If you want to take the pulse of what is going on in our economy, look no further than the small- and medium-sized manufacturers that seem to dot every city and town. Our work takes us to all corners of this country, and although each company and location is unique, we do see some common themes. Here are the trends we’re seeing and our annual predictions for manufacturing in 2016.
- Volatile end-user markets. For many of our clients, end-user markets are the most volatile they’ve been in recent memory. Oil and gas is up, and then it bottoms out. Agricultural equipment does the same. Defense, aerospace, locomotives, automobiles – tracing the different trajectories of each will get you dizzy.
- People Gap. Is it a skills gap or a wage gap? The truth is, manufacturers can’t find the people they need at the price they need with the skills they need. There is nothing more frustrating for a manufacturer than turning down work because of a lack of workforce. Manufacturers have had to step to the forefront to solve this problem, directing higher education on what skills they’ll need when, and encouraging economic developers and workforce development boards to lend their expertise. Manufacturers will solve this problem, even if it means keeping on Baby Boomers, recruiting at the grade school level, continuing to replace people with machines, and other creative strategies that you and your fellow companies are devising right now.
- Industry 4.0. This is the fourth major upheaval in modern manufacturing that McKinsey first articulated a couple of years ago. Evidence of the digitization of manufacturing is all around us. And it’s not just about using 3D printing in manufacturing; for most of you, this is probably not yet economically feasible. However, the OTHER elements of Industry 4.0 are likely affecting you, or will be soon. The rise of Big Data, advanced analytics, and human-machine interfaces (including robotics and virtual reality) are disruptive emerging trends that manufacturers cannot afford to ignore.
So how do you succeed in this kind of environment?
- Retain and grow what you’ve got. Hold on to your existing customers. Get to know them extremely well. Uncover new needs that you can fulfill. These may be in service, assembly, finishing, or more.
- Add value. Search endlessly for niches: areas where you can add value that your competitors would be hard-pressed to match. For a lot of manufacturers, getting connected to the “Big Data” value stream is an important strategy right now because those who have the information will have power.
- Work your way to your customers’ engineers. You can’t rely on your old relationships with purchasing managers because in many OEMs, they’re retiring. The new purchasing people don’t know you. Worse, they probably don’t understand the true value you can bring. To them, it’s just about comparing apples to apples. Drive innovation, build relationships, and get to those engineers at the OEMs. There’s no single silver bullet; our clients are using a mix of different strategies that reflect their own strengths and goals.
- Make sure your internal house is in order. It’s always easier to look outside your organization for growth, but would you be ready for it if it came? Your local Manufacturing Extension Partnership can provide a comprehensive diagnosis of your operations and organizational structure to make sure it’s aligned with and can support your growth strategies.
- Treat your website as a revenue generator, not a line-item expense. Websites are the most common way that new customers will find you, but only if you have a website, and only IF they can find it. It’s time to move to a responsive website (one that will display on mobile devices), because the Google search engine is penalizing you if you don’t. And it’s time to sharpen your story about your competitive advantages so that end users understand not just what you make (features), but what it means to them (benefits).
AS I SEE IT, manufacturing, like most other sectors of the economy, will grow increasingly competitive in 2016. Market volatility, lack of workforce, and digitization will continue to present challenges to productivity and profitability. Manufacturers will need to look for creative ways to hold on to their existing customers, focus on preparing for growth, and make sure their website and SEO are top-notch to be competitive in 2016.
What are you doing to competitively position your company for 2016? What trends are you noticing and what challenges are you experiencing? I’d love to hear about them. Please comment or email your thoughts to me at [email protected].