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Increase profits in your manufacturing company
November 11, 2014
Are you a smaller manufacturing company trying to increase profits? If so, let me start by saying knowledge is power!
If someone were to ask you what your profit margins are where would you start looking? If you’re like many, you’re probably thinking about reaching for your last month’s financial statements. Worse, you may be looking for last quarter’s or even last years. Now if you’re looking to borrow money from the bank, or maybe even doing some high level strategy meetings within your operation, then this isn’t so bad. If you really want to boost your bottom line though, you’re too late, you need to be looking at costs far earlier than this.
PBS Manufacturing can help you to easily develop your products within the system and provide you with a more complete cost picture. This includes materials, outside processing costs, labor and even overhead or burden costs. That means you know what to expect before you ever produce or sell a product. Is this perfect? Probably not the first time you produce the product but it is far closer than many companies come initially.
Why is this so different? So often companies look at their financial statements at the end of an accounting period, and see they made money. They can clearly tell you how much money they made for the period, which is great, but when asked most couldn’t tell you which products are more profitable than others. They target an overall profit margin and as long as that’s what they are seeing on the bottom line, then they are satisfied that they are performing well as a company.
The problem with this approach is too often, you will have a handful of products that are outperforming others. In other words, their margins are much higher than assumed so they hide the flaws of others. In some cases, companies are selling products for little to no profit. In extreme cases, they may even have products that they are selling at a loss and have no idea because this is hidden by those products performing better than expected. That’s a result of seeing your numbers too late in the process, more specifically, a lack of visibility.
By simply adjusting the selling price on some or all underperforming items, you can immediately impact your bottom line. You may also find better ways to produce some of the underperforming products, such as outsourcing an operation you aren’t equipped to do efficiently in-house, or maybe by investing in newer, more efficient equipment to speed up a process dramatically, so you can reduce the cost of manufacturing an underperforming product. In extreme cases, you may even opt to drop one or more products from your offerings if they are costing you money to produce.
The problem is if you don’t know, how can you possibly adjust? Again I say knowledge is power. PBS Manufacturing can help you develop that knowledge quickly and easily, allowing you to start adding to your bottom line in the short term, while taking advantage of other great time and money saving benefits in the long term.