Regardless of sector, there is one goal shared among all manufacturers: reducing the price of raw materials. This is often the highest cost for manufacturers, and they are constantly trying to improve their profit margin, which is primarily done by paying less for materials.
However, decreasing the amount spent on materials can be a challenging goal to obtain. Of course, manufacturers can explore alternative options to the materials they are currently choosing, but this could sacrifice quality and customer recognition, thereby impacting consumer opinion of the end product, which is why some manufacturers are hesitant to switch to new options.
Buy in Bulk
One way manufacturers can reduce cost is to purchase necessary materials in larger quantities. The Houston Chronicle explained this will drive down the unit price, so the manufacturer will be paying less in the long run.
“Buy materials in bulk to drive down unit price.”
Buying in bulk can usually be done at any time, though there are other occasions when a manufacturer can buy a large amount of necessary materials for even less money, such as when a vendor needs to quickly get rid of materials. Money Crashers said this might happen when a company goes out of business, needs quick money or has another internal change that requires the vendor to free up inventory space.
These can be unpredictable events, so it’s important that manufacturers stay up to date on what is going on with vendors and other manufacturers in their area. There might be a rare opportunity they can take advantage of, if they move fast.
Reuse and Recycle
When material costs are relatively low, it can be easy to get into the habit of letting some go to waste. But when prices increase, it becomes clear that allowing even some purchased materials go unused and thrown away is unnecessarily expensive.
There are many ways to do salvage material that would have otherwise been thrown away. Evaluating the product design and production process are two places to start. Make sure both phases accommodate the most resourceful use of the materials needed. Stellar, a Florida-based engineering, construction and mechanical services firm, explained it’s essential to measure and analyze all processes to know how to improve them. Careful analysis will also help manufacturers understand where materials are being overhandled, which can lead to additional waste if not handled properly, and can reduce the efficiency of the overall operation.
Another way to reuse and recycle materials is to provide a way for returned goods to find their way back to the manufacturer. To do this, McKinsey & Company, a management consulting firm in New York, explained manufacturers need to restructure their business model to maintain ownership of the materials in the products they sell. This will allow them to take full advantage of any product returned to them.
Addressing Storage Needs
As manufacturers strategize ways to reduce material prices, they will need to rethink the way certain things are done. For instance, buying in bulk is a popular way to reduce unit price, and it’s always smart to take advantage of a big price cut. However, a manufacturer’s warehousing resources might only be large enough to accommodate relatively small orders. If machinery takes up most of a facility’s floor space, finding the room to put excess materials until they are needed can be difficult.
This can also become a problem for a company that has devised a way to bring returned products back to the manufacturer to extract additional use out of them. Regular storage is likely taken up by materials that have yet to be made into the final product, leaving little room for items coming back to the operation site.
Secure storage containers can help with this. Materials that have yet to be used can be kept on-site, yet out of the way in one of Mobile Mini’s steel storage containers. Or, returned products can be stored out of the way until the manufacturer is ready to dissect them for their value. These portable storage solutions are weather resistant and feature a patented Tri-Cam Locking System to ensure they are kept safe and secure.
It’s important for manufacturers to devise clever ways to save money, especially on their most valuable expense: materials. But these methods cannot be utilized if the manufacturer has not provided the necessary space to do so. Steel storage containers are a convenient way to quickly add storage space to any operation.