In a start-up business that may not have sufficient funds or financing available for significant expenditures in fixed assets, including machinery and equipment for a production process, it may be possible to subcontract part of the process to another business that has the necessary machinery and equipment.
If certain equipment is needed occasionally but not on a regular basis, it may be more economical to rent the equipment when it is needed, rather than purchasing it. Leasing vehicles rather than purchasing them may also be an option to consider.
Inventory Reduction
The amount of inventory that needs to be kept on hand will depend on the characteristics of each particular business. Inventory should not be reduced to the point where sales are negatively affected, but there may be some strategies that can be used to reach a proper balance, to keep inventory levels down but still satisfy customer demand.
Increase the frequency of stocking rather than holding a large quantity of inventory over longer periods of time. Plan ahead based on sales and production forecasts, building in any necessary lead time.
Make arrangements with suppliers to hold inventory or to produce and delivery based on short turnaround times.
Reduce the number of products or components. It may be possible to eliminate slow-moving items, or items with a low profit margin, without a significant detrimental effect on earnings.
Replenish inventory as sales orders are being shipped.
Integrate and coordinate the purchasing, production, inventory, and sales functions.
Liquidate deteriorated or obsolete items in inventory.