Tips on Trimming Overhead Costs
Facing a crisis of shrinking profit margins, Bucks County manufacturing leaders have been asking for some tips on trimming overhead costs. Before offering advice, a couple of ground rules:
- For this article overhead costs are considered as; “any resource, task or thing that does not directly touch the product being produced for sale”.
- Talk to your employees, don’t target them.
- Do not look for magic bullets
Every cost cutting list usually starts with a few things we already know, but don’t usually get around to doing. Sometimes, the best way to “get them done” is ask an outsider for help.
- Go paperless, go green and get an energy audit.
- Benchmark best practices for outsourcing goods and services.
- Create a comprehensive digital strategy that includes cloud computing.
- Re-evaluate all third party contracts, services and off-site support functions.
A few that have already been looked into previously but should be revisited:
- Buy (gently) used
- Bulk purchase supplies
- Cutting travel costs by working at home, telecommuting and conference calling.
- Getting and using customer endorsements and crafting creative incentives to reduce traditional selling costs.
When digging deeper by looking at costs that have already been cut a few times before, we recommend getting an outside pair of eyes to help identify the real costs and solutions. Some of these items would be:
- Reduce product travel time and warehouse space by selling your lift trucks. Don’t haul things. Create a continuous production flow for your products.
- Eliminate clutter costs by selling your storage racks and barricading storage rooms.
- Store work items and raw material where they are used. If you don’t “put them away” you don’t need to take the time and expense to “go get them”.
- Create a visual color coded system for all things product related. Red, Yellow, Green are easy and quick indicators of what to do and not to do next.
- Introduce time management techniques. Create rewards and awards for time savings. Prove to yourself and your organization that saving time means saving money.
- Reduce meeting times by taking the chairs out of the conference room.
- Reduce office space requirements by holding meetings on the production floor.
- Hold Kaizen related events for issues that require creative solutions.
This is just a short list of saving ideas. Please send any suggestions or saving stories you would like to share to kellyd@bcedc.com for mention in a follow-up article on this topic. Also, please feel free to contact us for recommendations on outsider help as well as suggestions for that fresh pair of outsider eyes.
This article was submit by Gregory Olson, Director, SESEWN Region, 215-776-0130, Sewnse@steelvalley.org, www.steelvalley.org/sewn.