As the year draws to a close, manufacturers are thinking ahead toward next year's budget. With so many factors to be considered after an especially eventful year, the budgeting process is poised to be a tough one.
Luckily, there are many ways to plan ahead. Here are five tips manufacturers will need when they plan their budgets in 2022.
1. Buy in bulk
When you order your materials in bulk quantities, you end up saving big in the end. Bulk-buying effectively reduces the cost per unit of material purchased.
In other words, you get more for your money up front when you buy in large quantities versus small quantities over time. Plus, you'll stay stocked on the necessary materials and products that keep your manufacturing operation running. With plenty of units on hand, you'll never run into a costly shortage.
Chron recommends not buying anything perishable in bulk, however. If you don't exhaust your inventory of perishable goods on time, those resources will go to waste.
2. Perform a thorough assessment of your facility
If you don't know where your problem originates, you don't know how to solve it, either. That's why assessing your operation from top to bottom is vital to planning an effective budget.
Self-auditing means digging deep and reflecting on every process in your organization. In doing so, you'll identify areas of improvement or inefficiency. When it comes time to hammer out the budget, you'll know exactly what areas are in need of a larger allocation of funds and which areas are putting them to waste.
3. Out with the old, in with the new (technology)
Many manufacturers are stuck in their ways. Their budgets, in turn, are suffering the consequences. Investing in new technologies can not only streamline productivity; it can also help balance the budget.
Automation, according to McKinsey, can translate into a major boost in efficiency. When they studied the impact of automation across multiple industries, they found that companies who automated 50-70% of their tasks most often had ROIs in triple-digit percentages.
Although the up-front cost of automation technology — which is steadily decreasing — may scare away manufacturers, the long-term financial benefits are abundant.
4. A greener future is a greener pocket
One of the most costly factors in manufacturing is energy consumption. Investing in a greener approach across the board, however, will mitigate that costly expenditure. There are many ways manufacturers can reduce energy consumption quickly.
For example, replacing old lighting fixtures with energy-efficient lighting, or installing solar energy panels on the facility can reduce overhead cost. Smart technologies, like IoT sensors, can detect rooms that aren't in use. They'll automatically turn off lights and HVAC systems in these rooms to cut down on energy use.
These simple investments are cheap, sustainable budgetary solutions. By going green across the factory, manufacturers can go green in their budgets, as well.
5. Use an inventory management system
One effective and cheap way to take control of your manufacturing budget is to implement an inventory management system. As a software solution, a proper inventory system will help managers optimize their storage space and never lose track of product.
This is especially important for manufacturers who buy material in bulk. With so many goods on hand, it's vital to locate, distribute and use them as quickly as possible. You'll never experience a costly stockout when you have complete real-time visibility into your inventory.