How to reduce Operating Cost-Never forget these

The correlation between CAPEX and operation costs/expenditures (OPEX) cannot be ignored. Decisions made while investing in a new plant could ultimately affect the operation cost of the plant when it is completed. The following are suggested ways to reduce operating cost:

a) Select the right equipment/machinery/design or review the design

The selection of the right equipment/machinery/design could make a lot of difference when it comes to maintenance cost or operational costs. In the oil and gas sector, selection of flexible pipes instead of rigid pipes makes a lot of difference when it comes to maintenance and decommissioning cost even though the initial cost of a flexible pipeline is far more than that of a rigid pipeline. A careful analysis of the overall life time cost for both pipes proves that the flexible pipe might be cheaper in the long run for most projects than the rigid pipes. For buildings, making a house energy efficient could increase the initial cost (CAPEX) but will reduce the operational cost. Hence the choice of the right equipment/ machinery/design cannot be overemphasized if operational cost is of concern. Architects normally have fanciful designs with additions that sometimes increase the operational cost for the building or plant. Hence it is always recommended that the project engineer carefully reviews designs submitted in consultation with the Client (or Stakeholders).  

b) Re-evaluate suppliers for raw materials/spare parts etc

One of the ways to reduce operating is to constantly re-evaluate the suppliers for raw materials/spare parts and to make sure you are getting competitive prices while you maintain your quality standards. It is recommended that you update your supplier’s list at least every year.

c) Cut down on your labour cost/automate if possible and ensure safety

This is a well known method to reduce operations cost in difficult times. Reduce the labour cost and try to find people with multitasking abilities. There are jobs that can be performed by one person without stress. To ensure you have the right skill set, focus on getting highly skilled people in your team with the flexibility you need. While you cut done on labour cost, ensure that the health and safety of your staff are safeguarded by putting in place measures to prevent accidents.

Also, with the technological advancement we have today, many aspects of work could be automated. You don’t need 5 security guards at the gate! Supervision for some jobs could be done by CCTV cameras. Check which technology can help you reduce cost and improve service delivery

d) Eliminate waste

 Operating cost for most projects or factory based works could be reduced if strict measures are put in place to reduce or eliminate waste. In most cases, the items tagged as waste are not waste at all but materials in transition. The end product of some processes could be the feed materials for other processes. Work out strategies to reduce or eliminate waste. Can you sell some of the ‘waste items’ to recycling companies? Can you re-use the items? Answers to these questions could mean a lot of savings for the company. Unilever is an example of a company that has strict measures to eliminate waste and its bringing results. Unilever’s sustainable living plan has with it the goal to eliminate waste at its factories thereby making substantial savings.