Go Lean to Control and Reduce Manufacturing Costs

According to the experts at Merkur, 60% of manufacturing tasks are non-value added. That might seem high, but it’s possible to drastically improve performance by adopting a few simple Lean manufacturing principles. You’ll increase productivity, cut production lead times, reduce inventory, and cut manufacturing errors and defects by over 50%.

Lean and the different types of waste

The term “Lean” was popularized by James Womack and Daniel Jones in 1996 in their book Lean Thinking. It presents five steps for adding value to products by reducing waste. A great place to start with Lean manufacturing is the different forms of waste, including transportation, inventory levels, unnecessary movement, wait times, overproduction, and defects.

Eliminating waste will directly affect your gross margin, and in turn, your bottom line. Mature Lean companies implement measures that help employees see waste and, most of all, encourage them to find ways to eliminate it. An experienced Merkur consultant can identify sources of waste at your company and help boost performance.

Three ways to reduce manufacturing costs

Improve productivity

It’s not uncommon for companies to expand their plants as they grow, adding new assembly lines, workstations, and equipment over the years to keep up with demand. But not all of them take the time to reassess production flow. The result? Increased waste as a result of unnecessary movements and transportation of material. A good starting point for improved productivity is rethinking your plant layout to eliminate waste at the source.

An in-depth analysis of all tasks performed by plant employees can also reveal all sorts of waste. It’s a good idea to explore new scenarios that would allow operators to focus solely on value-added tasks and reduce, eliminate, or automate repetitive tasks.

Reduce the cost of poor quality

Measuring the cost of poor quality is no mean feat! Many people think poor quality only occurs when the product that comes off the production line is defective. But it also represents the cost of all “rework” carried out in the production process. For example, the number of times an employee has to correct an error is rarely measured (and therefore often hidden), but results in surplus labour costs.

Reduce inventory

Most managers don’t fully or objectively assess the financial impact of their inventories. The cost of inventory goes well beyond purchase price. The space occupied by each part has a value and there are also handling costs involved. In other words, reducing inventory (quantity and value) reduces pressure on cashflow. It also drives down labour costs generated by movement of stored merchandise, which are much less visible.

Lean improves your company’s overall performance by boosting plant productivity, minimizing poor quality costs, and reducing inventory levels. So you’ll quickly see impacts on your production and bottom line.

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