Like the rest of the world, today’s machine shops are looking for ways to control costs. But with inflation increasing and prices soaring, the effort can seem impossible.
It’s time to stop, think, plan, and act! This simple strategy will help you regain control over your costs while enhancing manufacturing efficiency and boosting your team’s morale.
Stop, Think, Plan, and Act
Figuring out how to run a machine shop is no small task, but learning to control your costs can be much more straightforward. Here’s the method I’ve employed over and over again throughout my many years in the manufacturing industry.
STOP. Before you spend (or slash a budget item), stop and take a breath. If you’re fixated on this or that as the source of your money management woes, you can easily walk right past streams of money flooding out your door and not even see the truth of what’s happening.
THINK. Where does your money go? And not just your direct manufacturing costs but all of your company’s expenses? It’s a common misconception that manufacturing efficiency is the only kind of efficiency that matters, but today’s machine shops can find many ways to cut costs.
PLAN. Once you know where every penny is going, you can identify areas of improvement. Where do you want to save? Where are you most likely to save? What costs are unavoidable? What costs help your company enhance its efficiencies?
ACT. Finally, you have to take action. Simply knowing your costs won’t make them any lower. You must take the steps to implement change—steps that can be time-consuming on the front end or even a little bit scary.
Take Action to Control Your Costs
Here’s how modern CNC machine shops can leverage the stop, think, plan, and act strategy to control costs.
Lean into your vendor relationships
Controlling costs isn’t always as simple as switching to a cheaper supplier. In fact, longstanding vendor relationships can work in your financial favor because neither of you truly wants to lose the other.
When you’ve been purchasing from a vendor for a long time, there’s no reason you can’t reach out and say, “We’ve been buying from you for several years, but we need to cut some costs. Before we start shopping around, are there any pricing improvements you can offer our shop?”
No one is going to contact you to offer an unprompted discount, but you may be able to secure a better price simply by asking.
Evaluate your workforce’s needs
One of the first things you discover when learning how to run a machine shop is the high cost of skilled labor. Talented manufacturers don’t come cheap—nor should they! But in today’s fiercely competitive jobs market, the best manufacturing professionals can command top salaries and benefits with little wiggle room for you, the employer.
One NTMA member shop pivoted to a four-day work week with 10-hour shifts instead of the standard five-day work week with eight-hour shifts. The new three-day weekend delivered several competitive advantages:
- Shop employees do the same amount of work but save time and money commuting—the equivalent of a pay increase that doesn’t require the company to cut a check.
- The new schedule has dramatically improved morale! The entire team, from interns to managers, loves the increased flexibility, and they’ve proven to be more productive with a three-day weekend to look forward to.
- It’s less costly to keep the shop open longer across four weekdays than to open the shop for a full fifth day. The energy savings may not seem like much at the start, but it quickly adds up!
Employee churn is incredibly costly, so it’s almost always best to keep the team you have. Paying your employees more isn’t the only way to incentivize them to stick around. Ask them what would make their work experience better, and you may be surprised at the simple solutions you can implement at no cost to your business.
Get focused on shop-wide cost efficiency
In manufacturing, the shop floor is often the first place we look to save money. We pressure our machinists to work faster and faster as if controlling our costs rests solely in their hands.
In most cases, however, a machinist has very little control over your shop’s manufacturing efficiency. A skilled, experienced machinist who’s already using the equipment to its fullest isn’t going to magically discover a way to make a three-hour part in two hours.
Instead, start looking at the less visible costs hidden throughout your company, such as:
- Administrative supplies
- Dues and subscriptions
- Packing materials
- Third-party services
- MRO: maintenance, repair, and operations
Don’t overlook discount programs
As NTMA president, I’m consistently shocked by the number of people who don’t take advantage of the incredible discount programs we offer!
NTMA Affinity Partners provide discounted service solutions for human resources, accounting, payroll, legal guidance, employee benefits, ancillary trade memberships, and more. Today’s machine shops can also find Industry Partner savings on raw materials, certifications and credentials, automation solutions, and beyond. And don’t forget NTMA’s workforce training initiatives, all available at members-only rates!
Also, take the time to seek out localized discount possibilities through your NTMA Chapter and other area business associations. Businesses can often find special savings on cell phone plans, janitorial services, and even utility bills.
Plan during more prosperous times
When the economy is tight, we’re naturally inclined to watch every penny. But the best way to mitigate the effects of inflation and recession is to remain cost-conscious during times of prosperity.
I think of it like going to the lake to water ski after a rainy season. The water is high, and boating is safe. But after a season of drought, the water goes down, revealing old trees and dangerous rocks. These risks lurked beneath the surface all along; we simply couldn’t see them before.
Those obstacles represent the “obvious” cost savings that we lose sight of when we’re making plenty of money. But if we wait until the water—our revenue—is low, it may be too late.
The time to save is when we don’t need to save. When business is booming, that’s when you should:
- Look for new, better-aligned customers
- Let go of difficult, poorly matched customers
- Invest in productivity-boosting equipment and technology
- Step away from old or irrelevant processes that no longer serve you
- Prioritize training so your team’s capabilities are optimally diversified
- Integrate marketing practices that keep clients coming in
Are You Ready to Take Action?
If you’re serious about cost control, don’t wait to take action! Whether you’re in your first or 30th year of business, there are always savings solutions at your fingertips.
Get started on the insights we’ve shared here, or Connect with your NTMA network to learn how to run a machine shop without breaking the bank.
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