How to Reduce Production Cost in Manufacturing

automated warehouse in china

Source: Unique Vision/

There are so many expenses that go into running a manufacturing warehouse. From the location of your facility to the cost of your shipping and handling materials, there’s almost always a way to reduce your operating expenses. However, some of these changes are easier to implement than others.

We’ll talk about some of the largest factors that will determine the cost of production, as well as smaller changes that can make a big difference over the long-term. 

Location, Location, Location

A recent study shows just how much these costs can vary across the U.S. Researchers calculated the total cost of operating a hypothetical 350,000 square foot warehouse in 78 different U.S. cities, and the results were surprising. 

Ordering Cheap Wire Baskets in Bulk Saves You Money!

Operating such a facility in New York would cost around $24,456,430 per year, based on the latest estimates for power, fuel, labor, shipping and storage. Compare that to what it would cost to run the same facility in other cities. In Denver, the price goes down to $16,283,237 per year, while Little Rock, AR comes with a price tag of just $12,380,216 per year.

If you really want to lower your production expenses, consider relocating to a city with a lower cost of living. 

Technology and Automation

Implementing automation and more advanced manufacturing strategies will also reduce your operational expenses, but this usually requires a steep investment. Machines can come in handy in the warehouse in all sorts of ways, completing tedious, mundane tasks in a matter of seconds when it would take a human being much longer. 

You wouldn’t have to spend as much on labor, but these machines can easily cost tens of thousands of dollars, making this strategy difficult to implement, especially for smaller businesses. 

warehouse manager reviewing inventory

Source: urbans/

Keep Inventory Visible 

If you can’t uproot your entire facility or replace your workers with a robot, there are other ways to reduce your costs. Picking and stocking can eat up a lot of time throughout the day. Proper labeling and organization are key to helping employees find what they need on the shelf, but your workers can easily get lost or confused when comparing SKUs from thousands of different products.

Plastic Pallets Are Affordable and Long-Lasting

To avoid these delays, store your inventory in wire baskets and open containers to keep these items visible. Your workers will be able to recognize the product inside and retrieve it in a matter of seconds without second-guessing themselves along the way. Buy cheap wire baskets in bulk to simplify the layout of your facility. It’s the fastest way to pick and stock individual items, outside of installing a robot. 

Utilize Reusable Packaging

Disposable packaging can be bad for business in more ways than one. In addition to hurting the environment, throwing away or recycling all this excess waste can be time-consuming, especially when your workers need to get orders ready for shipment. You may even have to hire a full-time janitor or recycling person just to keep up with the number of packages coming in and out the door. Plastic wrap and cardboard boxes can also lead to needless clutter. Tools and supplies can easily go missing when there’s so much trash on the floor. Wooden pallets can also be a hazard to your employees. 

Switch to reusable containers and supplies to keep your employees on track. You won’t have to keep reordering more supplies. Just rinse off incoming pallets and containers before putting them back into the supply chain. 

That’s true of wooden pallets as well. Debris, wood chips and dust can affect the air quality in your facility. It can also increase the rate of trips and falls. Use plastic pallets so your team can spend more time fulfilling orders and less time sweeping the floor.

factory producing composite slabs

Source: Vadim Po/

Stay Organized 

We don’t usually associate tidiness with cost, but there’s a clear relationship between the two. Mislabeled containers, dirty floors and misplaced items can all decrease efficiency on the floor. Make sure your team puts everything back where it belongs before heading home at the end of the day. Your workers won’t have to spend as much time tracking down lost items or avoiding miscellaneous debris. Learn how to organize a warehouse the right way to keep your costs as low as possible. 

Keep these tips in mind when comparing different strategies for manufacturing. It’s possible to improve efficiency and reduce your costs at the same time if you adopt the right approach.