5 Ways to reduce costs in an industrial company

There are two ways to grow your company: increasing sales or reducing costs. Although in most cases the first option focuses all efforts, the truth is that reducing the costs of an industrial company is key to increasing its competitiveness and obtaining profits.

It is not a question of making cuts without rhyme or reason, but of acting strategically to optimise costs, so that it is possible to produce more while spending less. To optimise the costs of a factory, it will be necessary to review all business processes, from treasury and taxation to logistics and energy consumption.

Luckily, technology will be a great ally to optimise your company's costs and start growing. Here are 5 cost-cutting tips that you can implement immediately.



Techniques to reduce costs in an industrial company

1. Proper stock management

One of the key points to reduce the costs of an industrial company is to optimise the inventory. To do so, it is recommended to find a balance between inventory cost and the optimal level of production to meet demand.

The storage of goods after production involves maintenance and logistics costs. When inventory is not managed properly, two equally damaging situations can occur: capital employed in manufacturing can be tied up, or stock outs can occur without meeting demand.

Intelligent stock management requires tools capable of interpreting customer demand data to anticipate the evolution of sales.

2. Control of energy costs

Electricity and air conditioning systems can be a major outlay for factories. It is therefore essential to compare different offers and negotiate with electricity and gas suppliers in order to reduce costs for an industrial company.

An audit to detect energy inefficiencies will help to adopt energy saving measures and to identify leaks due to inadequate maintenance of installations.

In addition, the increase in fuel and electricity prices at the present time means that alternative sources of energy, such as photovoltaic or wind power, should be considered. Finding the type of energy that best suits our productive activity will help to reduce costs and be more sustainable. This can lead to tax advantages.

3. Eliminate unprofitable lines or products

One way to lose money in an industrial company is to aspire to offer all kinds of products and services to reach more customers. Those lines of business or products that do not bring profits should be eliminated in order to specialise in what we are good at.

In order to achieve an optimal business structure, it is advisable to outsource any activity that you are not specialised in or that is not profitable to manage. To make this kind of decisions, of course, data and audits are required. This post on how to calculate the Oee can be very useful.

4. Optimising staff costs

It is important to properly review how much your company spends on staff and to consider the following aspects:

  • Analyse whether you can take advantage of the new hiring bonuses.
  • Study the amount paid for accidents at work and occupational diseases.
  • Ensure that all workers pay contributions for the correct activity to avoid cost overruns.

For example, a factory with several workplaces may have one where its structural or office staff are located. If the entire workforce pays contributions for the main activity of the company, it will be overpaying.

5. Rely on technology

In Industry 4.0 projects, having customised production control software is key to obtaining greater profitability, having the information to take the appropriate measures and managing your company's resources more efficiently.

The MESbook system enables real-time cost control by automatically identifying possible productivity deviations and the reasons for them.

MESbook is the only MES system that identifies cost holes in real time. It evaluates labour and raw material costs, as well as the different profitability factors of a factory, product and service line or customer.

Main expenses of an industrial company

Maintaining the activity of an industrial company involves numerous expenses, from labour and raw material costs to logistics and transport costs. Among the different expenses, we can identify two types: direct and indirect.

Direct costs of a factory

In the case of industrial companies, only those costs that affect production, i.e. that are incurred in the production process, are identified as direct costs. There are mainly two types of expenditure: raw materials and direct labour.

How does implementing the MES system help us to reduce these costs?

  • Raw materials. Differentiates and quantifies between different types of process shrinkage by purchase price, so as to optimise raw material costs.
  • Direct labour. Identifies the causes of the deviation of money from the factory standard, depending on the number of people, speed or cost per hour worked.

Indirect industrial costs

Indirect costs are those that are not directly related to the production process, but are still necessary for the economic activity of the company, such as depreciation, rent of offices or production plants, electricity supply or indirect labour.

Having a record of different types of expenses with real-time data is essential to reduce costs in an industrial company and to establish improvement plans. Request information about MESbook's MES cost module - it 's time to optimise your company's costs and start growing!

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