How companies around the world are reducing manufacturing costs

Reducing manufacturing costs is a common goal for many businesses, such as original equipment manufacturers (OEMs), especially in today’s competitive and dynamic global market.

Illustration showing robotic arms and engineers working the line

In this article, we explore some of the ways you and your organization can reduce manufacturing costs and improve profitability and TeamViewer’s role in that.

Identifying opportunities to reduce costs in manufacturing

Manufacturing costs can be divided into three main categories: direct labor, direct materials, and manufacturing overheads. Each of these can be optimized by applying various strategies and techniques.

Discover how to reduce manufacturing costs in the different parts of your business:

Direct labor costs

Direct labor costs are the wages and benefits paid to those employees engaged in the actual production process. It is important to pay fair and competitive wages to retain and motivate staff. So, as a responsible employer, you probably don’t want to review wages and hours with a view to cutting them. However, you could consider options to ensure you are getting the most from your employees; for example, by improving scheduling, optimizing deployment, and reducing idle time.

You can improve employee efficiency further by offering comprehensive training and support, including on-the-job learning. You can also support your employees to be more efficient and effective by introducing technology that simplifies tasks, such as inventory management and quality control, and facilitates feedback or support requests. All these measures can help optimize staff utilization, thereby increasing productivity without increasing costs.

Direct material costs

Direct material costs are the costs of raw materials, components, and supplies used in the production process. Of course, suppliers are often willing to offer discounts or preferential terms for bulk orders. However, buying substantial amounts of material in advance increases both storage and inventory costs, as well as the risk of spoilage or obsolescence. So instead, you can lower direct material costs by closely collaborating with your suppliers to focus on reducing material defects and streamlining the supply chain.

The process of reducing manufacturing costs starts at the factory gate. By introducing robust control systems in the warehouse, you can ensure materials and parts are inspected for quality and reliability when they first arrive. Checking components at an early stage avoids reworking and extra costs later on down the production line.

What’s more, you can explore opportunities to introduce JIT (Just-In-Time) or JIS (Just-in-Sequence) deliveries to reduce the costs of inventory and storage. However, such arrangements need a dependable, long-term supplier and precise forward planning. But remember, regular communication and exchange of data is essential to ensure the success of JIT and JIS deliveries.

Manufacturing overheads

Manufacturing overheads are the indirect costs of production that are not clearly related to labor or materials. These include rent, utilities, and maintenance. So what can be done to reduce this type of manufacturing cost?

One of the major costs centers for businesses in all sectors is energy costs. You can lower your business’ consumption of electricity and fossil fuels by installing energy-efficient equipment or investing in renewable energy solutions. These not only help lower your utility bills but also reduce your company’s carbon footprint. But you should also remember, solutions to lower energy costs represent a significant investment and could lead to disruption.

However, reducing the manufacturing costs caused by one type of overhead, maintenance, is relatively easy. We all know, maintenance is essential for keeping your equipment working well and in good condition. Introducing regular preventive maintenance means more equipment uptime and therefore less disruption to production schedules.

Reduce manufacturing costs with augmented reality

Industrial augmented reality (AR) solutions have many potential applications in the manufacturing sector, such as enhancing worker training, increasing operational efficiency, and reducing costs.

Here are six ways industrial AR solutions can help reduce costs in manufacturing:

AR solutions provide employees with real-time information and instructions, reducing costly mistakes and reworks.

AR solutions provide real-time feedback and visual guidance to workers, optimizing performance and accuracy.

AR solutions integrate data from sensors, machines, and other sources to enhance production processes and reduce waste.

AR solutions assist employees assembling complex components to identify defects and troubleshoot issues before they become costly problems.

AR solutions reduce labor costs by providing workers with immersive and interactive learning experiences, minimizing human error and enhancing quality control.

AR solutions accelerate equipment maintenance and repairs by providing real-time expert guidance, avoiding costly travel and increasing equipment availability.

How can TeamViewer Frontline reduce manufacturing costs?

TeamViewer Frontline is an industrial augmented reality platform whose solutions can help reduce manufacturing costs by improving the efficiency, quality, and speed of each stage of production.

So how can TeamViewer Frontline help you reduce production costs?

Frontline xMake is a make-by-vision AR solution providing step-by-step instructions and visual cues to the workers wearing smart glasses or mobile devices. Frontline xMake speeds up manufacturing and assembly processes and reduces errors and rework. Thanks to built-in quality assurance features, such as sophisticated cameras and sensors, each step on the assembly line can be checked and approved in real-time.

You can also improve training engagement and outcomes with Frontline xMake. Instead of going through uninspiring printed manuals, staff can undergo interactive training using augmented or mixed reality. As a result, training becomes an enriching, more hands-on experience using real objects or even a hologram duplicate.

As an added bonus, training using Frontline xMake can be completed anywhere at any time, not just in the classroom.

As an inspect-by-vision AR tool, Frontline xInspect simplifies inspections and reduces the time and cost of maintenance. Maintenance technicians can work hands-free with diagnostics, relevant documentation, and troubleshooting guides appearing automatically in their field of view.

Frontline xAssist is a see-what-I-see AR that streamlines technical support. When on site technicians can solve problems faster thanks to live advice from one or several remote experts via their smart glasses or mobile devices. As a result, operational downtimes are shorter, resources are utilized to the full, and travel expenses reduced.

By using these industrial AR solutions, the TeamViewers Frontline suite helps you digitalize and optimize work processes, resulting in lower costs, and higher quality.

AR-based inspection & maintenance

Airbus Helicopters takes digitalization to the next level

  • 100% data reliability, through zero manual input error
  • 40% faster gearbox inspection
  • 100% paperless

Frequently asked questions about reducing manufacturing costs

You can calculate total manufacturing costs by using the following formula:

Total manufacturing cost = direct labor + direct materials + manufacturing overheads

And by dividing the total manufacturing cost by the total number of items produced, you get the unit manufacturing cost.

Augmented reality technology reduces manufacturing costs by providing real-time information and guidance to employees, improving their efficiency, accuracy, and productivity. AR also reduces errors, risks, and costs associated with traditional processes.

Yes! Implementing AI, machine learning and other digital technologies such as TeamViewer Frontline reduces manufacturing costs in most sectors. A holistic approach to digitalization and Industry 4.0 involves connecting systems, machines, humans and data and sees impressive results. According to a recent McKinsey report, companies can achieve a reduction in machine time by 50%, a 30% increase in throughput and 30% improvement in labor productivity.

Reducing costs and maintaining quality are not mutually exclusive. Optimizing production processes with digital technologies such as augmented reality actually increases productivity while reducing defects, errors and waste. With platforms such as TeamViewer Frontline, companies leverage the data and analytics gathered to improve consistency in real time.

We’ve done this before. Now, let us do it for you.