Back to Basics: How To Make More Money Now

Many small manufacturers ignore the improvement strategies that could improve profits now, while positioning themselves for growth tomorrow. Here is why that is not the best idea.

There’s lots to talk about in manufacturing these days — the Internet of Things, cloud computing, additive manufacturing, robotics, etc. And there’s no question these new technologies could transform your company — but only if you’re ready for them.

Alas, there’s the rub: Many manufacturers — especially smaller firms — ignore the improvement strategies that could put more money in their pockets now, while positioning themselves for an more lucrative tomorrow.

In fact, 17% of manufacturing companies have no improvement methodology in place at their plants. Sadly, two-thirds of those facilities belong to small manufacturers (revenues of less than $25 million).[1]

Make no mistake: These “No methodology” facilities woefully underperform vs. their improvement-minded peers:

  • They lag in sales per employee by $105,315 per year — $168,844 (average) vs. $274,159 at plants with an improvement methodology in place.
  • They’re much less likely to lower production costs: 22% reduced manufacturing costs (excluding purchased materials) over the past three years vs. 37% of plants with an improvement methodology.

It doesn’t have to be this way.

Small manufacturers have major advantages and opportunities in adopting improvement principles. First, the scopes of their efforts are smaller — which means fewer people to train and faster implementations. Second, most improvement methodologies emphasize creativity and process changes instead of capital investments — preserving cash while still generating high ROI. Finally, a commitment to improvement fundamentally changes how a company operates. Manufacturers with an improvement methodology in place are far more likely to have range of best practices in place — from training to safety to waste elimination — that change culture and create competitive advantage (Figure 1).

How good is you company at the basics? More importantly: How will you improve?

[1] All data from the MPI Manufacturing Study, The MPI Group, 2015.

 
© 2017 The MPI Group

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