subject: Manufacturers Challenges Vary In Ireland [print this page] Cost reduction is an ongoing battleCost reduction is an ongoing battle. Their expenditure covers in many cases a wide diversity of raw material input costs as well as the normal range of selling, administrative, distribution and financial costs.
Experience tells us that it is often in the lower profile cost areas of raw material input that good opportunities arise to achieve cost reduction and profit improvement. For example take a number of manufacturing companies, particularly but not only in the food processing area, where the company has a very tight control on its main raw materials but the company could be spending 5-10% of sales turnover on packaging.
In some manufacturing companies which are busy and profitable the true levels of profit margin per customer are obscure. Often this is because larger customers have grown to an extent where it becomes very difficult for the company?s managers to devote the time and other resources needed to analyse and effectively control cost associated with supplying such customers. It can also be said in many cases major customers are not as profitable as the company believes them to be. Profit improvement projects can be implemented to uncover the issues and to supply solutions to this situation; starting from a full analysis of product and customer profitability through to the pricing policy adopted by the business.
Many companies have little or no movement on the pricing or input costs at the manufacturing level; however with a cost reduction programme it is almost always possible to achieve significant reductions in one or more overhead costs. Such reductions transfer immediately to the bottom line, the benefit of such costs could be applied for a minimum of 3-5 years.
Programmes for manufacturers in Ireland use cost benchmarking techniques which as well as providing the means of controlling costs allow manufacturing companies to assess if they really are getting a good deal in their key expense areas. Expense reduction is nearly always possible and adds to manufacturing profitability.
It is thought to gain maximum analysis of costs an outsider should evaluate the company with a clearer focus. The objective analysis is better achieved as they are not attached to any part of the company
Ask yourself these questions:if the answer is yes then you need to assess your company in more detail ...
Are your profit margins declining and why?
True profit margin on each product line/customer should always be known?
Are you aware of and can you introduce imminent innovations affecting your industry sector?
Would your business benefit from technology transfer?
Have your products got export potential and could you benefit from currently available grants?
Keeping stocks at perfect level and is wastage and shrinkage analyzed constantly?
Is there added value potential for existing product lines?
Are you making the most of the information and value from your supply chain?
by: Tony Goold
welcome to Insurances.net (https://www.insurances.net)
