Fotolia_65781297_XS-300x300.jpgAs businesses look to find ways to grow profitably and build efficiencies into the process upfront, maintaining low operational costs remains paramount.  It also provides pricing flexibility as you are able to reduce your breakeven point for covering costs. A few strategies to consider include:

1. Reduce waste – sounds obvious but often requires significant focus. Focus demands priority. Dictating priority doesn’t last long; instead, it must be a priority backed with support when “the going gets rough”.  Reducing waste reduces raw material cost – if raw materials are a significant portion of your business cost, consider prioritizing. If they aren’t, ignore this item!

2. Improve operational efficiency – find a way to resolve roadblocks, analyze root causes and improve your throughput. Improving operational efficiency frees up capacity for growth. You might be able to free up crews/people that can be re-focused on other, value-added activities that will increase profitability and support business growth.

3. Minimize machine breakdowns – it is obvious that minimizing machine breakdowns will improve operational efficiency. In addition, it typically also reduces waste because lining out the machine when starting back up uses extra materials. A healthy focus on preventative maintenance combined with operator training programs typically does the trick.

4. Reduce inventory levels – although the main benefit of lower inventory levels is increased cash flow, it also can reduce operational cost. For example, if there is less inventory on hand, it is typically quicker and requires less people to cycle count, pull inventory, etc. It also can reduce costs significantly if your company is at the breakeven point in terms of warehouse space.

5. Continuous improvement – don’t forget to ask your employees for ideas! In my experience, employees are able to generate significant ideas to save operational cost when asked. Be genuinely interested and you’ll be amazed with the results.

Continue reading on how to be the Strongest Link in your organization:

Quality Tips for Manufacturers

Inventory Velocity