Costs are the enemy of profit margins. The higher your costs, the harder it is to make a profit unless your customer base is willing to accept higher prices for their goods. In food manufacturing, there are several areas where costs can be cut. Carry on reading to see which ones apply to your business.
Reduce the Cost of Raw Materials
Whether you manufacture soup or chocolates, your factory will need raw materials. Usually, the raw materials needed for your product lines are the biggest item in the debit column of the profit and loss sheet, so it makes sense to start here when looking for ways to save money.
Find out exactly that raw materials cost in the current market and approach all your suppliers to see if they can offer you better terms. Contact other supplies to verify whether there are any more competitive deals available but be careful not to sacrifice quality or your customers won’t be happy.
Cut Shipping Costs
Packaging and shipping costs can be substantial, depending on what you sell. It’s worth investigating whether you can invest in a different type of packaging to save money on shipping. For instance, flexible packaging offers space-saving advantages and costs less to manufacture, waste is minimized, and costs are reduced. This blog post explains in more detail why you should use flexible packaging for food storage.
Make Your Manufacturing Processes More Efficient
Efficiency is critical in any manufacturing process. Go over your processes to see where you can eliminate delays. Perhaps some of the equipment can be updated to prevent costly breakdowns and delays. Introduce pre-emptive maintenance schedules, and examine shift patterns to see if you have enough workers at key times. Remove any processes that are not needed or are too time-consuming.
Remove Unprofitable Product Lines
Take a critical look at your product lines and sales figures. Taking into account seasonal trends, identify which products are less popular and, therefore, not as profitable to manufacture. While it may be an unpopular decision with a small minority of customers, it makes sense to remove them from your product line.
Streamlining a product line is better for the brand. It’s easier for customers to identify a small number of well-known products and advertising and other associated costs will be lower.
If you don’t want to remove a product entirely, look at how you can manufacture it more cheaply. For example, perhaps changing some of the ingredients could reduce costs, but not at the expense of taste. Or you could make it smaller – this is a common tactic in the food industry, where customers rarely notice a small reduction in the overall size of a product, but it can make a significant difference in the cost of manufacturing.
Optimize the Efficiency of Your Workforce
Run the figures on how efficient your workforce is. Can they be trained to work faster? Is it worth offering financial incentives for meeting higher production targets? Look at all the options and ensure you have enough skilled workers on your production lines at peak times.
Reducing the cost of manufacturing makes sense for a food production business. Other areas to look at include energy consumption and administration costs.