Key Ways Manufacturers Can Improve Profitability

BY: CHERYL BURT

The goal of any manufacturer is simple—be successful. This can be measured in many ways (happiness, money, health), but in terms of running a business, profit is essential for survival. It’s possible to generate large sums of money in customer sales and still go bankrupt after paying employees and taking care of bills such as rent, electricity, gas and insurance. Fortunately, there are four simple steps that any manufacturer can take to help ensure that their company avoids money troubles.

Step One: Take Time to Understand Your Company
Manufacturers often produce goods on a large scale; therefore, it is necessary to fully understand the capacity of your company and what impacts it. Make it a priority to change your perspective. Spend some time in a different department to get insight from those who thoroughly understand your business and which goods might generate the greatest return on investment.

Step Two: Cut Production of Unprofitable Goods
If you’re breaking even on a product or service—or worse yet, losing money—it’s detrimental to the future of your business. While it can be a difficult decision to discontinue a product that your customers love, these choices are mandatory to keep your business afloat.

Before deciding on whether to start the production of a good, be sure to set a time limit on how long the product can be produced without making any profit. After your designated amount of time is over and you’re not happy with the profit, end production. The same rule can be applied to products that were profitable in the past, but have been steadily declining in recent months.

Step Three: Use Process Key Performance Indicators
Process KPIs are different from KPIs because they tell you what is happening in your business instead of telling you what has already happened. They’ll give you information about the success of a process and a chance to fix any problems before the process ends in failure. Being proactive is key to running a long-lasting, revenue-producing business and KPIs allow and encourage it.

Step Four: Welcome Change
It is vital to the success of your company to continuously adapt with the ever-changing world. Strategies that worked years ago may be outdated, or products that were once in high demand may have gone out of style. That’s why you must be open to new ideas that may benefit your business, even if they aren’t your own.

Taking the time to understand what your business needs to be profitable will keep you out of the red and in the loop! By using the steps above, you’ll increase the effectiveness of your company and watch your profits grow.


MEET OUR EXPERT

Cheryl Burt, Senior Business Solutions Manager
Cheryl Burt is a Senior Business Solutions Manager with the Michigan Manufacturing Technology Center (The Center). Cheryl works directly with manufacturers in Macomb County. She is a successful Account Manager with an extensive background in business development, operations, business strategy, sales and relationship building.

She has spent the majority of her career in sales of ISO 14001, ISO 9001:2000 and ISO/TS 16949 training and consulting. Cheryl also has been responsible for selling a broad range of quality solutions to help customers better customize manufacturing processes, enhance product flow and reduce operating costs.


Since 1991, the Michigan Manufacturing Technology Center has assisted Michigan’s small and medium-sized businesses to successfully compete and grow. Through personalized services designed to meet the needs of clients, we develop more effective business leaders, drive product and process innovation, promote company-wide operational excellence and foster creative strategies for business growth and greater profitability. Find us at www.the-center.org.