How to Cut Costs and Compete with Global Manufacturing
The days are long gone when the US was the clear dominating winner in manufacturing. With established global competitors, it’s getting harder for small and medium-sized manufacturing plants to not only grow but to merely exist. With low international labor costs and rapidly changing technology, it makes it hard to keep up. In fact, the pressure builds…
We increasingly have to find ways to improve our process and lower our costs even as the cost of labor and materials continue to climb.
There’s only one way to truly compete in this environment.
Through efficient, innovative processes and technologies, US manufacturing can beat the global competition and lead the way.
Here is how you can minimize the cost of your operations and grow your company.
Stick to the Classics and Build Up from There
Since the industrial age, we have fine-tuned the manufacturing process. As time has changed, we have had to make adjustments and introduce innovative solutions. Still, it has always started on a foundation of proven principles.
Ask yourself questions based on the key five sigma principles.
What do my customers need?
Do you really know your customers? It’s important to know their exact needs and to continue learning how they evolve over time.
What do my data and statistics tell me about root causes of problems?
We live in an age of big data. We can harness so much that the biggest challenge is using it effectively. Equipping yourself with the right tools and formulas to get effective results will put you ahead.
How can I eliminate variations (or bottlenecks) and tune my process?
You and your team should know every area of opportunity within your process. What’s the problem and how can you fix it?
Am I communicating and training my team clearly and effectively?
It’s all about people. If your team is on a different page than you, don’t expect to see improvement.
Am I flexible, responsive and willing to adjust?
Knowing how to improve does nothing if you don’t take action. It can be hard to change, but that’s exactly what’s needed to continuously grow your business.
When you use this process, you build a strong foundation to improve.
Tweak What You Have
Cost of labor. Raw materials. Quality control. The list of factors that can eat your bottom-line seems to quickly add up. We know the textbook solution… the more products we produce, the cheaper our manufacturing process is and the more profit we can make. But not everyone is equipped to scale a bigger production. That’s why it’s important to be creative about cutting your costs.
Improve Your Design
When you first produce a product it’s exciting. There is potential and profit looks good. But as the cost of producing rises because of growing prices and competition, the picture gets bleaker. You might even feel stuck.
By reanalyzing every component in your product, you might be able to find a cheaper or more cost-effective material that meets your standards. If you could cut the cost just a few percentages, your profit margin will reflect it.
Simplify Your Products
How is your packaging? Is there something you can eliminate? Finding areas in your process and products that could be simplified is key to finding better saving opportunities. Value the essentials and eliminate anything that isn’t truly needed.
Negotiating and Finding Strategic Partners
If you can find partners to improve your process, you can decrease your operating costs. Imagine outsourcing an extension of your operations to a manufacturing partner that can expand your operations… without the added capital expenses that go along running it on your own. By scaling your operations with partners, you can produce more products and decrease your overall cost.
Look to The Future
Popular Mechanics published an article on interviews they did with a couple of dozen prominent manufactures about the future of American Manufacturing. There were three popular consensuses.
Close proximity to customers makes getting products to them cheaper and more effective. It also allows for faster and more accurate feedback.
The biggest challenge in manufacturing is the skills gap. And US labor cost is a lot higher than the rest of the world, which makes it hard to develop those skills internally.
Manufacturing requires redundant shift work, which makes it difficult and tiring for the workforce.
Knowing those advantages and disadvantages can put you ahead. For example, #1. While other manufacturers overseas can produce things cheaply, it’s still difficult to get it over to the US and to get good feedback. This gives US companies the chance to build superior products based on quality. With a winning product that promises value, you can justify a higher selling price.
Tackling the other issues can be difficult, but solving it can put your company at an advantage. If there is a skills gap, why not invest in students within local colleges? You can develop them and offer internships to get a pipeline for your business. Maybe there aren’t enough students interested in the skills you need. By offering community programs and workshops to increase interest, you could be developing a long-term plan for a consistent workforce.
Redundant work is also a challenge. It can lower team morale and increase turnover or affect the quality of the product and process. By building a better company culture or adding incentives, you can improve your business.
Is your company positioned now to be where you want it in 10 years?
If you aren’t investing in the technology (opportunities like AI and other innovations), your team, and process, you could be pushed out by global competition. The key is all about innovation. It puts you at an advantage and continuously finds ways for more effective processes. If your operation looks the same as three years ago, then consider reanalyzing it for areas that could use improvement.
Where it All Hinges
Leadership expert, John Maxwell, is famous for his saying that “Everything rises and falls on leadership.” He argues that every company failure and success all ultimately depends on you (the leader). We think of issues relating to employees, the market, competition, but how we react and maneuver those challenges will determine the fate of our companies.
Finding the right plant managers, directors of operations, and other pivotal positions, will be the biggest influence in your company.
What makes a good leader for your business?
Is he/she qualified with the right education, skills and experience needed? If you want to improve your business, you need to fill it with winners. It’s even better if you hire people who are smarter than you are.
Can your leader solve difficult issues in a timely manner with a clear head? The most influential and critical factors of your business will come down to the decisions your leaders make. Is he/she the right person to represent the vision and future of the company?
You want people you can trust. Integrity doesn’t just mean having a good moral compass, it also means how they represent you. Do they value your vision for the company and will they work hard to uphold it? When it comes down to it, they are the ones running your company.
Value for People
How are their relationship skills? If they can’t develop a team, then your operations will suffer. With symptoms like low morale, lack of training/improvement, high employee turnover, bad relationship skills can knock out your company. Find leaders who love adding value to people.
Does he/she go the 2nd mile? Do they find an issue before it becomes a problem? You want someone who is assertive and who takes a sense of ownership from your company.
By finding people with these leadership skills, you get leaders who build healthy companies. Healthy companies breed healthy operations, which breeds healthy profit margins. If you have a great team, you can expect great growth for your company.
At SCOPE Recruiting, we work hard to find candidates like these. Our founders came from Supply Chain and Operations to start a recruiting service that equips you with leaders that provide value to your growing company. Our hands-on experience and comprehensive understanding of the roles we recruit for allow us to find better-qualified candidates that match your specific needs. Contact Us to find a winning team.
In a Nutshell
To beat the global market with manufacturing, it comes down to a few simple steps.
Develop a Strong Foundation
By using traditional methods to measure and grow your business, you create a foundation that can continue to be built on. Know everything about your business through six sigma and other effective methods.
Review your product and process. There will always be areas to improve on. Each tweak can save you money or increase profit, setting you up for future success.
You can’t do it all alone. And that goes for companies as well. Find partners that can provide win-win solutions based on growth and value.
If you stop changing you will eventually fade away. Encourage innovation and continue to find ways you can improve manufacturing.
When you hire the right people, everything else gets easier. You aren’t alone. You have a high-performing team that solves problems and creates innovative solutions.
At SCOPE Recruiting, we match the best talent in Supply Chain and Operations industry with Start-ups to Fortune 500 companies nationwide. Contact Us for the best recruiting service in the industry.
Our expertise in your industry means a rapid, on-target search, resulting in top candidates for your organization.