After surviving the recession, most manufacturing companies understand the importance of budgeting and reducing overhead costs all too well. Unfortunately, with energy and transportation costs rising more each day, some companies look to cut spending on vital research and innovations.
In the long run, reducing spending on product research and development can cost manufacturers significantly more as they struggle to compete with growing international manufacturers. How can companies shrink their budget without sacrificing product quality and innovation?
Crowdsourcing IT and HR Tasks
The last few years have shown a notable increase in outsourcing of human resources and information technology departments as companies seek ways to shrink company budgets without losing the skilled workforce they need to operate. Contracting third party companies for HR and IT needs enables manufacturers to offer superior benefits and take advantage of improved technology at a much lower rates.
In a discussion about the value of outsourcing human resources, business specialist Renu Chopra discusses the flexibility of outsourced programs because they “…can turn relatively fixed HR costs into variable costs that can scale with business changes such as acquisitions, divestitures, growth in new markets and contraction in times of economic downturn.”
In addition to the overall costs of outsourcing these departments, companies benefit as HR and IT firms work to improve quality of service and resources to remain competitive. Working with an agile, adaptive third party allows companies to focus spending and time on growing their business rather than updates and training for stagnant in-house departments.
Reducing Energy Costs
Another major opportunity for reducing overhead costs without a reduction in quality lies in reducing energy costs. For many manufacturers, energy costs almost equal that of workforce costs, yet most manufacturers spend little to no time on energy reduction efforts. With energy costs on the rise, reducing energy waste and consumption should play a major role in manufacturer’s budget cutting plans.
The chart above compares the average percentage of manufacturing overhead costs to the average percentage of time spent on cost reduction efforts.
Energy efficient products like UniTherm’s High Temperature Insulation Systems often provide significant energy savings within as little as a year. State organizations and utility providers across the US offer incentives, rebates and other forms of financial assistance to manufacturers that offset the cost of implementing energy efficiency systems and considerably increase manufacturer’s ROI.
Preserve Quality
Crowdsourcing HR or IT tasks and reducing energy costs provides a simple solution for lowering overhead costs without sacrificing quality. Today’s competitive market makes maintaining and improving product quality a necessity for any manufacturer. Manufacturers like Mayfield Plastics, a Massachusetts based plastics manufacturer, are improving quality control processes and moving toward implementing ISO production standards.
What methods of reducing waste have you found most effective in your experiences?
In the next segment of the “5 Keys to Survival After the Recession” series, we’ll discuss ways to implement lean manufacturing processes by reducing waste, inventory control and adjusting company culture. Subscribe today to receive updates.