In this era of cutthroat competition, the objective of any industry is to reduce costs and improve profits. The traditional manufacturing culture tries to push down the costs to increase profits, directly. Little do they know, that it is impossible to attain the desired primary goals without a holistic approach for addressing the secondary goals.
Organizations must understand that costs and profitability are dependent variables that cannot be derived directly. These two prime objectives of the organization are highly dependent on the performance of the other variables, also called the secondary objectives.
If the secondary objectives – the variables, such as value-adding ratio, reducing MUDA, improving machine health, optimizing the inventories, supply chain efficiency, lean business processes, etc. are defined, monitored, and improved upon continually, they provide an effective platform for cost reduction and subsequently reduce the costs of goods sold and improve the gross profit through manufacturing.
COSTS & PROFITS can be derived, not CHASED.
Implementing these 10 steps for reducing manufacturing costs through the adoption of lean manufacturing practices can result in reduced waste, increased efficiency, significant cost reductions, and improved bottom line.
Moreover, a lot of organizational and cultural issues also need to be addressed with equal importance.
Organizational structure, roles, responsibilities, boundaries between family, business, and ownership, defining measurable KPIs, etc. play a very important role in bringing about a sense of responsibility, authority, and accountability for every stakeholder.
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