- The ISM index of manufacturing activity hit its lowest level since the Great Recession in December 2019, indicating industry contraction.
- Manufacturers can offset the effects of outside pressures and meet evolving challenges with strategic implementation of technology solutions.
- Some manufacturers are turning to supply chain automation to counteract chronic shortages of skilled workers.
2019 began with a strong promise of growth throughout the manufacturing industry. But trade wars, along with economic and political uncertainties in the second half of the year, slowed global growth to 3.0% — its lowest level since 2008-09. In the United States, manufacturing accounted for only 11% of the national GDP, its smallest share since 1947.
These year-end trends are expected to slide into 2020, with global pressures, coupled with a continued shortage of skilled workers, causing worldwide industry contraction.
Despite this outlook, manufacturing companies can build resilience by evolving with the coming climate. Strategic technological upgrades can not only mitigate uncontrollable outside forces but also provide a competitive advantage to accelerate growth and scale profits into the future.
Adapting to Economic and Political Uncertainties
The Institute of Supply Management’s (ISM) index of manufacturing activity hit its lowest level since the Great Recession in December 2019. This trend looks unlikely to reverse itself in the first half of 2020.
Axios reported that the United States’ trade war with China is also further squeezing the supply chain. Higher costs from the resulting tariffs are being absorbed by the manufacturing industry and subsequently redirected back to consumers.
To combat these global pressures, companies are looking for ways to cut fat and operate as lean as possible. Many are finding success with supply chain automation technology.
For example, enterprise mobility extends digital business systems like an ERP onto wireless handheld or tablet-type devices with mobile data collection software. This lets employees capture data with perfect accuracy at their point of work, dramatically increasing efficiency, productivity and visibility throughout the entire supply chain.
Vertically integrated manufacturer of cement and concrete, Grupos Cementos, recently integrated an enterprise mobility solution after becoming the second company in Latin America to upgrade to SAP S4/HANA.
This decision helped them overcome challenges caused by inaccurate, outdated spare parts inventory management and high working capital expenditures.
As a result, they:
- Eliminated paper tracking
- Gained 95% warehouse transaction automation
- Reduced on-hand inventory by 10%
Going forward, Grupos Cementos can harness the future-proofing capabilities of their mobile inventory solution to seamlessly grow operations, regardless of other unforeseeable challenges.
Worker Shortages: How to Increase Productivity Without Increasing Headcounts
The Society of Manufacturing Engineers reports that 89% of manufacturers have difficulty finding skilled workers. The inability to fill needed positions costs an estimated 11% of annual earnings in the U.S. alone, or losses of about $3,000 per year per existing worker.
This trend is set to continue into the next decade as an aging workforce retires. Meanwhile, the younger workforce is also moving away from manufacturing jobs to take less labor-intensive positions in other fields.
To help overcome the challenge, its predicted that 60% of top manufacturers will have incorporated digital platforms into their daily operations by the end 2020.
Manufacturers that drive shop floor productivity with mobile inventory management and real-time visibility have an opportunity to grow operations without increasing headcounts or investing in a total infrastructure overhaul.
For example, Lakeside Manufacturing needed to overhaul their legacy inventory management system. They produce and supply stainless steel, aluminum and plastic equipment for the food service, clinical healthcare and material handling markets. Their historic reliance on paper-based processes was fraught with manual entry errors. Avoidable inefficiencies resulted, such as adding more labor to perform manual counts and other redundant tasks.
By automating these manual processes with an enterprise mobile barcoding solution, Lakeside Manufacturing:
- Eliminated manual data entry
- Increased their receiving productivity by 71%
- Shortened their new user training time by 99%
- Reduced overhead costs
Using mobile data collection solutions, Lakeside Manufacturing extended the functionality of their ERP system onto mobile devices through an ecosystem of mobile barcoding apps, hardware and supply chain expertise. The solution provided advanced functionality to empower workers by reducing repetitive tasks and on-the-job training time.
Manufacturers can also gain efficiency, optimization, job satisfaction and worker retention from mobility technology as well. In addition, companies can rely less on filling job vacancies and more on investing in and improving the productivity of their current workforce.
Harnessing the Power of Digital Supply Chain Transformation
No matter what governing bodies project for manufacturing and supply chain operations in 2020 and beyond, companies must fight stagnation and continue to evolve and adapt in order to stay relevant and profitable into the future.
By making simple, thoughtful operational changes — like investing in supply chain automation solutions — companies can equip their current workforce with the tools they need to enhance productivity and regain their competitive advantage.