Don’t overlook material handling for cost reduction opportunities

posted on: Monday March 11, 2013

Most manufacturing companies are in the process of on-going cost reduction.  In this competitive environment there is no other choice if any company wishes to survive.   One of the biggest opportunities for cost reduction could be your material handling system.  Yet many companies are ignoring material handling and focusing on direct manufacturing operations.

Material handling is a very broad and can include a lot of activities such as:

  • Receiving material and moving into raw material storing
  • Moving raw material to the manufacturing operations
  • Moving in process material from operation to operation
  • Moving work in process to interim storage
  • Moving finished goods to storage
  • Packaging and shipping final product

With all these items there are the specific costs:

  • Cost of inventory
  • Cost of human labor associated with moving and storing
  • Facility costs associated with storage and WIP
  • Cost of counting and tracking inventory
  • Cost of scrap or rework associated with material movement
  • Cost of accidents due to material handling

Power tuggerPerhaps the final and potentially largest cost is the cost of accidents.    A significant portion of work mans comp claims are related to material handling activities, in fact over 20% of industrial claims are related to back issues caused by stress of picking up and moving material.   The average claim is over $60,000 and that does not include costs associated with training, overtime and inefficiency associated with “filling in” for injured employees.

Material handling varies widely from industry to industry; costs of material handling also vary.  Many companies just categorize material handling as overhead along with other costs like facility expenses.   This may cause some companies to overlook material handling when analyzing opportunity for cost reductions.   By looking at all the expenses associated with material handling, one may determine that material handling is the biggest area of opportunity.