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7 Ways to Reduce Your Cost of Production

As an SME owner, maximising your profit will definitely be one of the more important priorities on your mind when it comes to managing your business. It is easier said than done so we have compiled some ways to aid your ideation process in reducing your cost of production. This will help increase your profit margin, without needing to raise the price of your product.

Do note that these points listed below are simply proposals from our end and you should tweak accordingly to fit your own business model! The points should not compromise the quality of your product as this could potentially result in you losing customers in an attempt to maximise your profit.

1 Choose the most value worthy cost

The most direct way would be to reduce the cost of producing your goods or services! Ensure you compare the price and quality of goods that your compiled list of manufacturers offers you. A suggestion would be to monitor and regularly review your list of suppliers as the price of your chosen materials may have changed since then or a different supplier is now able to offer a more competitive price for the same quality.

2 Simplify your design

Simplicity is key! Taking inspiration from brands like Apple and Muji, they market the usability and simple design of their products as their selling point. A less complex product or service offering will also induce less confusion to your clients when they are using your product. After all, as architect Ludwig Mies van der Rohe said, less is more. If your design is too cluttered, it might confuse potential customers even though your product has much more to offer.

Simplifying the design of your product would also mean that you are able to reduce the cost you spend on packaging, printing and some other non-essential materials that do not necessarily value-add to your product.

3 Track your inventory regularly

Keeping up to date with your inventory allows you to know when you should restock your products or when you have an overflow. Shortages can lead to unsatisfied customers which harms your business ratings while an overflow may potentially incur additional costs. If you store goods that are perishable, you should take extra care with the maintenance and watch the expiration dates.

You can instruct an employee to manually check the inventory or invest in an automated system that helps you manage your inventory and sends alerts if there is a shortage. This would aid in tracking and allow easier communication with the suppliers on the exact quantity that you require. The automated system would be more efficient in the long run as there is reduced human error and it is constantly up to date with the inventory, as long as the employees restocking the inventory regularly update the software.

4 Efficient employees

Having a team that works efficiently and productively is key, and as a business owner, it is up to you to equip them with such skills! Having one qualified and experienced employee is much better than having a few inexperienced ones. You should always thoroughly communicate your thoughts and expectations to your employees. Open communication between employers and employees causes less misunderstandings and time can be spent more productively so the salary you pay your employees is worth the work you receive from them in return.

5 Bulk buy your resources

Negotiate with your suppliers on the best price they can offer based on the larger quantity you are purchasing from them. Your suppliers are also business owners so it would be best if you request for a reasonable reduced quote without souring the relationship. One way to persuade them during the negotiation process is to inform them of other quotations that you are also considering and try to persuade them to decrease their price.

6 Register for GST

An underrated way to decrease costs is to register for GST as it allows you to claim the GST that has been spent as part of it’s supplier payments (also known as input tax). This allows your business to claim back the GST the company has spent as part of it’s supplier payments (also known as input tax). We have shared more about this in another article, Should SMEs register for GST?

7 Partner with is financial-technology (fin-tech) startup, predominantly operating on a pay-upfront, get cashback (PUGC) platform for SMEs and micro-businesses. This can help you reduce business costs by up to 5%. You just have to share your invoice, someone else will buy it for you and you pay them 95-99% in cash/PayNow to save 1-5%! The cashback-hungry users who buy the bulk for you use a card that would give 2% to 8% cashback and part of this is shared with SMEs.


We hope that this would help you in your process towards minimising your cost of production and maximising your profits! This list is meant to be used as a reference and might not work for everyone but we do hope they aided your ideas to reduce cost directly or indirectly.

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