The industries are having options to reduce the cost of manufacturing, transportation, administration overheads and marketing promotion expenses without losing share in the market thereby increasing the profitability of the organizations. The standards has to be prescribed and directed to be followed at all levels. the costs can be reviewed and analyzed very frequently with the help of in dependent consultants.
A). Manufacturing costs: the costs include cost of raw materials, transportation, labour charges, shortages, indirect taxes, power, fuel, etc.,
Raw materials costs : which can be reduced by
Entering into supply agreements with raw materials suppliers for quantity, quality , price and period wise to avoid fluctuations in the availability and prices of raw materials.
Transportation costs: can be reduced by bulk purchases and time bound planning of quantity and long term agreements with transport operators, availability of knowledge and reliability of service providers.
Frequent cost analysis by independent organizations.
Labour charges : can be reduced by bulk and
Planned production of finished products, incentives in addition to regular remunerations with the help of longer period agreements,
Shortages : reasons for shortages are defective quality of purchases, long storages, thefts, more scraps, etc. Which can be avoided by entering into agreement for supply of raw materials as by products of other organizations and time bound planning schedules.
Indirect taxes : which can be reduced by claiming the deductions for taxes paid while purchasing the raw materials, and receiving the services from suppliers.
Power : the most important and shortage product is power which has to be used more productively some times which cannot be purchased without higher price or even with higher price. The only alternative is to maxmise the productivity with available power supply. The requirement can be bifurcated for manufacturing activity and non-manufacturing activity. The required power for non- manufacturing activity can be purchased for shorter periods with alternative power suppliers whereas the manufacturing requirement has to be uninterrupted and low cost only to reduce the cost of manufacturing.
Fuel : the costs are invariable and the activity cannot be carried without fuel though the cost may be less. It be kept in mind to have uninterrupted supply of fuel and abundant availability without possibility of any risk of shortage or non-availability while manufacturing activity is being carried on.
