Facing a crisis of shrinking profit margins, Manufacturing Alliance leaders have been asking for some tips on trimming overhead costs. For this article, OVERHEAD COSTS are considered any resource, task or thing that does not directly touch the product being produced for sale. Also, a couple of suggested ground rules before engaging in our analysis:
- Talk to your employees, don’t target them
- Do not look for magical solutions
Cost Saving Tips from our Members
In the first segment, we’ll discuss how almost every cost cutting list starts with a few things we already know about, but for one of many reasons, just haven’t evolved into actions and results. We strongly suggest using an outside expert to help implement the corrective action steps for getting them done.
Go paperless, go green and get an energy audit
From Karla Trotman at Electro Soft Inc., “We installed LED lighting after an energy audit recommendation. The project was subsidized and the payback was less than one year.”
Benchmark best practices for outsourcing goods and services
From Bud Tyler at EF Precision Group, “As manufacturers, we can’t be everything to everybody, although we try in earnest to support our customers to the best of our ability. The Manufacturing Alliance was established with that goal in mind…your network is the most valuable resource in your tool box. If you don’t have the capability, technology or know how, reach out to your network. Use their resources to help amplify your value to your customer. Use a friend/supplier to turn a no quote RFQ into an opportunity for both companies and a win for your customer. You become a greater asset to that customer and a ‘HUB’ for future business needs.”
Create a comprehensive digital strategy that includes cloud computing
Tom Gilmour of e-Xplorations Marketing suggests “A good digital marketing strategy that does not necessarily need an expensive IT solution. Instead of purchasing a new software package like Hubspot, you can leverage your existing CRM system to manage leads and interactions. We create cost effective digital assets like whitepapers, “How To” videos and solution specific digital tools that your future customers will love. Then we leverage eMail and social media to promote these assets. Campaign specific landing pages are easy to create and the cost is minimal. Drip marketing helps nurture and develop the leads until your prospect is ready to buy. Use analytics to measure, rinse and repeat the positives from your marketplace.”
Re-evaluate all third party contracts, services and off-site support functions
Often there are a few things that you have already looked into but probably should be revisited:
- Buy (gently) used
- Bulk purchase supplies
- Cutting travel costs by working at home, telecommuting and conference calling
- Getting and using customer endorsements and crafting creative incentives to reduce traditional selling costs
Finally, we are suggesting that you dig deeper into these identified overhead costs by looking at areas that have already been cut a few times before. Maybe the use of an outsider can help provide a fresh perspective on creative alternatives for cost saving without major interruptions. Some of these options might include recommendations too:
- Reduce product travel and expense by selling your lift trucks. Instead of haul things around, use the product itself to flow your manufacturing process.
- Eliminate clutter costs by selling your storage racks and padlocking your storage rooms.
- Store items where they are used. If you don’t move it elsewhere, you don’t need to “go get it”.
- Create a visual color coded system for all things product related. The use of Red, Yellow and Green are good and quick indicators of what to do and what not to do next.
- Introduce time management techniques and create simple low cost awards and rewards for saving money by saving time.
- Reduce meeting times by taking the chairs out of the conference room.
- Reduce office space requirements by holding meetings on the production floor.
- Introduce a couple of lean manufacturing cost saving techniques by holding “Kaizen” related events for issues that require creative solutions
Our Alliance contains company leaders willing to assist with your cost trimming efforts. If you would like help with making connections, please contact us at [email protected] or call Greg at (215) 776-0130 and we can provide the support you may need. Also, we can share with you a generic NDA (if requested) and quick phone conversation if you are looking for a service provider referral.
This is the first in a series of articles covering topics that our Alliance members have asked us to provide information on as well as to give insight and recommendations. We encourage your feedback through blogs and/or comments on the Alliance website. Your involvement is beneficial to the entire membership.