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Economic Downturn or Opportunity to Increase Profits?

by John Williams, PhD, P.E.

While economists and politicians are busy debating the state of the economy, manufacturers must tackle the challenge of ever-increasing competition in the world market. Their objectives are twofold:

• Increase revenues through effective sales and marketing efforts
• Produce better-quality products, at a faster rate, and at a lower cost

The knee-jerk reaction of many manufacturers, however, is to look for places to cut costs. But where?  Staff? Suppliers? Utilities? Overhead?  Advertising? Of course, any and all of these areas may present opportunities for “belt tightening.” But for those seeking strategies to help them prosper in tough economic times, one crucial strategy is often either overlooked or dismissed.

Be proactive, rather than simply reactive.

In this inflationary economy, raw material costs represent an increasingly larger percentage of the cost of goods sold. Successful manufacturers will be looking for cost reductions that provide both immediate and long-term results, with gains (profits) that will be realized year after year.

For example, EPS engineers recently worked with a well-established vehicle manufacturer to reduce that firm’s raw material usages while increasing the product quality. By assessing realistic load requirements and optimizing the existing designs, they helped this company achieve cost savings ranging from 12% to 48% per part. Annual cost savings exceeded $1.02 million, with a 5000% return on investment. It is also important to note that the client was already a “lean” manufacturer – but  with a fresh analysis and engineering design approach, the result was an even leaner and much more profitable operation.

So, when the age-old question of “can we afford to do this right now?” arises, the answer is simple: Can you afford not to?