Factory cost reduction strategies

Aks

Description

Save cost in areas like procurement , energy , production , packaging and reduce wastages

Informations

• Publié par: dobus
• Nombre de lectures: 234
• Langue: Français

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  Factory - Cost Reduction Strategies  SAVINGS FOR PROFITS © Fromwww.shumaonline.com   In today’s world when Corporate are struggling for profits and with fierce competition in the market, cost reductions, productivity enhancement and lean organizations have become today’s mantra s for survival.Folllowing are the key area where you can implement cost reduction methods with significant results.  1. Raw material procurement: 2. Logistics-Inbound and Outbound: 3. Warehouse and Stores: 4. Manufacturing Process (Production) : 5.Energy, fuel & Water   for more details visit

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 6.Information Management 7. Finance 8. Human Resources 8. Sales & marketing   for more details visit 

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 FEW BASIC IDEAS PROCUREMENT IT CAN BE DIVIDED INTO TWO MAJOR GROUP  A. PRODUCT B. SERVICES Raw material purchases constitute around 60-65% of the cost of product; hence any savings on this front would be significant for profit of the organization.   for more details visit  

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 1. BULK BUYING: A. The company which has units spread across the geography can negotiate better price when the volumes are high, instead of buying for individual units its recommended to have central buying policy. B. You can negotiate better price if you can put your entire annual consumptions to a vendor and ask him for annual rate contracts. Bulk buying should be supported by bulk handling and storage system.  2. OPPORTUNITY BUYING: Most of commodities and raw material has seasonal Cycle of prices they peak and fall in intervals hence you have to look for the lowest price to buy in bulk and get the price advantage.  for more details visit 

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 LOCAL VENDORS: Vendors should be located in close vicinity of the manufacturing area that helps lower freight charges and keeping low inventory. Only when it becomes economical to source from international market .eg crude oil from Middle east, Palm oil from south east Asia .  4. PARTNERSHIP WITH VENDORS: It is highly recommended to have partenership with vendors in either having equity or technical collaboration so as any savings on their part would be passed on to customer. 4. E-PROCUREMENT: Putting up Tenders on Internet and setting up auction for the quantity to wider vendor base. Cutting cost on conventional way of asking tenders etc  for more details visit 

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 for the material. In Reverse auction where you ask the higher bidder to supply items. Many companies have fulltime dep’t for e-sourcing.  5. BUYING FROM TAX EXEMPTED AREA: In Several countries the federal Government have certain tax- exempted area where they allow manufacturers to set up their plants. In common parlance its called Tax holidays. Look out for regions and source material from such places.  6. REMOVING INTERMEDIARIES: Wherever possible buy from the OEM, directly from manufacturer not for any agent, distributors or commission agents.  for more details visithttp://www.shumaonline.com  

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 7. NON – BRANDED ITEMS: Look out for non – branded items for non-critical areas as branded items charge premiums for their product. 8 RECYLING AND REUSE OF PACKING ITEM: All items comes into some form of secondary packaging out of which some of the items can be reused or recycled .Ask vendor tot reuse/recycle packing item to recycle or re use them for next items eg pallets, sacks & bottles, trays etc  9 CONVERSIONS: Buying primary material then giving it to processor instead of buying directly from the manufacturer. E.g. CBB conversion in FMCG industry.  for more details visit  

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 10. ECONOMICAL ORDER QUANTITY (EOQ): The most basic principle of placing an order is to place an EOQ for material, which would reduce inventory. This figure can be arrived with your ERP software. 11. MAKE AND BUY DECISION: Certain items can be made in house rather than buying from out side . 12. NEGOTIATIONS: The price should always be negotiated with all information with you. Prices are reduced when you are informed and are aware of prices in the market. Always have an alternate quote for items negotiated. 13. INSPECTION: By eliminating inspection at factory and asking vendors to provide materials as per standards and completing inspections at their end we can eliminate delays and manpower used in these kind of activities.  for more details visit 

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 14. SCRAP MANAGEMENT : Segregation of scrap generated in a manufacturing unit is important . It has been observed that all scrap are sold as lot to scrap merchant who in turn segregate in different items and sells it at higher rates . You can increase the sale price by asking several vendors to bid for the same lot .  for more details visit

http://www.shumaonline.com 

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 13. SERVICES: All organization has certain services to be performed for smooth functioning of unit. E.g. hygiene, security, maintenance, safety & pest control, plumbing and building repair, which can’t by wished away and add cost to operations. In earlier days of factory operations company employees did these but now savings can be generated if these activities are out sourced.  Critical areas can be negotiated into some form of annual contracts and rest should be kept for call basis services.  for more details visit 

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 LOGISTICS  Raw material and finished goods are to be transported either into the factory or from the factory to other destination. Transportation charges contribute significantly to cost of product.  MAP ROUTES: By mapping all routes and then decide on the shortest route for both inbound material and out bound material.  IN TRANSIT DAMAGES : Check for In – transit damages report Improve upon the secondary packing and the way boxes are filled into he container  LOADABILITY: Check the load ability of products into containers. i.e. utilizing most of space into container. Load ability is term used for calculation of no of boxes per unit is of container.  ANNUAL RATE CONTRACTS FOR TRANSPORTATION : Always go for annual rate contract with transporter .  for more details visithttp://www.shumaonline.com  

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