#1 Breaking Through the Growth Barrier in Manufacturing
You've probably noticed something unsettling in the manufacturing industry lately: growth isn't what it used to be. According the ISM (Institute of Supply Chain Management), the manufacturing sector has hit a plateau over the past 13 months, where PMI stayed below 50, which indicates contraction in manufacturing. And no matter how hard we push, we just can't seem to get back on the uphill track given the constant economic and global curveballs that have been thrown at us. But there are ways to get out of this slump by getting out of a “it is what it is mindset” and start addressing the underlying causes of this stagnation and create a strategy aiming to revive growth and competitiveness.
What's Behind This Slowdown and How to Control It?
Internally, a lot of manufacturers are stuck in their ways – failure to innovate, leading to outdated products and processes that cannot compete in a rapidly evolving market. Operational inefficiencies further exacerbate the problem, with rigid organizational structures and policies, along with leadership complacency, hindering necessary changes and improvements.
Externally, manufacturers face challenges such as market saturation and commoditization, reducing the demand for products that once enjoyed little competition. Additionally, the sector is grappling with talent shortages, partly driven by advances in technology such as AI, which require new skill sets that are in short supply.
While manufacturers can’t control the external factors that are hindering growth, taking control of the internal situation is imperative to turn the tide:
- Adapting Internally to Address External Factors
Yes, the economic downturn hit us hard. Consumer demand drops, profits shrink, and suddenly, investing in growth feels like climbing Everest. But here’s the catch – cut too much, and we risk falling behind even further. Manufacturers must strike a delicate balance between cost-cutting measures and strategic investments during these times to maintain their market position and prepare for future growth.
- Spotting the Operational Hiccups
Now, let's talk shop. Our production processes might be our Achilles' heel. Inefficiencies lead to waste, reduced output, and ultimately, diminished profitability. Plus, teams often struggle because they're not getting the right know-how due to inadequate knowledge transfer within the organization. Safety and maintenance issues, arising from negligence or outdated equipment, further hinder operational efficiency and can lead to costly downtime and reputational damage.
- Leadership: Time to Step Up
Our people are our power. But if our hiring game is weak, we’re setting ourselves up for failure. The industry's hiring processes often lack the necessary rigor, strategy and innovation to bring in leaders capable of driving change, creating a workforce that is ill-equipped to meet operational challenges contributing to high turnover.
Complacency and a reluctance to embrace change at the leadership level can create a ripple effect throughout an organization, stifling innovation and adaptability. Effective decision-making is often hampered by rigid structures within the organization, preventing the swift action needed in a dynamic market environment. The negative impact of poor leadership extends to talent retention and organizational culture, driving away skilled workers and creating a less motivated workforce. This shortfall in leadership quality directly impacts organizational performance and growth potential.
- Innovate or Stagnate
Innovation isn’t just a buzzword; it’s our lifeline. Manufacturers that fail to innovate and invest in R&D (research and development) risk falling behind competitors in technology and product offerings. This lag can lead to customers losing interest and shifting their loyalty to more innovative brands. Furthermore, manufacturers must adapt to changing market demands and consumer preferences to stay relevant and competitive. Get ahead of the situation by leveraging the data you have at your fingertips to make informed decisions on: 1. Customer needs and trends that can contribute to R&D improvements, 2. Operational challenges impacting production, 3. Identifying opportunities to become more agile to deliver quality products faster than the competition, as well as 4. Innovation through hiring strategies.
Strategies for a Turnaround
So how do we break out of this rut? For more than 30 years, TBM has been guiding manufacturing companies through various economic environments. We've steered them to success across three recessions, transforming their operations to come out stronger. But it's not just about the tough times; we've also been there to help companies maximize their potential when the economy is booming. To break free from the current cycle of flatlining growth, manufacturers need to adopt these five series of strategic actions:
- Lead with Passion and Grit: Lead with purpose and passion. Instilling a mindset of continuous improvement starts at the top. Leadership must be committed to driving change and fostering an environment that encourages innovation and efficiency.
- Tools for Operational Excellence: Lean and Six Sigma remain vital in manufacturing, serving as a manufacturing's roadmap to efficiency. Use them to focus on what matters. These tools can significantly improve operational efficiency and productivity, eliminating waste and optimizing processes.
- Management System Integration: What is a management system? It is our playbook we have implemented at manufacturers all over the world. It helps operational leaders and associates keep all parts of their operations focused on the same company goals. It is vital in orchestrating change and should encompass all aspects of the operation, from production to customer delivery, ensuring that every component aligns with the organization's overall objectives and creates a roadmap for growth and sustainment.
- Effective and Continuous Communication: Communication is key and it starts with leaders. The entire team must be on board and aligned with goals and it up to leaders to deliver that message and keep everyone up to date on progress at a consistent cadence. As a result, there is cohesion within and across teams boosting engagement and productivity that will propel the company towards growth objectives.
- Continuous Improvement and Sustainment: Improvement isn’t a one-time thing. It’s a continuous journey. Leaders, managers, and associates need to be on their toes, ready to adapt and evolve. Sustaining improvements requires regular evaluation and adaptation of processes to meet evolving demands and challenges.
- Strategic Human Capital Development: Investing in our people is crucial. Developing a robust human capital strategy involves not only attracting top talent but also nurturing and retaining it. This means providing continuous learning and development opportunities, fostering a culture of empowerment and accountability, and ensuring that employees' skills are aligned with the company's evolving needs. By focusing on employee engagement and development, we create a skilled, adaptable workforce that is capable of driving innovation and efficiency, ultimately contributing to sustainable growth and competitiveness in the market.
The Future Looks Bright – If We Act Now
Overcoming flatlining growth is not merely about regaining upward momentum; it's about transforming your manufacturing business into a more dynamic, competitive, and financially robust company now and in the future. A more engaged and innovative organizational culture emerges, driven by effective leadership and management systems that foster creativity and accountability. Finally, an increase in EBITDA becomes a tangible measure of success, reflecting the overall health and potential of the organization.
In conclusion, the path to reviving growth in manufacturing is complex but achievable. It requires an agile approach to addressing both internal operational, leadership and external market challenges. With the right strategies in place, manufacturers can not only overcome flatlining growth but also set new standards of excellence and innovation in their industry.