Production costs are one of the biggest expenses for many businesses. You have to spend a lot to make your product, and if you don’t think through the process carefully, you could find yourself spending more on production than you earn in revenue. The result is a struggling business and one you’ll have trouble keeping open. One way to fix this is by saving money on production costs whenever you can. Below are a few strategies you can use that will hopefully save you some money and help your business grow over the long-term.
Explore Different Manufacturers
The first thing you should do is explore different manufacturers. There are many manufacturers out there that can produce your product, all at different costs. There are two things, in particular, you will want to focus on when choosing a manufacturer.
The first is their location. While you may get a cheaper price if you make your product overseas, you then need to factor in shipping costs. You want to add up all the associated costs, from production to shipping the product to shipping the materials when considering each manufacturer.
The other thing to look at is their bulk policy. Most manufacturers won’t create just a handful of any one product. You need to order in bulk for it to make financial sense for the manufacturer. Each manufacturer will have a different minimum order amount that you’ll need to reach. Knowing this amount is especially important when you’re first starting out, as you likely don’t need as many products yet. Compare different minimum orders, add up the costs, and see which one makes the most sense for you.
Optimize Your Material Needs
Next, make sure you are only using the barest minimum of materials. You should look for ways to optimize this process so that you don’t have a lot of extra materials going to waste. For example, you could melt down spare metal material and use it in another piece of your product.
Spend some time going over your product and looking for ways to reduce the number of materials you’ll need. Even if you can cut back only a little bit on each product, this will add up to a large amount of savings over time. Of course, you don’t want to sacrifice quality, but there are likely some areas, whether it be in the product or packaging, where you can cut back a little on some materials.
Do Your Own Production
In some cases, it can make sense to do your own production rather than hiring a manufacturer. For example, if you only need to produce a small number of products or if the process of creating your product doesn’t require a lot of advanced equipment. You can save a lot of money by producing everything yourself, provided you have the time and manpower to get it done.
If you decide to do your own production, a great way to save money even further is by getting used equipment. Whatever equipment you need to make your product, look to see if you can buy it used. For example, if you are making a small child’s toy, you could get some used plastic machinery to help you out. Buying things used is a great way to save money on production costs, assuming the equipment you buy is in good shape.
When deciding between doing your own production and hiring a manufacturer, think about your long-term goals vs. the short term. Which one will benefit you the most now, and which one will help out more in the long run? If you go with one option now, how difficult would it be to switch to the other in the future? These are important questions you’ll want to ask yourself before making any decisions.
Conduct Tests and Improve
Finally, whatever you decide to do, find a way to conduct some tests. You should analyze every aspect of your production process and look for ways to collect data. Then, over time, you’ll have an easier time finding ways to save additional money. For example, you could test out some new technology and find that it saves you some money on production costs. Each test you perform will give you better insight into your production process and help you make better decisions going forward.
A lot goes into production, meaning there are always areas you can look at to improve. Don’t assume your current setup is the best possible way to run production for your business and always be on the lookout for new ways to cut costs.