT technology to:

• optimise energy supply and consumption,
• reduce CO2 emission,
• reduce factory operation costs.

These energy management systems have both hardware and software components for power generation, transmission, and distribution. In summary, they enable manufacturers to gather real-time data on energy usage throughout their facility on major systems (air conditioning, lighting, electric motors, etc.) Users can then make data-driven decisions to optimise their energy consumption.

5) Workforce Productivity

A skilled and productive labour force is an important factor for reducing operational costs because although people are the biggest asset for any business, mismanaged staff can become a major source of loss, stress, and headaches for manufacturing plants.

A few areas to focus on are:

• Training - An organisation can hardly go wrong through investing in a skilled labour force that is frequently trained and updated with new innovations in that industry.
• Communication - Communication and feedback from within the ranks are often overlooked but these are great sources of ideas for reducing costs and improving processes. These workers are constantly using the equipment and they often have valuable insight into improvements that will reduce costs.
• Safety - The importance of staff safety cannot be overemphasised. Apart from the damaging psychological effects of injuries on the plant floor, there are also very stiff regulatory penalties for defaulting manufacturers. Automated safety systems are worth looking into in this regard.

By carefully examining the unique work culture and processes in a plant, it is possible to identify where the major problems are, then gradually begin putting in place measures like the ones outlined above. They can help all manufacturers cut operating costs and create a platform for continuous improvement without compromising product quality products or service delivery.

Bryan Christiansen is the founder and CEO at Limble CMMS. Limble is a modern, easy to use mobile CMMS software that takes the stress and chaos out of maintenance by helping managers organise, automate, and streamline their maintenance operations.

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