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ID Challenge Report: Sustainably reducing cost-to-sale in manufacturing

Efficiency. It’s a top KPI for manufacturing businesses, where improving cost-to-sale margins is an ongoing target. Today, this runs alongside the requirement to manufacture more sustainably – industries have environmental regulations, reporting requirements and stakeholder demands to manage.

According to McKinsey, discrete manufacturing operations are leading the way in sustainable, efficient manufacturing processes. Those who are at the forefront of this revolution are those who have clear visibility over both their operations and their supply chains. They understand how various changes will impact the business, and they proactively look for areas where efficiency can reduce energy use, improve material use and lower wastage.

As McKinsey notes, this isn’t an easy option. Particularly so for manufacturing companies with long supply chains, multi-geographic locations or complex processes to manage.

So how can you reduce cost-to-sale in your manufacturing business, whilst also ensuring you meet sustainability goals?

Improving your cost-to-sale ratio

Profitability is the measure by which most people judge your business. Keeping your costs of materials, production processes, people and logistics as low as possible whilst maintaining the quality of your product and service is critical to maintaining and growing your profits.

You can assess your costs of manufacturing at the same time as analysing your business from a sustainability perspective. For sustainability issues, you start with sourcing materials and end with what happens to your product at the end of life.

For profitability efficiency, your starting point is the same, ending at the point you sell the product – or where your product reaches the end of any warranty or service period. Even then, if you are able to look at new income streams from recycling or reusing your product whilst also selling a new version to your customer, you can increase your profitability.

What don’t you know about your cost-to-sale ratio?

It’s often only when you have a project that requires you to look in depth at your manufacturing costs and processes that you discover you have gaps: areas where you don’t actually know what’s happening or how much it is costing you.

These are often the areas where you can make immediate improvements or adjustments, improving cost and process efficiencies. They might be quicker wins than you were expecting – but you need to be able to identify them in the first place.

Insights are the key

Whatever the reasons for analysing your manufacturing processes, you need to have accurate insights. And that means collecting the right data – and having it all in a single place. 

It also means understanding the impact that external influences can have on your business – everything from energy prices to currency fluctuations; materials costs to tax implications. 

Can you do that today? For example, can you easily access accurate data on:

  • Your production volume
  • Single-unit production costs
  • Overall equipment effectiveness
  • Capacity utilisation 
  • Logistics and delivery
  • Production downtime – and reasons
  • Inventory management
  • Materials purchase, storage, usage and waste
  • Inventory-to-cash cycle

These are just some of the many KPIs that manufacturing businesses need to be on top of if they want to improve sustainability and efficiency. 

Data and Insights for better business efficiency

You will already be collecting data across your business. But is that data giving you the valuable and actionable insights you need in order to transform your manufacturing either for sustainability or for better efficiency?

In a fast-changing environment, you need to have real-time visibility across your business – no matter how complex. This puts you in control, allowing you to spot gaps, make changes and plan for the future.

In particular, having a ‘single source of truth’ allows you to scenario plan faster and with greater confidence. You can inform better decision-making, and do it faster – giving you a competitive edge as well as a more profitable operation. 

To find out how we can help you with your cost-to-sale ratio, why not book a free discovery call today?

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