The current economic climate for manufacturers provides significant challenges. Increasing foreign competition, price pressure from weakened demand, tight capital markets, and increasing costs of raw materials have combined to create a particularly competitive landscape. Forward thinking manufacturers are turning these challenges into opportunities—and using these challenges as a springboard to operational improvement and increased profitability. Here are some best practices for how to mitigate costs and other innovative ideas.
- Reduce market uncertainty. Investigate long-term contracts for raw materials and long-term contracts with customers, even at reduced margins.
- Make safety a priority. Implement improvements to decrease down time and increase yield.
- Encourage innovation. Empower and motivate employees to make product and process improvements throughout the organization.
- Consider near-sourcing. Reduce shipping costs and gain more control over manufacturing processes and costs by using suppliers closer to your manufacturing facility.
- Focus on value delivery. Find out what your customers value and focus on delivering what matters. Trim costs in areas in which customers do not place value.
- Communicate. Discuss costs and anticipated cost increases with customers. Work together to increase and decrease prices as commodities fluctuate.
Shore up financials
Banks and financial institutions are slowly loosening their credit requirements. Venture capitalists and private equity groups are beginning to invest again. Congress has established programs that encourage lending to small businesses, such as the Small Business Lending Fund (SBLF), and State Small Business Credit Initiative (SSBCI). Having your financial records in order could make or break your opportunity to secure funding.
Hire and retain top talent
Attracting and retaining employees is a very important matter to focus on for business and creating a culture that values the whole employee is a good first step. While pay is important, it is not the most important motivator for most employees. Today’s generation of employees want it all – good pay, advancement, and most of all the opportunity to do new and exciting work and have fun doing it. Passionate business leader who treats their employees like family, and gives back to the community, will find their employees follow in their footsteps.
Reward innovation at all staff levels and recognize employees for their dedication and achievement. Develop a total rewards strategy that includes compensation, benefits, performance and recognition, and career development opportunities. This will attract the best and brightest, which in turn will help to drive your firm’s brand in the market.