Four Common Challenges Facing The Manufacturing Industry In 2019

Four Common Challenges Facing The Manufacturing Industry In 2019

  • The manufacturing industry continues to show strong resiliency, shaking off global trade uncertainty, finding ingenious workarounds to its labor crisis, while still innovating new products using design-to-manufacture workflows.
  • 76% of all manufacturers prioritize improving shop floor productivity as their most valuable growth strategy, 1.4 times more important than marketing improvements to drive more leads (44%) or growing partnership-based revenue (31%) according to a recent Decision Analyst survey completed in conjunction with IQMS/Dassault Systemes.  
  • The manufacturing skills gap could potentially leave an estimated 2.4 million positions unfilled between 2018 and 2028 with a potential economic impact of $2.67T according to a recent study by Deloitte.  
  • Every direct manufacturing job creates an additional 2.5 additional jobs in the US economy, according to the National Association of Manufacturers.

The manufacturing industry is at an inflection point today. The days of running production scheduling on multi-tabbed Excel spreadsheets and financials on QuickBooks are over. At the heart of the industry’s inflection point is the high priority every manufacturer places on flexing their schedules to support short-notice production runs. Achieving the scale and speed needed to meet every customer delivery date has always been a priority, and now it’s pursued with an intensity never seen before.

That intensity over customer performance has never been higher because any given manufacturer has a competitor that’s just a Google search away. Add to this the fact that for many manufacturers, their reputation and ability to deliver high-quality products are more valuable than a year of marketing spend, and the inflection point becomes real. What’s remarkable about the manufacturing industry is how, in aggregate, it takes on these challenges, turns them into a crucible that strengthens and improves the industry, and finds new ways to grow.

Forces Driving Challenges in the Manufacturing Industry

With the forces driving manufacturing’s inflection point in mind, here are the four common challenges facing the manufacturing industry in 2019:

  1. A labor shortage so severe manufacturers say it’s the top issue impacting their ability to operate effectively and take on new customers.  When a plastics part manufacturer serving the automotive industry is paying stay-at-home mothers, retirees, and shut-ins to do light assembly of plastics parts needed by a luxury auto manufacturer, one can see just how severe the labor shortage is. The 2018 Deloitte and The Manufacturing Institute skills gap and future of work study illustrate why labor is manufacturing’s greatest challenge in 2019. The following graphic explains why an estimated 2.4 million positions unfilled between 2018 and 2028 with a potential economic impact of $2.67T.

Deloitte found that the manufacturing skills shortage could put $454B of manufacturing GDP at risk in 2028 alone if qualified workers cannot be found to fill the open jobs. This is the equivalent of about 17% of the total US forecasted manufacturing GDP of US$2.67T.

  • Manufacturers leading the industry’s inflection point and growing 10% a year or faster are the most adept at integrating analytics, Business Intelligence (BI), quality management, and ERP integration.  By capitalizing on a single ERP platform that integrates analytics, BI, quality management and ERP into a single system of record, the fastest growing manufacturers make the level of intensity around customer success metrics their new normal. They’re able to do this by having superior intelligence into supplier quality levels, with 42% of these high-growth manufacturers tracking inbound supplier quality at a .95 level of confidence every day according to the recent Decision Analyst survey, Where ERP Is Making The Greatest Contributions Growth: IQMS Manufacturer’s Survey Results, Q2, 2018. They are more likely also to have quality management systems that can track the most basic metrics of scrap rates and rework to more advanced metrics of production yield rates.  
  • 76% of all manufacturers prioritize improving shop floor productivity as their most valuable growth strategy, 1.4 times more important than marketing improvements to drive more leads (44%) or growing partnership-based revenue (31%). The recent Decision Analyst survey completed in conjunction with IQMS/Dassault Systemes, Shop Floor Productivity Investments That Drive Manufacturing Growth finds that 61% are prioritizing operational improvements in 2019. Increasing sales to existing customers and achieving greatest cost optimization and reduction (both 53%) is a close 2nd and 3rd. Manufacturers’ greatest investment priorities for 2019 include investing in machinery upgrades, acquiring smart, connected machinery (both 41%) and investing in real-time monitoring/Manufacturing Execution Systems (MES) (38%).
  • Cybersecurity is becoming a higher priority for manufacturers as breaches and ransomware incidents continue to proliferate. Manufacturers are turning to the Zero Trust Security (ZTS) framework to secure every network, cloud and on-premise platform, operating system, and application across their supply chain and production networks There are several fascinating companies to watch in this area, including MobileIron, which has created a mobile-centric, zero-trust enterprise security framework manufacturers are relying on today. Centrify’s approach to Identity Access Management thwarts privileged account abuse, which is the leading cause of breaches today. Centrify’s most recent survey, Privileged Access Management in the Modern Threatscape, found that 74% of all breaches involved access to a privileged account. Privileged access credentials are hackers’ most popular technique for initiating a breach to exfiltrate valuable data from manufacturers and sell it on the Dark Web.

Conclusion

Manufacturing’s four common challenges taken together form the crucible that is strengthening the industry to grow despite the trade uncertainty it faces today. The four common challenges also form the foundation of what helps those manufactures growing 10% a year or more are doing today. First, they aren’t running production using Excel and having their financials on QuickBooks. To grow in an era of customer-centricity that has an intensity all its own, it takes a unified system that can provide a 360-degree view of manufacturing. That’s why ERP systems were invented, and they are the enabling technologies that provide manufacturers the intelligence and knowledge they need to take on these challenges, become stronger for overcoming them and keep growing even during turbulent economic times.

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This article was written by
Louis Columbus

Louis is currently serving as Principal, IQMS. Previous positions include Director Product Management at Ingram Cloud, Vice President Marketing at iBASEt, Plex Systems, Senior Analyst at AMR Research (now Gartner), marketing and business development at SaaS start-ups. Mr. Columbus’ academic background includes an MBA from Pepperdine University and the Strategic Marketing Management and Digital Marketing Programs at Stanford University Graduate School of Business. Louis also teaches MBA courses in international business, global competitive strategies, international market research, strategic planning and market research. Mr. Columbus currently is a member of the faculty at Webster University and has taught California State University, Fullerton: University of California, Irvine & Marymount University.