The manufacturing and distribution industry has faced unprecedented challenges in recent years, with factors like rising costs and supply chain disruptions only making things worse. Meanwhile, ongoing labor shortages continue to complicate the situation—leaving many companies struggling to stay afloat.
At the same time, some manufacturers continue to perform at the top of their game despite the looming challenges facing the industry at-large. How is this possible? Rather than focusing too intently on the day-to-day challenges, these businesses are looking at the big picture with long-term success in mind. More specifically, when manufacturing and distribution companies focus on three key factors as described below, they can better protect their profits, improve their overall cash flow and stay competitive in a dynamic industry.
1. Knowing Your Inventory
For most manufacturers and distributors, inventory is by far the largest and most important company asset. At the same time, however, very few businesses have a true sense of the inventory they have on-hand and what kind of overhead they're dealing with.
Even if your business already has a robust inventory-tracking system in place, the reality is that you need to know what your inventory is actually worth to make informed business decisions. This includes details about not just how much inventory is in stock, but:
- The overall accuracy of your inventory counts.
- The true costs of production for each product (accounting for both labor and overhead).
- Whether your inventory is actually likely to sell.
By taking the time to perform inventory cycle counts more frequently while turning your focus to tracking both inventory and product profitability, your business can make better informed purchasing decisions that align with customer demand forecasts.
2. Investing With Care
The manufacturing and distribution industry has seen an influx of new technologies over the past several years, with many companies jumping on-board with artificial intelligence (AI) and automation tools in an effort to keep up with the competition and save money. At the same time, however, some companies have seen these investments in new technology backfire on them because they failed to do their research or due diligence before implementing new systems.
Rather than investing in new technologies simply because your competition is investing in them, a better course of action is to take your time researching the tools and tech that will be most beneficial to your business. This includes:
- Identifying clear business challenges that could be solved by technology.
- Researching tech and tool options to assess potential costs and benefits before deciding on one.
- Ensuring that all employees receive proper training on how to get the most out of new technologies.
Ultimately, the issue here isn't that technology can't be helpful; it's that businesses aren't doing their due diligence before investing. With careful research, the right tools and tech can help manufacturing and distribution businesses gain a competitive edge while streamlining processes and saving money.
3. Reducing Business Risk
In the manufacturing and distribution industry specifically, certain risks may not be obvious until they've already cost a company a lot of money (or other damage). From employee fraud to cybersecurity incidents, a lack of oversight and financial controls can set the stage for major disasters that can derail entire businesses.
Ultimately, these kinds of issues most often arise not because of a lack of policy, but because businesses fail to enforce their policies. With this in mind, businesses in this industry should renew their focus on risk assessment and mitigation by taking such proactive steps as:
- Providing employees with regular cyber threat training.
- Keeping financial responsibilities separated among employees, or ensuring that no single employee has too much financial control.
- Conducting routine fraud and cybersecurity risk assessments.
With these simple and proactive measures in place, businesses can significantly reduce their risk of falling victim to costly fraud, cybersecurity attacks and other disasters.
The Bottom Line for Manufacturers
Although these factors may seem to stand on their own, they are all interconnected in some way. A lack of inventory tracking, for example, could increase the risk of costly inefficiencies or even fraud. Poor investment decisions could affect cash flow and capital.
With this in mind, business leaders in manufacturing and distribution are encouraged to always look at the big picture. By implementing the simple changes outlined here, companies can improve their inventory data, strengthen their internal controls, and make more informed investment decisions for the future of their companies.
Our Manufacturing + Distribution Industry Group can help your business create a plan for success. If you have questions or would like additional information, please contact us here.