Manufacturers should focus on frugality, cost tracking, inventory tracking and sales monitoring.
For the past several months, manufacturing has been at a virtual standstill, teetering on the verge of growth or stagnation. Manufacturers should focus on these four areas to keep their businesses running strong through fat and lean times:
- Cost tracking
- Inventory tracking
- Sales monitoring.
Let’s discuss each of these in detail.
It’s easy to say you should keep costs down, but it’s another matter entirely to make this happen. An example of a manufacturer that puts a major focus on frugality is Nutty Guys, a Salt Lake City, Utah-based manufacturer that produces and distributes more than 100 tons of dried fruit, nuts and candy each month.
In order to keep costs down, Nutty Guys constantly researches raw material pricing from multiple suppliers, manufactures in mass production, keeps equipment well maintained, minimizes the number of slow-moving products, and avoids tactics that don’t add value to their customers.
Nutty Guys has found creative ways to get their hands on an impressive array of manufacturing equipment at great prices. This allows them to be competitive in pricing and pass those savings along to their customers. Nutty Guys is more interested in using their facilities to manufacture high quality, fresh products for their customers. Rarely do products stay in the warehouse for more than a week or two.
By combining quick inventory turnover and thousands of square feet of refrigerated pallet racks and warehouse space, Nutty Guys prevents product from going bad and saves money.
By totaling all the costs of labor, parts, equipment and other things that go into finished products, you can set appropriate prices for your customers that will be competitive and offer a healthy profit. This is one area where it’s definitely not enough to guess because that could lead to serious financial consequences.
As you monitor costs, you can spot areas for improvement. For example, if you’re spending too much on labor, you may want to find tools to help you automate more processes and reduce your workforce. If more material is being put into a certain product than necessary, you can see if that material is getting lost, damaged or something else, and stop it.
There are many other ways that cost tracking helps. The point is that the more information you have, the better job you can do running your business.
It’s not always easy to keep track of your inventory, especially if you’re growing rapidly. Which products need to be reordered? Which ones are on their way? How many do you have on hand? These and many other important details are almost impossible to tell if you use an inadequate inventory tracking system.
There are many inventory tracking solutions that are available for different business types and sizes. You can find one that can fit in your budget and have a lot of helpful features, like automatic work orders and bills of materials, multiple location tracking, warehouse management and more.
You should monitor sales trends so you’re not caught by surprise when demand shifts occur. Products have lifecycles and seasonality that you need to be aware of. By paying close attention to these trends, you’ll be able to plan how much inventory to keep in stock at different times, and which items are in the highest demand at different locations. All of this leads to higher sales and lower costs.
The Bottom Line
By keeping a lid on costs, setting appropriate prices, managing inventory prudently and analyzing sales trends, you will have a healthier business. No matter what the future brings, you can make it through and gain a competitive advantage by keeping everything in perspective.
Malcolm Felt, inventory solutions specialist, Fishbowl
Malcolm Felt, inventory solutions specialist with Fishbowl, is a serial entrepreneur who has implemented inventory management processes for divisions of small businesses to publicly traded companies.