By Ron Ketterling – President

how-not-to-lower-manufacturing-costsOver the past month, we have discussed the most effective ways of reducing manufacturing costs. The opposite end of the spectrum, however, is just as important. Knowing how to not lower costs will save you time, effort and significant amounts of frustration. The following tips offer insight into the list of Don’ts you need to be aware of when attempting to lower costs.

  • Don’t try to remove cost after the product is designed. Cost is designed into the product, thus making it very difficult to remove later in the process. Attempting to reduce the cost after the product has been designed often leads to more costly changes and problems.
  • Don’t use low-bidding. Low-bidding, or choosing cheap parts, is not the answer to lowering total costs. It not only fails to achieve real cost reduction by lowering only one category of cost, but it also raises many less obvious costs. In addition to raising some unforeseen costs, low-bidding compromises essential goals of manufacturing, such as quality of product, delivery and contributions from partners and vendors eager to be a part of the manufacturing process.
  • Don’t use off-shore manufacturing. Off-shore manufacturing, however promising it may seem, does not result in a net cost savings. Hidden overheadcosts cancel out the potential savings, and the concept itself goes against 6 of the 8 cost reduction strategies (presented in March’s article series) due to the following reasons:
    • Off-shore manufacturing separates manufacturing from engineering, thwarting Concurrent Engineering and compromising 80% of the cost determined by design. The transfer, support and issues related to the delivery and quality of remote manufacturing also absorbs many resources in engineering, manufacturing, and purchasing that could have been used to develop low-cost products and reduce overall costs.
    • Off-shore manufacturing causes an increase in delivery time, making it hard to pull parts just-in-time and making build-to-order nearly impossible.
    • Lean Production methods are not carried out in off-shore manufacturing since parts are often batched for shipping.
    • Off-shore manufacturing removes production from the control of the OEM manufacturer.
  • Don’t take prototypes into production without commercialization. With the pressure to get the product drawn up and into production as soon as the prototype works, many companies overlook commercialization. Unrefined products that have not been designed for manufacturing could have many problems with product launches, quality assurance, consistent functionality and higher production costs than projected.
  • Don’t try to save cost with unethical business practices. Don’t skimp on quality when buying parts and designing products. It is not only unethical to sell second-rate and unsafe products, but you are also damaging the name of your company when you do it. Also, don’t lay off employees in order to off-shore their jobs. This betrays loyal workers and, ultimately, hurts the people in the surrounding community. Make it your utmost importance to operate according to the highest ethical business standards and policies.

As you can see, there are many methods to avoid when lowering costs. By keeping the overall quality of your product in mind when trying to lower costs, you will make more effective decisions for both your company and your clients. For more information on effectively reducing costs, see our introduction article to “Effective Ways to Reduce Manufacturing Costs”.