Reduce manufacturing costs with no access to capital

Reduce manufacturing costs with no access to capital

Are you one of the 67% of UK manufacturers who needs to invest in new IT but don’t have the capital? Data published in The Manufacturer’s 2017 Annual Manufacturing Report suggests that access to finance is an on-going issue, which hampers investment in new hardware and software. The report states that IT investment priorities for factories include new ERP systems, hardware and specialist software.

A secondary barrier to adopting new IT is getting management buy-in. According to The Manufacturer’s survey, 42% of respondents find it difficult to move IT projects forward because of uncertainty about return on investment and concerns about the risks of making big investments in big projects, which ultimately don’t deliver what they promised.

Given that technology is the key underlying ingredient for moving to Industry 4.0 and the smart factory, an inability to fund, and reluctance to embrace new IT should concern executive teams running manufacturing businesses.  However, in this era of procuring “everything-as-a-service”, manufacturers should consider the opportunity costs of not embracing new technology.

Lowering the barriers to technology adoption

As consumers of IT in our personal lives, we’re used to downloading apps, instantly, for free, and just using them. If we don’t like the app, we delete it.

Fortunately, an increasing number of software vendors for business are creating applications that are hosted in the Cloud, are fast to configure and enable users to get up and running quickly with minimal training. What’s more, there’s typically less financial commitment to get started with these kinds of solutions as the software-as-a-service model of choice is a scalable monthly rental; you pay for the licenses you need, month-by-month. Using software-as-a-service enables manufacturers to adopt new IT without the big financial commitments of yesterday – with much less risk of failure.

For those that adopt new systems to modernise their factories, what opportunities are open to manufacturers in the pursuit of reducing costs? What and where are the fast, low-cost fixes that technology enables?

Reduce labour costs

For many manufacturers, the wage bill is the biggest contributor to cost in the goods they make; it’s also one of the most difficult to bring down.

Reducing labour costs require a focus on managing performance. To do this successfully, you need access to accurate and timely information. For many companies the answer lies in moving away from using outdated paper- and spreadsheet-based data collection to deploying software on the shop floor that accurately measures what people do and how long it takes them, providing information in real time.

When operators become aware of their performance, we have seen shop floors achieve a 20% boost in operator utilisation overnight.

Deploying dedicated manufacturing software on the shop floor is a foundation for continuous process improvement. It may also enable you to reduce labour costs by employing people with a lower level of skills, as you can configure the software to provide detailed guidance to operators.

Improve quality

Poor quality costs you in having to rework or scrap products. It may also result in sales returns, complaint handling, field service labour and loss of reputation and the inevitable consequences for future sales.

A dedicated factory software solution identifies the root causes of quality issues and prioritises improvements based on cost savings; gives suppliers feedback when their material has caused problems; uses real-time data to identify new quality issues before they waste more labour time and provides embedded ‘quality alerts’ in work instructions to ensure operators avoid repeating past quality issues.

Cut material costs

To counter increasing material costs, manufacturers should be looking for opportunities to better manage their inventory levels and stock.

Most ERP systems “backflush” material consumption when jobs are completed. This means that you don’t know accurately and dynamically what your inventory levels are, and material use is based on planned consumption rather than actual consumption.

Any uncertainty in inventory levels requires you to hold a significantly higher level of raw material stock to prevent running out. Recording inventory usage in real time allows you to improve accuracy and confidence in inventory levels; hence you can reduce safety stocks and run your factory at a lower level of WIP.

Reduce batch sizes

Manufacturers typically choose large batch sizes to benefit from economies of scale. Long assembly runs enable them to buy raw materials in bulk and reduce variable costs. However, this approach increases inventory costs for input materials and having to store quantities of finished products – overhead costs that manufacturers avoid with small batch runs.

To enable efficient manufacturing in small batches, accurate measurement becomes more important than ever. Small batch manufacturing also allows businesses to identify and fix quality problems much sooner – and more cost-effectively – than manufacturers who run long assembly lines.

These are just some of the ways that manufacturers are using automated factory floor solutions, like MESTEC, to reduce costs. We offer our solution as a service for an affordable monthly subscription, so no capital purchase is required. Typically, shop floors can get up and running within a week and begin to see immediate results.

Ready to find out more?

Please contact us as we would be delighted to discuss your manufacturing challenges and demonstrate how our rapid, low-risk solution could bring major cost savings and performance improvements to your business.

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