Manufacturing surplus is a manufacturing-related term that refers to the reducing or ending of production. This can be done for many reasons, but usually, manufacturing costs have increased. There are not enough sales to offset these costs.
There are two main ways in which manufacturing surplus can be reduced:
1) by temporarily halting production and 2) by permanently closing the manufacturing facility. The first step should always be to reduce manufacturing capacity before resorting to closing the entire plant.
1) By temporarily halting production, this will allow a company time to assess their situation and determine if they need to make any changes in the future concerning how much inventory they keep on hand or what kind of products they produce, if any (i.e., manufacturing a different product).
The company can also look at other methods to lessen its manufacturing costs, such as looking for new suppliers with lower prices or investing in more efficient machinery or equipment.
This is the first step that any manufacturing company should take before permanently closing their plant down. They have time to consider alternative options and make the most informed decision.
-A manufacturing surplus can lead to either contract manufacturing of other companies’ goods or just nonmanufacturing options like leasing out equipment and selling off inventory.
2) By permanently closing the manufacturing facility, the manufacturing surplus can be a positive opportunity and give the company time to decide which manufacturing options are best for their industry.
-Contract manufacturing is an option that may not make sense in all cases. Still, it has been successful for some companies before doing so.
The manufacturing surplus may be due to an economic slowdown in demand for a company’s products, or it could simply be that manufacturing is no longer profitable. Make sure to check online for more information and economic studies on this subject.