Optimizing process efficiency is key for manufacturers of any size or scope. After all, small performance gaps can make big differences and impact profitability in manufacturing environments.
Achieving peak efficiency requires a great deal of testing and refinement—as well as thoughtful input from people on the shop floor. While business owners often are inundated by daily tasks, it’s imperative to prioritize process improvement – and focus the necessary time and effort – in order to help your manufacturing business operate better.
Thankfully, there are several proven techniques for boosting process efficiency in manufacturing. Consider the following five tips as you think through potential process improvement initiatives.
- Solicit input from your team and build buy-in and ownership. Who knows better than your front-line production staff about what works – and what doesn’t – on the shop floor? Talk to them – get their ideas, listen to their concerns – and involve them in initiatives to streamline processes and eliminate waste. Showing them that you truly value their insights, then empowering them to take action, goes a long way toward building consensus, teamwork, and Often, it also leads to meaningful process improvements.
- Utilize best-in-class enterprise resource planning (ERP) tools. In manufacturing, scheduling/production control, job costing and labor monitoring are critical elements in maintaining cost efficiency throughout your operation. ERP software is designed to help you manage these and other crucial functions. That said, there are many ERP solutions on the market these days and many offer features and options you may or may not need. Do your homework and select the right system for your unique needs.
- Revisit your purchasing process. If you eat three pickles per year, for example, and you buy 12 jars of them at your neighborhood wholesale club, the total price may seem attractive compared to the cost of 12 jars at a typical grocery store. However, it doesn’t reflect consumption trends and other key variables. Likewise, there are many instances where bulk purchasing is a smart choice for manufacturing businesses. Other times, it’s not. You may want to base purchasing decisions on data, analytics, intelligence and insight as they relate to customer demand, inventory space and cash/financial considerations. Don’t put your manufacturing business in a position where excess inventory unnecessarily ties up warehouse space.
- Take a hard look at your storage space. In this regard, we recommend sensible lean initiatives like locating popular or heavily used items nearest the location where they are being used (and conversely, situating bulky or rarely used items away from heavy traffic areas). Again, in manufacturing environments, little details can make big impacts—positive or negative.
- Move finished products out the door. Collectors of fine wine are happy to keep vintage bottles in storage for long durations. In the case of manufacturing businesses, it almost always pays to move finished products out the door as quickly as possible. In this regard, you should try to avoid storing excessive or discontinued products longer than absolutely necessary. Doing so likely accomplishes little more than tying up valuable space.
Whether you implement these ideas or consider other process improvement techniques, it’s important to understand the entirety of your business in detail before embarking on process improvement initiatives. This includes:
- Taking a hard look at how your actual facility (or facilities) function and where physical or design limitations may exist
- Getting a strong handle on every element of your production process
- Evaluating all facets of your raw material purchasing, inventory, processing, and distribution
- Understanding the universe of back-office operations—and how they may positively or negatively impact manufacturing operations
Intelligence in each of these areas is key to making smart, strategic moves that position your manufacturing business for peak efficiency and success over time.
Goldin Peiser & Peiser works with manufacturers on tax strategies that will help them meet their financial goals and objectives. Learn more about the Manufacturing and Distribution Services Group at Goldin Peiser & Peiser. For more information, please contact Jason Cope, CPA, at 214-635-2546.