When rolling out new products, many manufacturers find themselves struggling to keep down overhead costs, which can directly affect profit, market competitiveness, and overall product success. To ensure optimal efficiency, managers across all industries are working hard to curb the high costs of manufacturing overhead. Customers know what they are paying for products however they don't know what they are buying and at what cost. With AFI, you get the transparency you deserve.
Overhead Costs in American Manufacturing
In today’s manufacturing world, production managers have the most immediate impact in cutting overhead costs. U.S. industry overhead accounts for an average of 35% of overall production costs, and in some cases, the burden rates can be as high as 100%, 200%, or even 1000%.
The electronics and machinery industries have an especially difficult challenge; the automated systems in these facilities require high levels of support and maintenance, resulting in additional overhead — often at a differential of 70% to 75% of value added.
Why Are Overhead Costs Rising?
Not all vending and inventory management programs are created equal. Oftentimes, inventory isn’t adequately researched or programmed, leading to impulse buying. Customers end up paying premium rates for parts and components without even realizing what they’re spending. For example, a single trim auto assembly piece with an actual cost of $5 could carry as much as a 5000% premium depending on the retailer.
The dangers of impulse buying only reveal themselves when it’s too late: after overhead costs have already been affected.
Tips to Reduce Overhead and Avoid Impulse Buys
With a little extra research, strategic inventory management can cut overhead costs significantly. By researching and verifying part numbers, for example, it’s possible to gauge supplier rates. Additionally:
- Altering product designs and vendor specifications for efficiency can help cut down part counts.
- Direct delivery to the manufacturing floor can eliminate part inventory needs.
- Programs such as Vendor Managed Inventory (VMI) allow you to order what you need, when you need it, and in precise amounts.
Inventory Management Solutions from AFI
Managing parts and their resulting overhead costs can be extremely challenging; successful manufacturers rely on strong vendor relationships and effective inventory management to reliably keep down costs.
Is your vending supplier taking up excess valuable space to display unused product? Here at AFI, we’ve developed a proprietary vendor managed inventory solution to help companies keep down overhead costs, save square footage in facilities, while efficiently managing their inventory. Our new Automated Vending Manager (AVM) system allows for the following cost- and time-saving benefits:
- Streamlined purchasing
- Detailed reporting of usage and spending
- Point-of-use dispensing system
- Reduced inventory consumption by 20% or more
- 24/7 secure access without the need for additional staff
- First In First Out - Add inventory from the back
We’ve also introduced inventory locker units, which feature:
- Custom configuration options
- Easy PIN or card-swipe login
- Wi-Fi or cellular network connectivity
- Dedicated market-tested controller
- Low-stock alerts via email or text
- Proprietary software
- Plug and play design
Combining these locker units with your AVM will ensure reliable, efficient inventory management while keeping overhead costs to a minimum.
To learn more about what it takes to keep your supply chain operating with peak efficiency, check out our new eBook detailing AFI’s signature Vendor Managed Inventory program.