An increase in the demand for your agricultural equipment is good, and likely the goal you had when you started manufacturing equipment in the first place. An increase in sales brings with it an increase in your business. But greater demand for your equipment comes at a cost.
The more demand for your agricultural equipment, the more ag equipment overhead you will incur.
Watch that Overhead
Here are some of the ag equipment overhead expenses you’ll incur:
- Purchasing of more raw materials
- Constructing some kind of storage facility to house the greater amount of raw materials
- Hiring more employees to help fabricate and assemble your equipment
- Working longer hours to complete orders (employee overtime)
- Purchasing more tools for your new employees to use
- Investing in better equipment to be more efficient and increase your output
- Greater delivery costs on both raw materials and finished equipment
These are just a few of the expenses associated with an increase in demand and orders for your equipment. The list doesn’t even touch on the smaller costs of supplies, some kind of asset management / inventory system, office personnel to handle orders and sales, office supplies, increased manufacturing work space, and more.
An increase in demand brings with it an increase in your overhead expenses, which, if not handled correctly, can kill your profit.
Ways to Reduce Overhead
So how do you reduce your manufacturing ag equipment overhead while also keeping up with increased demand? Here are 4 tips:
Hire an outside fabrication company
The greater the demand for your equipment grows, the more hands you’ll need fabricating all the component parts that go into your equipment – which can get incredibly costly if you do it all in-house. Hiring an outside fabrication company will take the overhead of employee salaries, health insurance, tools and equipment off your shoulders and allow to only pay for the work done.
An outside fabrication company has the tools, equipment, and personnel needed to pump out the component parts you need in a timely fashion and with a greater level of quality and consistency than you could achieve with an individual hire.
Reverse engineer your purchased parts
Many equipment manufacturers purchase some component parts from the big name vendors. If you can buy what you need for a decent price, why spend the time putting it together yourself? The problem is, you’re likely grossly overpaying for those parts. Finding a company that can reverse engineer those parts (aka – take them apart to see how they work and engineer a better solution) and fabricate them for you will often be cheaper and provide you with better component parts. When you purchase pre-made parts from suppliers like that, you are paying for the name on the part. Reverse engineering the piece and hiring a fabricator to manufacturer those parts for you can save you BIG.
Get discounts on materials
When you hire an outside fabricator to manufacture your component parts, you get an added benefit – discounts on raw materials. The amount of materials a fabrication company purchases each year for various projects affords them the ability to get drastic discounts on those materials – discounts you wouldn’t be able to get yourself. Why pay a higher price for the same material when you can reduce your costs with a discount?
Focus on assembling your equipment
You’ve designed an innovate piece of agricultural equipment. You know how it fits together, how it should look, and what makes it work. Why focus your time, energy, and money on manufacturing all the component parts when you could focus on putting it all together? Leave the fabrication to an outside company that charges you only for the work done, and hire the employees needed to assemble the parts into your equipment. It will allow you to keep up with the increase demand and save you money in costly overhead.
Partner with the Professionals
Are you ready to reduce your agricultural equipment manufacturing overhead? Consider partnering with Fusion Tech. Our agricultural equipment experts can develop a plan to help you keep up with the increased demand for your equipment while also saving you the high cost of hiring your own fabricators and investing in fabrication equipment. But don’t take our word for it.
See how we helped Calmer Corn Heads increase their equipment manufacturing while saving money in the process. View the case study here.