As a building materials manager, you're already well aware that every penny counts. You're dealing with an incredible amount of uncertainty given everything going on in the world right now, not to mention razor-thin profit margins that you're trying to preserve in any way you can. Because of that, you're always on the lookout for ways to improve efficiency, reduce mistakes, and reduce costs as much as possible.
The production costs formula is a simple one. To arrive at your production costs, just add together:
- The total of your direct materials and labor costs
- Your total manufacturing overhead costs
For a building materials manufacturer, an example of direct material costs would be the raw materials you're purchasing as well as your employee salaries. Examples of indirect manufacturing costs would be things like rent and utility expenses.
Thankfully, cost-saving opportunities are out there—and they're a lot easier to take advantage of than you might think. From new technology that will help streamline your communication and operational processes to using data to reduce waste, what follows is a list of some of the best ways that you can take action to start reducing costs for your business right away.
Lower Purchasing Costs with Enterprise Resource Planning
Direct material costs are always rising and falling, but throughout it all one thing remains the same—they'll take up a significant percentage of your budget, no matter what. Therefore, if you want to capitalize on an opportunity to not only lower purchasing costs but also inventory carrying costs, you need to make sure that you have the right enterprise resource planning (ERP) tool to support these efforts.
An ERP solution can maximize efficiency and productivity across your supply chain by making sure that the people who need real-time information to do their jobs always have access to it, regardless of where they are. In terms of lowering purchasing costs, this level of insight helps support you by making sure that you're only buying materials exactly when they're needed instead of too early. Buying too early means that you'll likely be paying to store materials that you're not getting any value from right now, almost creating a "hurry up and wait" scenario among your team.
An ERP solution can also help make sure that you're not buying materials too late, which can slow your production line during a time when you can't really afford it.
Minimize Human Error with Automation
Another great way that you can reduce costs as a building materials manufacturer involves focusing on one of the biggest indirect manufacturing costs out there: human error.
Employee-based mistakes like slip errors, which occur when someone is performing many menial tasks and makes a mistake while trying to keep up, will still end up costing you money.
Knowledge-based mistakes are also prevalent, which is when someone is faced with a problem they don't necessarily have an answer to, and they aren't quite sure how to react. If there is no set company rule in place that gives them specific details about what they're supposed to do, they'll likely take matters into their own hands—making a mistake through their unfortunately limited knowledge.
ERP solutions and other software are a great way to reduce a lot of these mistakes through automation. Any repetitive, manual task throughout your business is a prime candidate for automation. Not only can this go a long way towards reducing data input and slip errors, but it can also eliminate knowledge-based mistakes. Automated workflows can be created that can help notify the right team members when their expertise is needed, always making sure they're in the right place for maximum productivity.
Automation can be used in a wide range of different departments across your business, including sales, accounting, and warehousing. But when you consider automation is also a great way to free up someone's valuable time to focus on tasks that matter over repetitive admin, you begin to get a sense of just why this is one of the best manufacturing cost reduction ideas available to you.
Reducing Downtime With Predictive Maintenance
If your enterprise resource planning tool is integrated with the types of sensors and other devices that make up the Internet of Things, you can even use it to collect asset data in a way that helps you better utilize the machines on your production floor.
You can track the utilization rates of each individual machine to schedule maintenance only after it meets a certain threshold. You can also better anticipate downtime to reassign resources to help mitigate risk from potential drops in production capabilities. But if you also know what types issues are happening with certain machines and how often, you can also take steps to fix those small issues now before they have a chance to become much bigger and costly ones down the road.
Not only can all of this be largely automated to generate immediate alerts when certain machines need maintenance or repairs, but experts agree this can also help save as much as 40% on repair costs moving forward.
Optimizing the Buying Cycle with Customer Relationship Management
Similar in concept to a PRM, a customer relationship management platform is a single solution that you can use to manage all of your company's relationships—not only with customers but with prospects as well. The goal here is to help you stay connected to customers in a way that streamlines processes as much as possible, thus improving profitability as well.
This helps to reduce costs by improving communication between the sales team and your leads and customers, which does reduce costs by eliminating confusion and making sure that materials get into the hands of the people waiting for them as quickly as possible.
CRM also helps analyze customer buying behaviors, giving your sales team more confidence to offer upsells and cross sells that are personalized to each individual. The data inside a CRM helps you understand what your customer is trying to accomplish and why it is so important, empowering your team to ask the right questions to better navigate the upsell and cross sell conversation.
Streamlining Front & Back Office Operations
CRM is also a great way to make sure that your back office and front office processes are connected to one another. The right CRM platform can help manage all of your sales opportunities, including quotes. When that CRM platform has been integrated with your existing ERP, it offers your sales team with all the real-time information they need to make better and more informed choices regarding sales activity.
Your employees will be in a better position to predict changes in future demands, allowing them to take steps today to plan accordingly. This can help them manage aspects like quoting in a far more effective way. Not only that, but they finally have the ability to proactively plan for these changes as opposed to reacting to them - allowing you to develop the types of processes that support your delivery dates more effectively, too.
So not only would a CRM save you money and reduce costs because you're eliminating the significant duplication of effort that used to exist, but it also opens up a new opportunity to work more efficiently and increase profitability as well.
Leverage Data to Lower Production Costs
Finally, one of the best ways to lower production costs involves extracting as much value from the data your business is creating as possible.
Data offers a tremendous amount of insight into your business., such as:
- Trends and historical patterns across departments to forecast future trends
- Cost of machine maintenance, downtime, and productivity to optimize processes on the production floor
If the people making strategic decisions based on this type of insight have access to it, you'll quickly find that they're making better and more informed decisions across the board.
But throughout this, you cannot make the mistake of collecting data rather than information. Only once data has been properly analyzed will you be able to uncover the true story hidden inside. Ultimately, this data should be equipping your teams to deliver better for your end buyers.