4 Stages To Help You Reduce Material Costs

In today’s manufacturing companies, most of the production costs are spent on material procurement. In general, material costs account for more than 60% of the total cost. In the machinery, hardware manufacturing and other industries, material costs account for a large part, which resulting in lower corporate profits. Therefore, reducing material costs has become a concern for every manufacturer.

How to reduce material costs?

1.Design stage

Cost savings is a comprehensive effort that needs to start at the design stage. The cost reduction in the design phase is mainly done in two aspects. One is to reduce the cost of the design itself, and the other is to reduce the cost of the designed product.

The cost of the design itself is mainly due to the use of overly complex processes in the design, and excessive design leads to the extra cost of the payment. Or the company does not have a special technical research and development department, and seeks third-party design and research and development. This leads to a very unstable quality of the designed product, which consumes a lot of design costs.

The cost of the designed product refers to the difference in product cost due to the difference in the materials used in the design, the route of the design, the versatility of the designed parts, etc. during the design process. Therefore, using common materials in the design process, the design of the general parts to help increase the use of inventory and turnover. At the same time, the quality of the products can be guaranteed, effectively reducing the cost of the enterprise.

2.Planning stage

The planning phase also includes two aspects, one is the procurement plan and the other is the production plan. The goals of both are the same, to meet the production needs through reasonable inventory, to ensure smooth production. If the production line often fails, there will be a stoppage and a backlog, which will undoubtedly increase the cost of the enterprise. The procurement plan is based on the production plan, so the rationality of the production plan is very important for the procurement plan.

3.Usage stage

Controlling costs at the usage stage primarily means reducing waste. In actual production, in theory, there will be a certain gap between the materials used in the workshop and the actual use. Therefore, it is necessary to establish the process and system for the use of workshop materials; and it is necessary to establish an exception handling mechanism, finally, the ERP management tool is needed to control the actual production.

4.Storage stage

Storage stage is mainly considered from the control of inventory sluggish materials and the improvement of turnover rate. Generally, there are several methods for controlling sluggish materials. Inventories that are returned to the supplier due to cancellation of the order are generally returned to the supplier or transferred to other available factories. While the sluggish material is mainly from prevention for the reasons caused by the inaccuracy of the plan, the purchasing department purchases more, the supplier has more delivery or the inventory is not accurate.