In the fourth quarter, the U.S. ISM Manufacturing PMI index expanded from 55.40 to 60.70, showing that manufacturing companies are returning to pre-pandemic productivity levels. The numbers indicate the manufacturing industry is in one the strongest positions it’s been in since September 2014. Forbes reported manufacturers have willingly embarked on the journey of overcoming the new challenges of this past year – and the results are striking.
But that doesn’t mean the challenges are behind us. To “hit your numbers” in 2021, managers face a large number of issues; many of which may negatively impact the short term prospects of their business if handled improperly. Let’s take a closer look at what those challenges entail and how businesses are already starting to leverage technology and process in tandem to address them.
The Challenges Facing the Manufacturing Industry
There are four major challenges currently facing manufacturers attempting to reduce risk and hit their numbers in 2021 and beyond. These include the cost of production, on-time delivery, quality disruptions, and a lack of skilled employees to fill open positions.
A recent McKinsey report showed that companies that had already scaled Industry 4.0 use cases before COVID-19 hit have been better positioned to respond to the crisis. Over 65% of those who responded said they felt Industry 4.0 was more valuable now because of its role in weathering the pandemic. At the same time, the number of companies stuck in pilot purgatory, struggling to catch up grew from 2019 and is the highest in the last four years. Only 26% of respondents indicated they were able to successfully scale their industry 4.0 efforts. The pandemic’s impact on travel, cash constraints due to reduced demand, and team-capacity restraints are all causing companies to step back from their efforts.
These four challenges are a big part of why, and by addressing them, you can better position yourself to scale and benefit from industry 4.0 technologies in 2021 and beyond. Let’s take a closer look at each:
Cost of Production
In the midst of a global pandemic that has required the implementation of several new layers of safety protocols, new costs are to be expected, but with already thin margins, how are businesses capturing the same ROI they were pre-pandemic?
In 2020, as businesses opened and closed, global supply chains sputtered and consumer demand plummeted in many sectors, new costs arose in equipment, facilities, safety, and inventory. Both under- and over-supply of inventory was a major challenge for businesses that couldn’t rely on traditional forecast models.
Technology is helping to curb inefficiencies, capture savings in key areas that are primed for digitalization, and provide valuable resources to employees to keep them functioning at peak productivity levels.
Those same supply chains that wreaked havoc on inventory affected tiered suppliers and other businesses who rely on on-time delivery to service their customers. Delays in shipping, customs, and warehouse processing times lead to a bevy of issues that reflect poorly on companies going into 2021.
To take advantage of the increase in manufacturing activities, these companies need to know for certain that they can keep up with orders, avoid delivery delays and meet the specific needs of their customers. That means keeping employees healthy and safe to avoid staffing shortfalls, implementing technology solutions to help scale production as needed, and adjusting processes to meet post-COVID requirements for social distancing and cleaning.
Quality can be impacted by a number of factors, and in 2020 there were several culprits. The first was a lack of training and high rotation rates within personnel. Secondly, in many plants, no visitor policies and a reduction in quality checks limited access to vital resources. Finally, quality issues can spike during a restart if the plant is forced to shut down, even temporarily.
Each of these situations can greatly increase the risk of quality issues, which can exacerbate the problem if you don’t already have a quality containment solution in-house. When quality becomes an issue, it can cost an organization millions. The increased need for supervisors and an over-reliance on contractors can further create issues in this regard.
The Right Skills for the Job
Despite a steadily high unemployment rate, sitting at 6.7% in December, many companies have struggled to find qualified workers to fill important positions. A combination of factors has exacerbated a longstanding skills shortage in fields like manufacturing, with the risk of COVID-19, the unavailability of childcare and the increase in competition from warehouses owned by companies like Amazon or Walmart all contributing to a lack of qualified workers to fill open positions.
It’s bad enough that in some companies, executives are being recruited to work the factory floor, stepping in to fill vital holes in the production chain and avoid losing momentum. When someone is hired, it’s imperative that they are onboarded and trained as quickly as possible. At the same time, tools are needed to assess skills and cross-train employees so that day-to-day gaps can be filled quickly to avoid slowdowns. If one part of your plant has fewer workers available than another, technology that helps cross-train and coordinate rotations can be immensely valuable.
The Importance of the Right Tools
The right tools can make all the difference for your organization in addressing the increased challenges to stay productive and profitable in 2021. These include:
- Reducing training time – Labor inefficiency can cost up to $8,000 over a single training period and $50,000 for a single worker. Turnover can further exacerbate the cost. Technology that streamlines onboarding, work instructions, and cross-training can help reduce these costs.
- Digitization of paperwork – Downtime costs US manufacturers $6.3 billion annually. Reducing paper is not only a cost-savings opportunity, but it makes large volumes of data more readily available for analysis and improvements in operations.
- Industrial safety – Companies lose more than $170 billion a year in productivity due to injury and illness. That number skyrocketed in 2020 due to the pandemic, and it’s vital that you keep it under control to reduce the risk absenteeism poses to your business. Monitoring technology can help reduce accidents, and tracking software can ensure employees are in the right place at the right time, all while following COVID safety protocols.
- Capital Efficiency – Despite the challenges being faced, demand is increasing, but that puts many companies in a tough situation. Despite the boom in demand across the supply chain, CAPEX has long lead times and, for most companies, this is not a conducive environment to investment. The right technology can help wring more out of existing assets, reducing the need to invest while meeting demand in a tight environment.
When implemented properly, technology can help reduce the cost of onboarding, training, and quality issues. It can streamline operations, keep all of your employees on the same page with a centralized communication platform, and prepare you for the future of manufacturing in 2021 and beyond.
There is a wave building – if your company misses the boat, you will fall behind in 2021, making it nearly impossible to stay competitive. If the market is there, surely you want to take care of your customers and squeeze profits where you can. Therefore, invest in the right tools. Efficiency is absolutely vital, and technology will help.
Through Smart Work Station, Andonix connects front line workers to help maximize productivity throughout an organization, helping you maximize productivity with your existing resources, respond to skills shortages and meet demand as it rises. Embracing technology helps organizations of all sizes get the most out of their frontline workforce without an increased risk of safety, quality, or productivity-related issues.