Most businesses go through a time when they have to address difficulties with regards to expenses and consider lowering their production costs. This situation is brought about by varying and even uncontrollable factors like a widespread economic and financial crisis, decreasing sales brought about by a competitor, or ballooning unnecessary expenses. When this is the case, reducing production costs is not an option. It is necessary to keep the business afloat. Luckily, there are some ways to do this without resorting to drastic, complicated measures that may even hurt the business in the long run.
The secret to reducing production costs to the advantage of a business is utilizing Total Quality Management or TQM measures. Applying the philosophy of TQM in your business makes it possible for you to continue to provide the same quality of products and services you are known for while cutting back on some unnecessary spending. This ensures that you can still get a firm hold on your loyal customers and continue to keep them happy and satisfied. TQM measures include the following:
- Get better pricing costs - Make sure you only get the best deals from your suppliers by forming a strong business liaison with them so they can provide you with discounts, deals, and lower prices when you buy from them in bulk. This is very practical and efficient because when you buy in bulk, not only do you get discounts, but you also save yourself some time from coming back to replenish your materials or goods, helping you to cut back on transportation costs. If you're not satisfied with your present supplier, don't be afraid to compare and costs. Do some research and shopping around on your own to get the best supplier for you.
- Maximize the use of high quality machinery, equipment, materials, and facilities - Always make sure that your machinery and equipment is in perfect working condition. Buy only quality materials. Keep your facilities orderly and updated. This is important so that you will only produce and sell the best products and provide the best service. Producing sub-standard products due to malfunctioning, old, or slow machinery and equipment, plus cheap materials would incur greater costs and would make you lose customers and sales. Some dissatisfied customers even return unwanted goods and you only end up with accumulated waste products that nobody else wants to buy. Better steer clear from this scenario by investing in high-quality tools that help make production more efficient.
- Invest in the welfare of workers who are an asset - One thing to avoid is continuous hiring, particularly of those who are less qualified to take on the responsibilities and tasks required of them. Do not hire employees just to fill the void. And you can reduce production costs without letting go of many employees. Retain those who are an asset and contribute much to the welfare of the business. Help them to increase their productivity by providing necessary skill-based training and other additional training to complement their abilities, talents, and knowledge. Reward and encourage those who do well, inspire them to do better. By investing in highly competent workers and treating them well, you would also gain their loyalty as they help enhance your business further, making it as competitive as other established businesses.
- Practice effective and practical costs management - Always keep track of all expenses from the major ones like production costs, supplier costs and inventory costs down to the ones you pay lesser attention to like electricity costs and transportation costs. Everything you shell out money for and every transaction you make that's related to your business should always be recorded for future reference. Recording expenses act as a control measure, helping you to determine whether you're spending too much or just on target in using your budget. It also informs you where every cent of your budget goes to.