Hidden costs are often just as advertised: invisible or extremely difficult to detect. But with a proactive plan in place, operators can weed out inefficiencies that often fly under the radar.
Many in the industrial sector are operating on thin margins, making it imperative that they keep extraneous costs to an absolute minimum. As PwC reports, estimated mean revenue growth for industrial manufacturers is at a startlingly low 1.8% annually.
However, reducing costs isn’t always a simple task, especially when operational or budgetary inefficiencies are deeply rooted or not readily apparent. To cut through the fluff and identify the true cost centers, let’s run through five of the most common (and unseen) sources of inefficiency at industrial facilities, as well as how operators can begin to address them.
1. The Production-Facilities Gap
Oftentimes, managerial roles are too highly specialized and in turn isolated, creating unseen costs, according to Reliable Plant. For instance, if manufacturers look to maximize production volume, then warehouse managers may decide to invest in new space to accommodate the increased output. However, if the two parties simply communicate from the get-go, they’ll be able to collaboratively adjust production changeover strategies, rather than investing millions in new warehousing.
2. “Sharing the Load” Can Increase the Burden
At industrial facilities that operate over multiple sites, it’s common for each site to shoulder a portion of the burden for the most difficult, time-consuming, or costly processes. While this seems like an equitable solution on paper, it’s often more efficient to handicap one site, devoting its entire workforce to that one hard-to-produce item while diverting any excess resources to other sites.
3. No Eyes on the Ground
At the same time, too much of a top-down management style can make it hard to identify ground-level problems. For example, one study found that pharmaceutical manufacturers are wasting $50 billion annually on inefficient processes, largely due to the fact that lower-level workers have little power to make decisions. Granting autonomy to lower ranking employees who are more in tune with day-to-day operations can help to root out inefficiencies that upper management may have missed.
4. Unitemized, Uncharacterized, and Unknown
Many costs go unrecognized simply because they don’t appear on a balance sheet. The Fabricator notes than many facilities have redundant processes in place that are simply included in the blanket costs of production. Yet, these unitemized efficiencies can have a major impact on the operational bottom line. Generally, the costs of regular auditing and operational fixes are cheaper than long-term inefficiencies, especially when they’re unknown.
5. A Granular Problem
Lastly, many extraneous costs go unaddressed because companies already have a solution in place — yet the solution itself is fiscally inefficient. Dust, for example, is usually mitigated through regular grading and watering. Despite the approach’s popularity, however, watering is actually one of the least efficient ways to control dust.
By contrast, synthetic fluids — like those offered by Midwest Industrial Supply, Inc. — have proven far more effective over time, as their application reduces the frequency of grading, as well as the harmful impact of dust on workers, equipment, and the environment. In fact, by identifying the hidden costs of watering and adopting this more economical solution, one facility was actually able to recoup over a half-million dollars annually and produce a positive return on their investment.
In all of these cases, a reactive approach to maintenance and cost savings left companies in the dark about inefficiencies they could have easily mitigated. This shows that, while the up-front price tag of adopting a strategic maintenance program may seem unappealing, the long-term benefit of eliminating hidden costs is more than worth the investment.
(Image credit: stevepb/Pixabay)