The cost of production is an important economic indicator that reflects the activities of industrial enterprises. The cost of production expresses the costs of the enterprise related directly to the production and sale of these products. In other words, the cost reflects the cost of the products to the enterprise. This indicator includes labor costs (wages) and past labor costs (cost of raw materials, fuel, materials, other resources, depreciation of fixed assets).
Systematic cost reduction frees up funds for the further development of production and for improving the well-being of workers. That is, it is an important source of profit growth.
The correct calculation of cost plays an important role, because the better organized accounting at the enterprise, the more perfect calculation methods used, the easier it will be to evaluate ways to reduce costs through analysis.
How to reduce the cost of production?
An important condition for reducing costs is continuous technological progress. Integrated automation of the production process, the introduction of the latest technology, the introduction of advanced materials, the improvement of the technologies used are effective ways to reduce costs.
Another serious reserve to reduce costs is the expansion of cooperation and specialization. At a specialized enterprise with mass-flow production, costs per unit of production will be significantly lower compared to costs at enterprises that produce the same products, but in small batches. The development of specialization will require the organization of more rational cooperative ties.
Also ways to reduce costs include increasing productivity. By increasing productivity, the share of salaries in the cost structure is reduced.
Of great importance in the fight to reduce costs is compliance with the economy at all stages of production. This allows you to reduce the cost of material resources, reduce the costs of servicing management and production, eliminate losses from marriage and other non-production costs. As you know, material costs have a significant share in the cost structure, so even a small reduction in the cost of raw materials in the production of products gives the company as a whole a significant effect. Here you need to start by choosing material suppliers. If the materials will be delivered by the cheapest mode of transport, this will also reduce their cost to the enterprise. Cheaper materials should be preferred, but not to the detriment of the quality of the final product.
You should also pay attention to the possibility of improving the design of the product and production technology, the introduction of a reasonable rate of expenditure of material values.
These ways to reduce costs are not the only ones. You can also try to reduce management maintenance costs, simplify the management apparatus. Carrying out effective measures for the mechanization of auxiliary and auxiliary works will reduce the number of employees of the enterprise and, accordingly, plant costs. Significant reserves to reduce costs are in reducing losses from marriage. Studying the causes of marriage, identifying the culprits will make it possible to carry out measures to eliminate losses from marriage, reduce and make the most rational use of production waste. In general, the extent of the use of ways to reduce costs depends on the features and capabilities of each particular enterprise.