7 success factors to reduce your costs in manufacturing and logistics

Cost transparency is vital for any cost reduction initiative. If you want to identify cost reduction potential, you must have a clear overview of your actual expenses. A well-structured database draws attention to the right key aspects and helps you define the biggest cost drivers per area. Make sure that your database comprises all costs of your processes in manufacturing and intralogistics.

Any cost-cutting initiative must center on a defined cost target. These targets depend on the reasons that make the initiative necessary in the first place, such as maintaining competitiveness or increasing the profit margin in a specific product family. But target orientation does not stop with the definition of your goals: the cost reduction target can only be attained if everyone involved keeps the target in mind at all times and all people work together to achieve it.

To make real cost savings, associates from all hierarchies must be informed from the start and motivated to participate. The success of the initiative largely depends on consistent and committed leadership – including clear targets, providing the necessary resources, and systematically demanding results across all hierarchical levels. Operational associates on the other hand must be creative and dedicated to do their part in implementing measures.

All costs that arise on the shop floor can only be reduced on the shop floor. Evaluating cost optimization potentials in real operation is the best way to go about it – which is why on-site visits are crucial to reveal cost-saving potentials and to bring in the perspective of directly affected operational staff.

The pareto principle also applies to your cost cutting initiatives: for most intents and purposes, 20% of effort are enough to achieve 80% of output. Anyone concentrating on specific measures that have a major effect on costs can come closer to their cost target with very little effort. Keep this in mind for the derivation of measures. Prioritize those ideas that are expected to produce high cost savings with low investments and efforts.

Prioritizing measures that require little effort does not mean putting little effort into their subsequent implementation. On the contrary: once started, cost-cutting measures should be monitored consistently. A comprehensive tracking and reporting structure will help. Resources for longer-term projects, as well as continuous performance reviews are also necessary. If there are indications that the overall cost reduction target will not be attained, additional workshops and measures can be introduced in good time.

Keep your team as diverse as possible: apart from decision-makers and directly affected associates from the focus areas, it should also include process experts and colleagues from other areas. This makes it possible to integrate different perspectives and a broad range of knowledge in the process – and achieve sustainable results quickly.