Growth is usually seen by manufacturers as a good thing - a sign of success and a result of hard work. But if this growth isn't planned for, or the manufacturer can't react in time, growth can cause the same devastating results as if the business was in decline.
Regardless of the sector, manufacturing in general is a constant juggling act. It’s tough to keep everything moving the way it should do which is why you rarely hear factory managers tell you that running a factory is ‘easy’.
So, what kind of challenges do they face when business is booming? And how do they overcome these pressures whilst making sure they keep all the other plates spinning? In this blog post we look at 7 common areas that can cause manufacturers a headache when their business is growing along with solutions to help ease the pain.
Supply chain management
When a customer increases their order book, particularly without prior warning, extreme pressure can be put on the supply chain to keep up. This can be particularly challenging when bespoke or ‘drawn items’ (precision metalwork, plastic parts, printed circuit boards etc) are involved as they don’t tend to be held in stock in any great quantity.
In order to control the quality of supply, manufacturers often try and limit the number of key supply partners they work with. But as demands on the supply chain start to increase, issues with deliveries and in some cases quality can arise. These issues becomes heightened when the number of key suppliers the manufacturer works with is very small – there’s simply nowhere else to go.
Problems further down the supply chain not only impact the manufacturer’s ability to fulfil existing orders, they can also have a negative effect when it comes to winning new business. If a supply partner is already at maximum capacity and struggling to cope with existing demand, the thought of submitting a new quotation for another project is unlikely to be a priority for them. Which, unfortunately, means the manufacturer could then miss the request for quote (RFQ) dead-line their customer has requested.
When it comes to supply chain management communication is key. Where possible, manufacturers need to share their demand forecasts with their supply partners. They also need to make sure they are being supplied this level of information from their customers. Holding regular business reviews with suppliers to discuss fluctuations in demand (both up and down) can help make sure that any potential disruptions to the supply chain are mitigated. And while you are there it’s also a good idea to sense check any stocking agreements that you have in place with the supplier. Are they holding the levels of stock they committed to originally or have they been running things ‘lean’? If they have, even the smallest increases in demand from you could have a significant impact on their ability to supply.
It’s certainly not ideal but if things have gone too far the manufacture may have to step in and provide their suppliers with a list of priorities so they can deliver the most urgent (or disruptive) items first. This is usually a last resort action but it can help focus short term attention in the right direction, particularly if some of the orders that are being placed are actually for stock as opposed to firm customer demand.
This can be an issue for manufacturers when demand for one particular service offering or ‘capability’ suddenly increases, stripping out internal resources. Machine builders, for example, rely on having highly skilled time-served panel wiring staff in place. But if demand for this resource suddenly increases without prior notice, the manufacturer will struggle to recruit the right type of labor they need in time. Quite often this forces manufacturers to hire in temporary labor through specialist agencies to fulfill contracts. Not only is this an expensive solution, finding highly skilled time served staff is extremely difficult in the current climate and can take time.
Again, close communication with the end customer and forward planning based on forecast information can help. If the customer cannot wait the revised lead-time due to their increase in demand and the manufacturer has to resort to short-term external labor, a discussion between both parties about the additional costs incurred will need to take place.
Investing in new equipment
Production equipment and tooling can be expensive so decisions on what to invest in and when need careful consideration. Manufacturers will be constantly reviewing which equipment they need in order to maintain their own productivity levels but also what equipment they will need in the future to meet the evolving demands of their customers.
Holding regular technology review meetings can be a useful way of understanding more about the end customers’ strategy and how this might impact new products in the future. Gaining this level of insight isn’t easy, particularly if there are concerns by the customer around Intellectual Property, but if manufacturers are able to extract this information from their customers it can be extremely useful when considering future investment.
When a manufacturer starts to outgrow their facility they usually have a few options – expand what they have, invest in more space or take a long hard look at what they are doing internally. There are pros and cons to each, the key question for them to answer is ‘what will our customers expect from us in the next xyz years’?
Implementing flexible workstations and production cells that can be quickly reconfigured for different jobs is a common tactic to free up more space. And for more repeat or ‘stable’ demand, lean production lines can be an efficient use of space but are often ‘fixed’ so a little harder to move around.
But what about those tasks that add very little value to the business or the end customer?
Manufacturers that outsource elements of their operation can free up vast amounts of space. Being really clear on core activities and then implementing proven strategies such as outsourcing allows manufacturers more time and floor space to focus on the parts of their business that count. Ironically, for many Original Equipment Manufacturers (OEMs), the physical process of building, testing and shipping products aren’t really core activities at all when you compare them to product design, marketing and sales. So what are your core activities? And how much factory space would you need if you were to focus one hundred percent on them?
Manufacturers are often expected to be able to ‘flex’ their capacity with customers demand. For some, with varied product ranges and customer bases that are diverse, when one product or customer is ‘up’, typically, another will be ‘down’ which helps soften the blow.
Manufacturers also tend to work with their customers across a range of different purchasing agreements. For example, some orders they receive will be fixed and firm to an agreed schedule providing long term visibility. Others, however, might be based on a service level agreement (SLA) whereby product is ‘called off’ on short notice as it is required.
Planning can become a challenge for manufacturers when they don’t have forward visibility of customer demand. In addition, ‘urgent’ customer demands and/or revision changes have to be supported which means it is a constant juggling act for them to manage. It’s important that the sales/customer service team have regular business review meetings with the customer in order to provide as much forward visibility as they can to the planning team. It’s also important that the planning team don’t commit all of their resources at any given stage in order to retain the ability to ‘flex’ when unknown demand presents itself.
As the manufacturer grows it’s important that the commercial teams balance taking on opportunities from existing customers as well as brand new ones. A good starting question for the team to ask when presented with any new opportunities is ‘why us and why now’? With a finite amount of quote resource available it’s vital the manufacturer focuses their attention in the right areas and in order to do so, they need to be clear on what an ‘ideal’ customer looks like and what a ‘good’ piece of business really is. Creating customer persona or profile documents can really help the commercial team visualise this which in turn can help them qualify (in or out) new opportunities quickly. And if they struggle to define what an ideal customer might look like, ask them to write down all the reasons why they wouldn’t trade with someone and then turn each of the negatives into a positive!
So no, running a manufacturing facility isn't 'easy'. OEMs rarely know what is coming their way and as a result they need to constantly review what their business needs are today as well as what they will look like in the future. Thankfully, savvy OEMs free themselves up from much of the burden associated with manufacturing and outsource all the non-core activities of their business to Manufacturing Services providers. This leaves them to focus on what they are really good at so they can enjoy the fruits of their labor and growth, rather than worrying about how it could catch them out.