No matter how successful a company or business may be, shrewd business owners are always looking for ways to cut costs and increase profits. Not all cost-cutting measures have good results, however. Sometimes, the money you save in one arena can cost you far more down the road in that same area or cause an even greater increase in costs in another. Here are four great ways to cut production costs that won’t cost you more down the road.
Remember that there is a difference between negotiating a lower price and strong-arming a lower price. Every business goes through rough patches, so you want to keep suppliers as friends, not enemies. This means you need to find a way to cut costs for yourself while also sweetening the deal for your supplier. For instance, you might negotiate a lower price with some suppliers by offering payment on delivery rather than net 30 or taking larger shipments once a month rather than smaller shipments several times a month. This will save them on shipping costs, which can also lower your costs.
Just because you have a great thing going doesn’t mean there isn’t something better out there. That also doesn’t mean you should be constantly jumping from supplier to supplier every time they offer a better deal. Doing so could burn a lot of bridges and seriously damage your business. On the other hand, sometimes suppliers can take advantage of loyalty. If a new supplier can genuinely offer a significantly better deal and has the reputation to back it up, then it might be time to make a change. This doesn’t mean you have to be constantly exploring new options, it does mean once a year or so you should take a look at what else is available.
Buy Your Own Equipment
Almost everything you can do in-house is going to save you money. From packaging to manufacturing, the more you do yourself the greater your profit margin will be. Having said that, however, moving from having your product manufactured by someone else to doing it yourself represents a significant investment you don’t want to rush into too hastily. A good way to bridge this gap is to start small and slowly bring more and more steps in the process under your roof. For instance, you can start off by investing in some pre-owned packaging equipment to pack and ship your own product. Eventually, as you pay off that equipment, you can bring another phase in the process in-house.
There are few businesses today that can’t benefit from advanced analytics. Analytics can tell you where your new customers are coming from, where you are losing old ones and where your biggest waste is coming from. Analytics can help you spot tiny, almost unnoticeable cause and effect situations to take full advantage of them. For instance, you may not notice a sudden 3% increase in orders on the third Sunday of every month, but advanced analytics can. By identifying this upsurge and tracing it to its source, you may turn that 3% increase into a 12% increase or more.