In an era when the economy has been nothing short of a roller coaster, making cuts rather than improvements for growth has been the priority for many manufacturers.
Yet we all know that the most competitive companies continue to invest in their future success regardless of outside forces. This means that if you’ve been cautious to this point because of an uncertain economy, now is the time to explore where your company needs to invest in growth to generate the greatest return in future profitability and sustainability.
Generally speaking, there are four categories of improvement projects:
1. Investing in new products and/or new markets.
2. Investing in the expansion of existing products and/or existing markets.
3. Investing in projects necessary to continue operations more effectively and efficiently.
4. Investing in projects necessary to reduce costs.
With these general categories in mind, EFI Group has identified four areas that are likely to have the most impact on the growth and future success and sustainability of manufacturing companies in particular.
Each area is worth examining in depth because each has the potential for immediate ROI and also for laying the groundwork for future growth.
While our list is nowhere near complete, we think it will give you a good starting point for the answering the question we posed in the title of this article: Is your investment in growth strong enough?
For more on the growth planning process, see our recent article Closing Effectiveness Gaps in Capital Planning.
Four Key Investments in Growth for Manufacturers
#1: Invest in Innovation
Growth and innovation go hand in hand. But when it comes to investing in innovation, companies often neglect to ask the two critical questions:
How much should we invest in innovation?
What type of innovation will give us the greatest return?
Taking the time to analyze if your company’s financial goals are achievable with the level of investment you’re making in innovation goes straight to the heart of our original question: Is the investment your company’s making in growth strong enough?
Fortunately, there are formulas for figuring this out and because manufacturing companies are complex organizations, fully defining the boundaries of an innovation program in a way that considers best opportunities for breakthrough, as well as budget and payoff is essential.
When it comes to which types of innovation will provide the greatest return, articulating overarching objectives is always the first priority, followed closely by conducting the analysis and audits that will uncover limits in your current system and identify where additional profitability and growth can be found.
The previous sections of this article (energy savings, smart technologies and efficiency gaps) all point to potential areas for innovation – as does the intersection of product and process, the supply chain, plant design and more.
But regardless of where it might be best for your company to innovate, progress is unlikely unless your organization as a whole is committed to fostering an ongoing culture innovation. Whether this arises from leadership installing a company-wide innovation program or from a smaller team that chooses to tackle a single area, doesn’t matter. Once the ROI can be shown in black and white, a deeper commitment to growth naturally arises.
#2: Invest in New Technologies for Smart Factories
Today’s technology can tell manufacturers exactly where and how to increase product efficiency, as well as provide analysis for “what if” scenarios, such as the best place to locate equipment or a certain function.
For many manufacturers, the time for simply considering what might be gained through the combination of automation and information is long past and it’s time to take action or risk being left behind.
This means that examining where your company stands currently in its progress toward employing smarter systems that create greater efficiency and provide valuable data for continually improving the bottom line should likely be slated as a priority task.
#3: Invest in Shoring Up Gaps in Efficiency
As we all know, efficiency is the key to success for manufacturers – its what keeps internal costs low end product prices competitive.
Yet identifying inefficiencies can be highly challenging for the very reason that they can come from anywhere.
While it’s comparatively easy to find inefficiencies caused by sub-par equipment or blatantly dysfunctional processes, inefficiencies can be hiding in less expected places.
An unclear vision, unmotivated employees or faulty communication between peers and also between leadership and the plant floor can all lead to inefficiencies – inefficiencies that are not only more difficult to pinpoint, but also more difficult to fix once they’re identified.
For this reason, determining your company’s priorities related to increasing efficiency for future growth requires examining your operations at all levels – people, processes and systems.
While technology may be the answer for increasing process efficiency, and while information may go a long way toward shoring up communication, it might be a more thorough strategic planning process that eliminates the hidden wastes that are actually costing your company the most.
#4: Invest in Energy Savings
For manufacturers, energy efficiency is a subset of operational efficiency and has a significant impact on profitability and success. In fact, with the national call to create more environmentally friendly factories, reducing energy consumption is now even more essential for maintaining and increasing competitiveness.
In the past, one of the biggest obstacles to reducing energy use has simply been identifying where energy is being misspent. Fortunately, today’s technologies allow manufacturers to conduct in-depth audits that reveal energy patterns and enable the company to differentiate, for example, energy being wasted because equipment needs to be repaired from energy wasted because of operator error.
With the insights an audit reveals, manufacturers can then determine how to prioritize resources for the highest ROI – whether the investment is made in a larger capital project or by making smaller adjustments in how energy is used.
Should you wish to tap into our wide-ranging industry experience and the insights we’ve gained from working with manufacturers in sectors within and outside your own, schedule a complimentary conversation by contacting Jim Solich at firstname.lastname@example.org. We’d very much enjoy hearing your plans and sharing our thoughts on keeping up with the pace of change.