Competition requires many companies to constantly look for ways to improve. In some cases, that means investing in technology. However, some changes don’t involve technology at all. Manufacturing firms, in particular, can make huge improvements in areas that don’t relate to tech. Use these tips to grow and sales and increase profitability.
Research and development (R&D)
Manufacturing a product may require millions of dollars in material and labor costs. One potential area of improvement is in the quality of the product you make. Ideally, you want to avoid having any defective products in your production run.
If there are defects, those units of product must be repaired. In some cases, you may not catch the defect and send the defective product to the customer. If that happens, your customer will be upset. You’ll have to fix the defective product and apologize to your client. If the customer is upset, they may not buy from you in the future.
To avoid defects, manufacturing firms spend on R&D. The goal is to eliminate anything in the production process that may cause a defect. That may mean finding a supplier who provides better materials. It may also mean training your staff more effectively, so they avoid making mistakes in production.
An investment in R&D can reduce production costs and increase profit.
Your firm may save a huge amount of time and expense by thinking through the logistics of your operation. Every manufacturer has a process. For example, your firm purchases raw materials and incurs labor and machine costs to produce a product. Those products need to be packaged and stored before they are sold. After the sale occurs, your products need to be sent to the customer.
Assume, for example, that you manufacture leather baseball gloves. Here are some ideas that can make the process run smoothly:
· Consider where your machinery is positioned in the factory. You need to be able to quickly move raw materials to your machines, so you can make your product. In this example, you need to move leather (raw material) to the machine you use to cut the leather.
· When the manufacturing process is complete, you need to move the baseball gloves into a packaging department. After that, the gloves are stored in a warehouse until they are sold. Roller conveyors are a great way to efficiently move items from one place to another. You can find conveyors to fit the size and shape of your facility.
· Write a procedures manual and keep it updated. Your manual documents all of the logistics you use in your manufacturing process. The manual is a great tool to train new employees and clear up any confusion about your process.
Planning to replace assets
Your manufacturing operation may require a big investment in machinery and equipment. Perform cash flow analysis to determine when you should replace an expensive asset.
Assume that you can buy a machine that requires less maintenance and can produce more products in a shorter period of time. Over time, the increased cash flow from higher sales may be more than the cash outflow used to pay for the machine. If that’s the case, buying the new machine will increase your net cash inflow and your profitability.
Use all of these steps to outperform your competition and increase your profits.