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Articles From Lumsden McCormick

How Managing Waste Byproducts Can Improve Profitability

Reining in waste can have a positive impact on manufacturers' profitability. The most profitable manufacturers strive to maximize product output while minimizing resource utilization, making strategic cost savings crucial. One effective cost-saving measure for manufacturers is waste reduction within their facilities. However, waste encompasses more than just the accumulation of scrap materials on shop floors.

Operating with greater efficiency is key. This involves implementing preventive maintenance practices, conducting regular physical inspections, and ensuring effective quality control. For instance, ongoing maintenance of equipment guarantees proper calibration and smooth operational performance. Additionally, adhering to maintenance schedules helps prevent breakdowns that hinder productivity and entail costly repairs.

Replacing equipment on a regular basis is another aspect of preventive maintenance. Recognize that machines have a finite lifespan, and investing in new equipment can bolster production speed, minimize defects, and reduce energy expenses.

In addition to preventive maintenance, there are other strategies to reduce waste, such as:

Managing inventory: Analyze historical sales data to estimate the precise amount of materials required for production within a defined period.

Conducting walkthroughs: Schedule monthly plant floor inspections to observe the production process. Identify potential issues, including idle time of machines and employees and assess the organization of workflows. Optimize material flow by establishing linear pathways and positioning raw materials closer to the production line, thereby reducing idle time and transport inefficiencies.

Updating workspaces: Ensure clear delineation of work areas through signage updates or floor line repainting, promoting greater employee efficiency. Attention should also be given to removing broken, dusty, or expired inventory items, as they tie up valuable working capital.

Identifying defect causes: Investigate the root causes of quality issues and take appropriate corrective action. This may involve additional training for employees or repair/replacement of faulty machinery.

Reusing or recycling when possible: Explore opportunities for recycling or reusing materials within operations. For instance, rinse water could be reused in cooling systems, while metal scrap can be melted and returned to the raw material supply chain or sold for recycling purposes rather than being discarded as waste.

Tracking waste: An essential practice for manufacturers to maintain efficiency and sustainability in their operations. Start by establishing a dedicated team that includes representatives from all levels of the company to collect and analyze waste-related data and set waste-reduction goals. The team should continuously monitor the progress and provide regular updates to employees. Offering monetary incentives or noncash awards can further motivate employees to contribute towards these goals.

Conducting a professional waste audit: A waste audit can be beneficial for identifying waste streams and implementing effective waste reduction strategies. It may be worth considering hiring an auditor, who can assess your waste management processes and provide valuable guidance. Conducting the audit after your year-end inventory count allows for better organization and identification of areas with potential waste.

Excess scrap not only poses safety concerns but also leads to increased cleanup costs and reduced profit margins. Therefore, manufacturers should seek new perspectives and innovative approaches to waste reduction in order to enhance their overall productivity and profitability.

By implementing these educational strategies, manufacturers can cultivate a culture of waste reduction, thereby enhancing their profitability and sustainability.  Contact our manufacturing team for ways we can assist you.

How Managing Waste Byproducts Can Improve Profitability

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Jon leads audits, reviews, compilations, tax, and consulting services for manufacturers, contractors, and other commercial business entities. He serves as the audit practice leader for the Firm's manufacturing and construction niches and manages the Firm’s pre-qualification to perform third-party reviews of tax credit applications for the Film Industry according to agreed-upon procedures established and published by Empire State Development (ESD). In addition, Jon serves a variety of exempt organizations. 

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