The difficult challenges facing the manufacturing sector are a handful. And as the current health crisis continues, the future is an unknown landscape. To survive and ultimately thrive, companies must increase profitability, supply chain resilience, and embrace new technologies.
This article will cover topics around diversifying supply chains, getting started with automation, and, most importantly, business strategies for creating cash flow without taking on more debt.
Lower Overhead to Increase Profitability
Access capital without a loan
The list of daily operational expenses necessary to maintain any manufacturing facility running is long. Because of this, the first place to look when it’s time to boost cash flow is overhead. With revenue projections contracting around the world, the ability to save money on P&L statements can be crucial to maintaining business continuity.
Companies dealing with excessive overtime and high workers’ compensation premiums can use automation technology to cut down on paper-heavy and labor-intensive processes.
For other departments, already stretched staff may be great at keeping the books balanced, but they may not have the skills or the time for research to ensure the company is getting the best rates on utility, data, and insurance costs.
Firms such as Group Purchasing Resources help streamline the process of renegotiating maintenance and vendor contracts.
Their team has developed relationships with hundreds of vendors and can often help companies reduce expenses without changing from their existing service provider.
Great Ways to Invest New Funding
With new cash flow, companies can reinvest into other areas of their business. These areas can include anything from payroll to new equipment, facility upgrades, or staff training.
As a result of the recent supply chain disruptions and staff discounts, a majority of companies will probably need to invest in solutions for production efficiency and stabilizing inventory.
Diversify Suppliers to Increase Supply Chain Resilience
Phasing out of just-in-time manufacturing
Toyota established the universally common practice of just-in-time manufacturing in the 1960s. It was a perfected version of Fords’ assembly line that eliminated waste by making smaller batches of parts to be used as required as opposed to stocking larger quantities.
Also known as the Toyota Production System (TPS), it was later coined lean manufacturing in the MIT study-turned-book, The Machine That Changed the World. Unfortunately, in the current economic climate, this system of production has become entirely inefficient.
During periods of sustained supply chain disruption, companies can’t risk aligning raw material orders with production schedules. If one of their suppliers runs into an issue and can’t deliver, it could reduce order fulfillment and affect profits.
Socially Responsible Sourcing
Now when it comes to identifying new suppliers, companies must undertake due diligence to make sure all vendors have been thoroughly vetted.
Vendors undergo a gruesome background check, and it takes about six months to a year before they get approved. They assess finances, references, they actually visit the manufacturing plant and do site surveys to see how they are operating to make sure they are meeting industry standards.
There are too many recall stories that have stayed top of mind to take on products that don’t carry the appropriate regulatory approvals. The payoff is too short, and the risk too great for companies to place themselves and their clients in jeopardy.
Start Small and Act Now for Digital Transformation
Create A Digital Strategy
Despite the fact that the environment is getting more competitive, the process can’t be hurried, and each successful strategy starts with a solid business case. There are plenty of technology platforms, devices, and apps to choose from, but the ability to understand what data you need to get out of the machine to bring the most ROI is priceless.
Education is critical, and we think education is a precursor to any strategy and any technology selection that a client might go through.
As the developer of IoTco’s IoT Academy, he helps executives understand that each of the building blocks of an IoT solution requires a process of assessment, elimination, and refinement that stays aligned with the business case strategy to ensure achievement of the maximum ROI.
Evaluate Digital Readiness
There were an assortment of points in the discussion where the topic came back to digital maturity, an apt phrase that reaffirms digital transformation as a process rather than a destination.
If you can find a way to go up the digital curve and achieve a near-zero downtime and a near-zero defect operation rate, you’ve hit the holy grail. But it is a journey, and you have to find the right tools, the right vendors, and the right partners to work with along the way to achieve that level of excellence.
A variety of system integrators start with a consultation, such as IoTco, who charges no fee for the initial digital discovery. During this time, they indicate clients look at three main components: people, process, and technology.
Figure out which tools are needed to help gain digital maturity, be transparent with staff and be open to feedback, and finally, make certain that any newly implemented processes are a balanced collaboration between technology and the people.
Put One Foot Forward
Adopting smart factory technology doesn’t mean going 100% digital, but it is far better to be at the base of the digital curve than not at all. There are loads of opportunities and solutions on the market to assist manufacturing companies keep pace with their competitors.
By lowering costs and freeing up capital to invest in new technologies, profitability can be increased through efficiency and the ability to create new services. For under $500 a machine, companies can retrofit IIoT devices onto legacy machines and still produce valuable data.
Moving forward into 2021 and beyond, there will be challenges around workforce training and outdated systems. Avoid complicated solutions and start small with a very simple and well-tested business case. After that system has been fully integrated and gradually expanded to scale, it is possible to advance on the digital curve.
However, more technological complexity isn’t always the ideal answer. Sometimes, the answer is people. In a technology-driven world, human input is fast becoming an overlooked resource. For companies with a digital strategy already in place, the next level of advancement ought to be innovation.
Indviduals who work closest to the solution and the customer are the best resources for new ideas based on the current system.
Whether it is reassessing customer needs, discussing potential collaborations, or creating new revenue streams with enhanced services, the best advice is to think ROI first and think ROI always.