How can we reduce the cost of production?

Nowadays, many business owners are looking for ways to reduce the cost of production in their plants. There is no denying that the optimal solution is the one that simultaneously maintains an adequate level of product quality and does not put jobs at risk – the cost of maintaining employees is undoubtedly a significant part of the company’s budget.

Below you will find three ways to reduce production costs:

1. Implementation of new technologies

   Many small companies manage their production in outdated way-using paper documents or spreadsheets. Such solutions may work well at the beginning of a company’s existence, as the business grows proves them to be insufficient. Instead, we recommend using SaaS software to manage accounting, employees or used equipment. With this solution, you save time, reduce stress and gain complete control over your database.

2. Reducing the rate of staff turnover

   As we have already mentioned, a large portion of a business budget is used on hiring qualified employees. Perhaps this is the right time to make sure that the money is well spent. Staff turnover rate is a related cost associated with staffing. If employee turnover is high, you may find that the constant need to recruit new people generates considerable costs for the company. Looking for new employees often means investing in advertising or using a recruitment agency. To avoid this, talk to your employees and get their perspectives. Consider whether it might be worth retraining some of them for more valuable roles? Or would it be better to hire employees on a part-time, on-call basis? We leave it up to you.

3. Inventory reduction

   It is undeniable that having a large inventory is associated with frozen capital. In addition, a lack of reliable information about the actual demand carries the risk of high employee occupancy and the need to increase working hours, which ultimately results in exposing the company to losses. It is often wrongly assumed that the demand for a product is higher than a real one.

   The JIT (just-in-time) technique reduce work in progress and inventory levels. It focuses on the complete elimination of waste as a result of the immediate supply of each production process with elements that are needed in the required quantity and at a given moment. The benefit of implementing such a system is that the lead time is reduced to a minimum, which in turn brings savings resulting from inventory reduction.