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Reduce Manufacturing Costs, 7 Pits Shall Not Jump! Mentioned Parts Quality And Cost.
Mar 02, 2018

Reduce manufacturing costs, 7 pits shall not jump! (Mentioned parts Quality and Cost)

 

To reduce costs is the eternal theme of enterprises, but the problem now is very important and urgent, especially for China's manufacturing industry which is into the era of meager profit.

 

The more nervous, more can't blindly. What not can do for the enterprise in the process of cost reduction?

 

According to the Associated reports, if the manufacturing costs in the United States set to 1, the manufacturing cost is 0.96 in China, in pretty close. Individual industries, such as textile industry, manufacturing cost is higher than even the United States.

 

In actual operation, to ask management for benefit, blindly understanding as to cut costs, compress cost, the enterprises are likely to be injured.

 

Enterprise measure cost advantage principle is: in the guarantee product value equal to those of competitors provide premise, lower the cost of the enterprise relative to competitors, which cuts as far as possible don't add to the cost of the product or service difference.

 

Regardless of the product or service value, yet blindly behavior to reduce costs, can never make enterprise's cost advantage, sometimes do more harm than good, just the opposite.

 

In the cost management, the enterprises often exist in one sector, second guessed, too dependent on financial, not stick to quality, ignore the interests of the supplier, the pursuit of fashionable phenomenon such as surface, it will weaken the effect of cost reduction, and even cut costs into the erroneous zone.

 

Manufacturing industry in our country, because of the economic environment of the whole into rapid growth in the new normal, labor, raw materials, energy and other factors of production is greater than the growth of enterprises to promote the efficiency of production, make enterprise management more and more difficult, therefore, explores the ways of cost reduction is undoubtedly enterprise save a controlled way.

 

In the actual process of cost reduction, the enterprise can sometimes produce the phenomenon of pushing, kill, it must cause our vigilance, enterprise cost reduce error basically has the following several aspects:

 

Erroneous zone 1: With the advantaged position of a buyer's market for purchasing cost blindly demand led to the decrease of the quality of raw materials

In order to reduce the cost of raw materials, they often will call together, many suppliers to request the price, if supplier don't promise to the requirements of the enterprise, is immediately suspended cooperation relationship.

Actually, this is easily into the erroneous zone for the enterprise in lower cost.

In the face of such situation, many vendors have to settle for, but they will next to this unreasonable demand their upstream suppliers, put forward in the end, the whole industry chain in a deluge of price cuts.

The entire value chain in the enterprise, there is dependence between each link, the next link cost management must be based on the last link of cost management, a link does not mean that the next link cost of minimizing the total cost will be minimized, more doesn't mean the whole value chain cost is minimized.

Some enterprises one-sided pursuit on the purchasing cost minimum, then the purchase of raw materials and cheap quality.

If only in terms of purchasing, does the cost optimization, but because of the poor quality of raw materials in production costs rise, the increase in the cost of Marketing Department, customer satisfaction is reduced, summary to these questions, you will find the whole value chain cost rising.

What's more, because the purchasing price decline, resulting in raw material appear shoddy phenomenon, cause the quality accident, resulting in the company brand damage, is not worth the cost, the so-called "there is nothing wrong with selling, only buy wrong."

 

Erroneous zone 2: the cost advantage of unilateral thought is simply to reduce the production cost.

Most managers will naturally understand the cost for the production cost, the confined to production cost reduction activities, don't without him.

In fact, in the traditional manufacturing, production costs are only part of the total cost, accounting for about 50-70%, and a considerable part of the costs arising from technology research and development, marketing, customer service, and other fields, and they are often very little attention in cost analysis.

Therefore, in importance to reduce the production cost, at the same time, from the perspective of the whole supply chain to seek ways to lower costs.

Otherwise, too limited production cost, not only the effect is not enough, sometimes too much.

 

Erroneous zone 3: Take Cost reduction as each link of the supply chain costs are the lowest

Supply chain is around the core enterprise, through the control of information flow, logistics, cash flow, starting from the procurement of raw materials, made of intermediate products and final products, and finally by the sales network products to consumers' hands, some managers think that enterprise should pursue all link spending cost minimized.

Supply chain is composed of a series of value-added activities are interdependent a system, each link cost influence each other, and sometimes the shift, therefore, should through the mutual coordination between the supply chain and optimization to bring cost reduction opportunities, the pursuit of total cost optimization.

 

Erroneous zone4: Cut the cost down as aggressively institutions, reduced manpower, reduce welfare, as a sign of reform drive

Chinese companies is usually an extensive management, resource use efficiency is low, therefore, to strengthen the cost management is vital for corporate profits.

However, the true meaning of cost reduction are improving by money value of input output, rather than to improve the input-output coefficient, also is not blindly compression cost.

But unfortunately, a lot of enterprise cost management into the erroneous zone, especially in the human cost management, and the horse run fast, and the horse eat less grass, this be possible?

The result can only be backward elimination, good money after bad money, become a peer personnel training base.

What is the cost of the appropriate economic common sense, slightly should know: pay a fee for returns, the higher the cost is lower, pay a fee if you can't pay off, is a waste.

Cost of choose and employ persons, not from the enterprise to pay wages of high and low cost to determine the size of, but in employee contribution to judge the value of the size for the enterprise.

 

Erroneous zone5: ignore the product development, technology research and development of important influence on the design of the product cost

Product design often with market competition, consumer demand, factory production capacity, the influence of the cost of raw materials, etc, once the finished product to finalize the design, it is locked, 60% of the cost of the specific work only through input-output ratios to reduce costs, improve efficiency and effect is quite limited.

Therefore, the enterprise shall present the research and development costs as the primary part of supply chain cost reduction, from raw materials readily available, the mature of the production process, and the convenience of the stability of the production efficiency, product distribution cost considering aspects such as design, comprehensive consideration, make the enterprise cost leading strategy to win at the starting line.

 

Erroneous zone6: lack of dynamic cost perspective, comprehensive analysis and planning

Enterprises in addition to analyzing cost behavior at some point, also must consider the absolute cost value activities and relative cost change over time.

Some improvement measures in a certain time point for cost reduction effect is obvious, but over time, the effect of fast attenuation phenomena, such as some enterprises in order to increase the speed and the efficiency of production equipment more than design, resulting in the equipment degradation until scrap in advance.

Enterprise can through the dynamic analysis of cost, predictive value activity cost drivers for the possibility of change, and act quickly to make yourself in a position of cost advantage.

Ensure the durability of the cost advantage, to prevent competitors imitate, depends on the function of reduce the cost of a variety of factors, product scale, the advantages of systemic, proprietary technology, the cost is more persistent than the other cost drivers.

Through the interaction of multiple value chain link and obtain competitive advantage, can make the competitors are difficult to imitate, make the enterprise keep lasting cost advantage, therefore, judge the effect of cost reduction not only a time node.

 

Erroneous zone7: cost reduction factors of conflicting, cross influence

Enterprises to reduce the cost, because of the lack of overall planning, advance planning, often results in conflicting ways to reduce the cost of different links.

They are trying to increase market share and benefit from economies of scale, has produced a variety of specifications of the products, the result actually increased management costs, reduces the scale effect.

They will plant in close to consumers to save transportation cost, however because of the distributed production production costs increase instead.

At the same time, because of the cost of the product differences tend to affect its ability to compete in the market sales, the enterprise may be of certain products or customer overpriced, price subsidies for other products or customers, inadvertently cross-subsidy tend to make the price of competing firms.

 

China is a manufacturing power, the subject of "made in China" natural prolongs.

At present, the high-end manufacturing get national policy tilt, relying on its own industrial base, to say the immense and growing fast.

And low-end manufacturing lack of technology, brand and market position, adrift in the competition, struggling, and low-end manufacturing is the main body of manufacturing in China, they in technology innovation, industrial upgrading under the premise of no big breakthrough, how to base on their own advantages, to avoid the short board, through effective resources integration, to break from the competition, and through the cost benign, win profits, so as to create opportunities for further development, is a common concern and solve the problem.


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