Warehouse manager with laptop entering inventory data to database

Understanding How Waste Impacts Your Bottom Line


The goal of profitable manufacturers is to make as many products with as few resources as possible. With the economy continuing its uncertain path, getting ahead of cost savings is important. One way for manufacturers to save is to rein in waste at their facilities. But waste is much more than just scrap materials that pile up on shop floors. In fact, efficient production is the key to minimizing waste. Let’s examine how it works.

Operating More Efficiently

Preventive maintenance, routine physical inspections and effective quality control are the keys to operational efficiency. For example, do you conduct ongoing maintenance on equipment? Doing so can ensure that each machine is properly calibrated and running smoothly. Maintenance schedules can prevent unexpected breakdowns and leaks that drain electricity, gas, oil, coolants and so on. Another part of preventive maintenance is replacing equipment on a regular basis. No machine lasts forever. New equipment can help speed up production, minimize defects and lower energy costs.

Finding Solutions

Efficient production starts with waste reduction efforts. Besides preventive maintenance, other ways to help reduce waste include:

Managing Inventory. Having the right amount of inventory can help reduce waste through risk of loss, decay and damage. You should order only the materials needed for production for a specific period. This will require you to review past years’ sales data to estimate how much you need to produce. Now is the time to stop manufacturing less profitable products.

Scheduling Walkthroughs. On the first workday of the month, get into the habit of walking the plant floor and pausing to observe the production process. Look for such issues as how much time machines and employees sit idle and whether workflow seems to be organized. Examine the flow of materials. Revising the flow to be more linear and moving raw materials closer to the production line are simple ways to minimize idle time and transport.

Updating Workspaces. Pay attention to whether locations are clearly delineated. You may occasionally need to update signage or repaint lines on the floor to help employees function more efficiently. Likewise, look for broken, dusty or expired inventory items. Slow-moving inventory is a waste of working capital.

Determining Defect Causes. Always look for the underlying cause of quality issues and fix it. For example, link defects to a specific employee (who may simply need better training) or a machine (that may need to be repaired or replaced).

Recycling When Possible. Consider recycling opportunities. To illustrate, you may reuse rinse water in the cooling system. Or metal scrap can be melted and returned to raw materials — or sold to a recycling yard — rather than thrown in the trash.

Tracking Waste. Most manufacturers already track energy and water use at their facilities. Tracking waste isn’t so different. Start by creating a team — include representatives from all levels of your company — that gathers, analyzes and implements waste-reduction goals. The team then monitors the waste-reduction progress and reports back to employees. You can promote the goals to employees, even offering monetary incentives or noncash awards.

Conducting a Professional Waste Audit. Every manufacturer needs quality inspections to detect waste and prevent defects from recurring. It may make sense to hire a professional to conduct a waste audit. This person can help review your waste streams and provide guidance on ways to reduce waste. Consider conducting the audit just after your yearend inventory count: You’ll have your inventory organized and can see where you may have waste.

Time for a Fresh Start

Excess scrap can lead to safety issues, cleanup costs and diminished profit margins. However, waste extends beyond trash in a manufacturing context. Now may be the time to look for fresh perspectives on waste reduction and ways to boost your bottom line. Contact us or your CPA to review your manufacturing processes and schedule a professional waste audit if necessary.