Ways to reduce costs - advice from professionals

The cost of production is an important economic indicator that reflects the activities of industrial enterprises. The cost of production expresses the costs of the enterprise, directly related to the production and sale of this product. In other words, the cost price reflects, in what the produced production to the enterprise manages. This indicator includes labor costs (wages) and the costs of past labor (the cost of raw materials, fuel, materials, other resources, depreciation of fixed assets).

A systematic reduction in the cost price frees up funds for the further development of production and for the improvement of the well-being of the working people. That is, it is an important source of profit growth.

Correct calculation of the cost price plays an important role, because the better the accounting is organized in the enterprise, the more highly used calculation methods, the easier it will be to evaluate the ways of cost reduction through analysis.

How to reduce the cost of production?

An important condition for reducing the cost is continuous technical progress. Complex automation of the production process, the introduction of new technology, the introduction of advanced materials, the improvement of the technologies used are effective ways to reduce costs.

Another major reserve for reducing costs is the expansion of co-operation and specialization. At a specialized enterprise with mass-flow production, the cost per unit of output will be significantly lower compared to the costs of enterprises that produce the same products, but in small batches. The development of specialization will require the organization of more rational cooperative ties.

Also, ways to reduce costs include increasing productivity. Due to increased productivity, the share of wages in the cost structure is reduced.

Great importance in the struggle for cost reduction is the observance of the economy at all stages of production. This makes it possible to reduce the costs of material resources, reduce management and production management costs, and eliminate losses from marriages and other non-production expenses. As is known, material costs have a significant share in the cost structure, so even a small reduction in the costs of raw materials and materials in the production of products gives the company as a whole a significant effect. Here it is necessary to begin with the choice of suppliers of materials. If materials are delivered by the cheapest type of transport, it will also reduce their cost for the enterprise. Preference should be given to cheaper materials, but not to the detriment of the quality of the final product.

Also, we should pay attention to the possibilities of improving the design of the product and production technology, the introduction of a reasonable standard of expenditure of material values.

These ways of reducing the cost are not the only ways. You can also try to reduce the cost of maintenance management, simplify the control apparatus. Carrying out of effective measures on mechanization of auxiliary and auxiliary works will allow to reduce number of workers of the enterprise and, accordingly, общезаводские expenses. Significant reserves to reduce costs are in reducing losses from marriage. Studying the causes of marriage, identifying the perpetrators will allow to implement measures to eliminate losses from marriage, reduce and use waste production in the most rational way . In general, the scale of use of ways to reduce costs depends on the features and capabilities of each particular enterprise.