6 Ways A Metal Manufacturer Helps You Reduce Costs: Part 3
April 22, 2016
Are metal manufacturing costs draining your budget? To grow your business, you must partner with a metal manufacturer that goes above and beyond basic metal fabrication, industrial welding, machining, finishing and assembly services. It’s time to become more strategic about improving profitability for your OEM.
In parts one and two of this three-part blog series, you learned how lean manufacturing, consultations and supplier programs, logistical strategies, and industry expertise help you cut costs. Now, consider how reviews and audits along with supplier transparency enable you to reach budget goals in the final installment of this blog series.
5. Reviews And Audits Identify Cost-Saving Opportunities
Your metal manufacturing supplier should provide value-added services such as business reviews and audits, both of which help you find ways to save money. This feedback is more formal, and usually more comprehensive, than the recommendations you receive on a regular basis.
A business review provides an opportunity to step back from your day-to-day operations and focus on strategic goals that ultimately increase your revenue. This is a high-level meeting that management and executives should attend. Your focus is on the future, although current projects may be discussed if they play a role in your OEM’s growth.
While business reviews are usually held in a meeting room, an audit may take many forms. The two most common types of audits are product audits and process audits:
An OEM contract manufacturer audits your product by observing your production at the point of use or by conducting an engineering review. In both cases, the supplier looks for characteristics of your fabricated part that can be improved from a cost perspective.
For example, you may be able to use alternate materials or more efficient processes to lower the cost of production. Your supplier also reviews product specifications to identify non-critical features that may be inadvertently “over-engineered.” By simplifying your custom metal fabrication, you save significantly on costs.
During a process audit, your contract metal manufacturer reviews one or more of your business processes to identify inefficiencies or opportunities for improvement. An opportunity may be physical, such as updating a product flow, or informational, such as implementing EDI transactions for purchase orders.
6. Suppliers Provide Transparency Into Production Costs
There’s no way around it: You must understand where your production costs are going in order to improve your budget. Many OEMs struggle to accurately capture processing costs in the following areas:
- Labor variation
- Freight charges
- Support labor
Supplier transparency enables you to see exactly what costs are being generated in the manufacturing process. Your contract supplier should also ensure fixed pricing, so you don’t have to absorb cost variations related to labor, quality or unpredictable circumstances.
It’s preferable to work with a supplier that educates you in these areas. The better you understand your metal manufacturer’s processes and the benefits it provides, the more you’re able to save.
To sustain your company’s growth, you must find the most efficient, cost-effective means of procuring manufactured parts and assemblies. But you don’t have to do it all on your own. Partnering with the right metal manufacturing supplier is a strategic decision that brings you increased revenue and greater marketplace success.