Simple Cost Improvement for Small Manufacturers

Manufacturers in the United States have to more competitive than ever when it comes to controlling cots. Everyone knows how costs like insurance and freight are squeezing profit margins, often preventing domestic producers from being price competitive with imported products. Large corporations hire consultants or assign whole departments to analyze the costs and develop automation or process improvements to save money. But what does the smaller manufacturer do?

Small companies usually have fewer than 500 employees. Management layers have converged leaving less available resources for cost cutting projects but these efforts are vitally important to a small company's survival and ability to compete. For manufacturers unable to hire on analysts or MBA executives, there are some simple, inexpensive methods that can begin to net production cost savings. The key is in simplicity.

To begin, assign a general manager or a team of key people from all plant backgrounds. Provide a short time slot - say one hour - to brainstorm ideas for cost savings. The ideas are then sorted by anticipated net savings amount. The perceived savings may be greater than actual but if we don't allocate a lot of resources (mainly time & labor) then all the savings will be left on the bottom line. With the focus now defined, talk it up.

The savings list must be communicated throughout the organization. Post it on the cafeteria bulletin board, click the 'everyone' email list or publish the list in the newsletter. Generate some energy around this savings list and things will begin to happen. Many managers and leaders believe they must control the change but really, in small companies leveraging the energy of the entire employee base is more effective. The team or person responsible must, of course, maintain decision making control so that changes aren't made without proper process engineering, payback analysis, and policy or procedure documentation.

Focusing the entire plant on the savings list allows the leaders to manage the energy, artfully molding it into best practices that save money for the company which can benefit the customer and the employees. Sound difficult? Then you're going about it all wrong. Keeping it simple, flexible and focused takes practice but for small businesses it can help sharpen that competitive edge.