Direct material costs
Direct material costs are the costs of raw materials, components, and supplies used in the production process. Of course, suppliers are often willing to offer discounts or preferential terms for bulk orders. However, buying substantial amounts of material in advance increases both storage and inventory costs, as well as the risk of spoilage or obsolescence. So instead, you can lower direct material costs by closely collaborating with your suppliers to focus on reducing material defects and streamlining the supply chain.
The process of reducing manufacturing costs starts at the factory gate. By introducing robust control systems in the warehouse, you can ensure materials and parts are inspected for quality and reliability when they first arrive. Checking components at an early stage avoids reworking and extra costs later on down the production line.
What’s more, you can explore opportunities to introduce JIT (Just-In-Time) or JIS (Just-in-Sequence) deliveries to reduce the costs of inventory and storage. However, such arrangements need a dependable, long-term supplier and precise forward planning. But remember, regular communication and exchange of data is essential to ensure the success of JIT and JIS deliveries.