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Production costs - How to optimize them in the automotive industry? What are the supply chain cost savings ideas?

24 June 2020

Entrepreneurs in the automotive industry have to face many challenges. There are different ways to support production and optimize costs. Find a description of effective methods below.

The automotive industry is the industry of the future – the supply chain is particularly important

Europe is the home of many outstanding car brands. This industry has been developing in Europe from the very beginning – this is where the first self-propelled vehicle was built. Since then we have come a long way. Today, in order to enter the market, you have to know how it works and in which direction it is developing. Appropriate resource management, reducing production costs, and opening new distribution channels will certainly bear fruit in the future. The automotive industry is a constantly growing sector. In the future, transport may become even more important. It is an industry which is constantly reaching for unique solutions. Individuals in this industry do not hesitate to invest in and develop new technologies. Manufacturers must be ready for the high demands of the modern customer. 

How can supply chain cost be reduced?

In the automotive industry it is worth paying special attention to the supply chain. Optimization of supply chain costs in the automotive industry is one of the basic steps to improve the financial results of our company. Today, it is not only quality materials and efficient transport that make a new product successful. Supply chain cost analysis will show that we must first and foremost seek cooperation with professional partners who will help us optimise costs. And this can be achieved in various ways, for example by using affordable and efficient ways of manufacturing components, such as injection molding, or using reusable transport packaging. Cost optimization in the supply chain is a good start, but our company policy is also important.

How to reduce costs of production in the automotive sector? Lean Manufacturing

As regards the most effective ways to ensure the highest possible profit for the company, two are worth mentioning: reducing production costs and increasing sales revenue. Let us focus on the first issue. Currently, production costs include not only the purchase of materials but also their processing into the final product. This should also include the price of real estate, taxes (e.g. wage pressure), margins of subcontractors, and transport fees, as well as expenses related to development and innovation. Total costs are quite high, but there are some opportunities. There is no need to make cuts in all these sectors at once. Cost reductions can be introduced gradually by implementing further solutions. Everything depends on precise calculation. This method of reducing manufacturing costs is called Lean Manufacturing. It focuses on several fundamental principles – eliminating overproduction, reducing wait times, improving transportation systems and reducing over-processing. Most of these aspects need to be analyzed in relation to the infrastructure and management of the company. As far as the external factors are concerned, one should start from scratch, that is, logistics.

Reduction of production costs in the automotive sector – logistics is a major obstacle

Logistics specialists are not very friendly towards companies from the automotive sector. This is due to a number of factors, the most important of which are the requirements placed on transporters.

Cost reduction ideas in logistics management

In the automotive industry it is worth paying special attention to the supply chain.
In the automotive industry it is worth paying special attention to the supply chain.

In order to reduce manufacturing costs, two main principles of automotive logistics should be applied: just in time and just in sequence. These are quite harsh in practice, but they significantly improve efficiency in terms of optimizing production costs. Just in time refers to the time when a product should hit the production line – precisely at the moment when it is its turn. Therefore, the supplier must do everything to ensure that the materials arrive on time. Many random factors may occur during transport, but operators must be as precise as possible. These are enormous requirements, but they allow for a high degree of flexibility and a reduction of storage costs. The financial strategy also depends on the supply chain. So how does Lean Manufacturing work in practice?

Principles of cost optimization in the automotive sector: flexibility, trust, purchase control

In order to properly manage your spending, you need to be flexible and react to the current state of the market. To this end, we must have full control over the supply chain. Suppliers must be reliable, willing to cooperate, and punctual. It is even worth choosing those whose services are slightly more expensive than those of their competitors, as this will still bring results in the future. It is also important to remember some less popular methods of cost reduction, which are often environmentally friendly.

In the process of cost reduction, it is possible to reach the point where it is difficult to generate greater savings. In such a situation, technology comes to the rescue. Today we can save on everything, even on returnable packaging. As an experienced partner we specialise in the production of plastic parts with Lean Manufacturing as an important part of our brand policy. This manifests itself in environmentally friendly measures such as a high level of plant energy saving, efficiency in plant management (Industry 4.0), the use of recyclable materials, and time to market reduction, which allows for quick improvements in designs. Modern solutions not only optimize costs, but also preserve the resources of the entire planet, including energy, which is so important these days.

Impact of product quality on reducing manufacturing and supply chain costs

It is worth remembering that when you receive products according to designs whose workmanship quality is at the highest level, you do not have to incur additional costs, for example, related to the costs of complaints. It is worth choosing a partner who has the appropriate technology, and our company has the highest-quality equipment for the production of injected parts, and our infrastructure, created over many years, always meets the high requirements of the most important players in the market. When it comes to optimizing production costs in the automotive sector, our high-quality automotive parts always go hand in hand with savings, even if it’s not so obvious at the outset.

We are ready to take over orders for foams and injection molding components from our customers at any time. Our company is a reliable supplier and we are in constant contact with clients. 

Contact us to check how we can help you in manufacturing for automotive sector.

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