The Easy-Cut Expenses Any Lean Manufacturing Company Should Know About

Part of working in the lean manufacturing world is understanding that there is always room to cut excess expenses. Unfortunately, at times it can be hard to decipher which expenses should go. The good news is that cutting unnecessary costs is simpler than you might think.

In an effort to clarify the lean manufacturing process, we’ve decided to form a list of 4 easy-cut expenses that every lean manufacturing company should consider.

Labor

Labor is a necessary expense that any factory manager needs to account for. However, it can also put a strain on profits if not managed correctly. Take a moment to evaluate your company’s labor force. Are your employees operating at their highest level of efficiency? If you’re not sure, you may want to consider a few options.The most obvious way to reduce labor costs is to reduce your factory’s hourly wage—though this will likely have an effect on the intrinsic motivation of your employees or your ability to retain talented people. On the other hand, a factory could reduce labor costs by studying factory processes and utilizing findings to increase the efficiency of experienced laborers. Though it is cheaper to bring unskilled labor onto a shop floor, a more efficient worker who is already experienced in your facility can provide a much stronger turn out than someone new who is being paid less. Consider offering specialized training for certain departments to illustrate how certain tasks can be performed more efficiently, minimizing wasted motion or unnecessary processing. It could bring you large savings in the long run.

Materials

Materials are another necessary expense that any production facility manager needs to account for. In many factories, up to 70% of costs are in the supply chain. As with labor expenses, there are certain considerations you should make to assure that your materials costs aren’t excessive. Think of what goes into material cost. Does a certain material you are using have more bells and whistles than it needs to? Don’t pay for them; Find a cheaper material that can uphold the same standards of quality, or consider changing the material all together. Consider ordering product in larger quantities. Units are typically cheaper when sold in bulk. Look at material movement costs as well. Does lack of careful scheduling cause expedited shipping of raw materials or products, thus driving up transport waste? In addition, employees should be trained on the best practices for producing the least amount of waste or scrap. Material saved is money in your pocket for future production.

Overhead

When thinking of factory overhead, you might instantly gravitate to larger costs like rent or a mortgage, but building costs are just one of many that can add up in overhead expenses. We’re going to ask you to think smaller: utility, supply, storage, handling, travel, supervisory, and administrative costs should all be included in these expenses as well. The easiest way to assure overhead expenses are being controlled is to set a budget and keep within that budget. Review your overhead expenses on a weekly, monthly, quarterly, and annual basis and try to cut back a few percent. If one particular overhead expense is overloading your budget, find out how you can reduce it. True diligence is the only way you will be able to keep your factory’s overhead costs inline.

Investment

Though it may seem counterintuitive, investing company capital into products or services that will help save money in the long term may be something you want to consider. New factory equipment or Enterprise Resource Planning (ERP) and Advanced Planning and Scheduling (APS) systems are just some of many solutions for companies looking to reduce cost and increase profit. They can particularly help in the area of leaning transactions – saving labor and time in the back office. If you would like to more information on Enterprise Resource Planning and Advanced Planning and Scheduling, please see here.

At the end of the day, the most important piece of successful lean manufacturing is being able to produce with less cost without sacrificing quality. For some, this involves innovation, investment, and calculated formulation; for others, this is a simple re-evaluation of current factory expenses. We hope this guide has made your ventures into lean manufacturing a bit clearer. Be sure to read our recent article on Lean Manufacturing Starter Tools to learn more about this cost-saving practice.

Lean Manufacturing in Action: Minimizing Waste with APS

See how Advanced Planning and Scheduling (APS) supports lean manufacturing by cutting waste in labor, materials, and overhead. In this video, PlanetTogether APS is used to create more efficient production schedules, reduce unnecessary motion and processing, and lower material and inventory waste—without sacrificing quality. It’s an ideal next step if you’re re-evaluating factory expenses and want to see how APS and ERP investments can help you produce at lower cost while supporting continuous improvement.

 

Cut the Right Costs—and Turn Lean into Higher Profit

In this article, you’ve seen four key areas where lean manufacturers can cut expenses:

• Labor – improving processes and training to get more output from experienced workers instead of just lowering wages.
• Materials – reducing scrap, transport waste, and over-spec’d inputs to bring supply-chain costs under control.
• Overhead – reviewing utilities, storage, handling, and administrative costs regularly to keep spending in check.
• Investment – putting capital into tools like ERP and Advanced Planning and Scheduling (APS) to save labor and time over the long term.

Our eBook, “Producing for Profit: Simple Steps for Squeezing More Profits from Your Production Resources”, shows how manufacturers use those same principles—especially better planning and scheduling—to turn lean thinking into measurable financial results. You’ll follow a manufacturer that moves away from spreadsheets and reactive decisions toward an integrated APS-driven approach that reduces waste, stabilizes schedules, and improves margins.

In this short eBook, you’ll learn how to:

• Use production planning and APS to reduce labor, material, and overhead waste without sacrificing quality
• Align schedules, inventory, and capacity so you’re not paying for rush orders, excess stock, or chronic overtime
• Replace manual, spreadsheet-based planning with optimized schedules that support continuous improvement
• Turn technology investments like ERP and APS into sustainable cost reductions and higher profitability

If you’re ready to go beyond one-time “easy cuts” and build a lean manufacturing system that consistently produces at lower cost, this eBook is your next step.