During this time of year, everyone is encouraged to reserve a few moments for introspection to consider how the previous year compared to their expectations and to devise goals for the future by declaring a New Years Resolution. Despite the fact that only 8% of these resolutions are kept throughout the year, new goals are continuously set in the fog of optimism that exists time of year.
While embracing this month of introspection, one should also consider how their manufacturing business is doing. What surprising opportunities were encountered in 2023, and what challenges were overcome? What does the business look like 10 years from now, and what steps need taken today in order to reach those future goals? Our Manufacturing team at McKonly & Asbury meets regularly to discuss the issues our clients are facing, and from those discussions I have assembled 5 resolutions for manufacturers in 2024.
1. MODERNIZE HOW YOU REWARD YOUR EMPLOYEES
Recognizing and rewarding employees for good work does not need to be a major investment of time and money. There are many recognition platforms today which allow employers to reward their employees in a way that’s meaningful to them, encourages and highlights peer-to-peer recognition, and is not cost-prohibitive. We implemented an employee recognition platform over 3 years ago at McKonly & Asbury. Not only was it a very quick and easy implementation, but it continues to be used every day by our team. Recognizing and rewarding employees is one key part in creating a culture that people don’t want to leave.
While modernizing how to reward employees, consider whether the current incentive compensation plan is as good as it could be; many companies are using an incentive plan that was designed decades ago. As a new generation of employees reaches the executive level, this is an excellent time to have an open discussion about incentive structures with them.
2. TAKE THE NEXT STEP IN YOUR CYBERSECURITY JOURNEY
As manufacturers continue to implement Industry 4.0 technologies, cybersecurity becomes increasingly important. A cybersecurity breach not only jeopardizes sensitive data but could also have a significant impact on operations. By investing in robust cybersecurity measures, manufacturers can fortify their digital infrastructure and reduce the risk of cyber-induced downtime.
Cyber threats continue to evolve, such that the solutions businesses implemented a few years ago are not sufficient today. Manufacturers need to continually assess cybersecurity risks. While it can be daunting to get started, I recommend that one’s next step take place in the budgeting process by carving out more money to support investments to enhance the organization’s cybersecurity.
3. LEARN ABOUT THE MERGERS AND ACQUISITIONS ENVIRONMENT
Organization leaders should think about when the last time they met with a mergers and acquisitions consultant was. The mergers and acquisitions landscape is always shifting, so it is important that one is aware of the current market. Whether on the buy-side looking to grow strategically or the sell-side as one who is unsure of how to exit their business, an advisor will provide valuable insight into what can be done today to prepare for potential deals that might be years away.
4. IMPROVE YOUR INVENTORY CYCLE COUNTS
According to a 2023 Forbes article, the average manufacturing company is carrying 30 days more inventory than they did about 15 years ago. As a result, more cash is tied up in inventory and companies are left with less money to invest in things like automation. Many companies are relying more on their line of credit and taking on additional debt during a time with high interest rates.
Additionally, manufacturers have seen high levels of turnover in their warehouse staff. A less experienced warehouse team can result in misplaced inventory and inaccurate reporting of inventory levels. This leads to an increase in excess and obsolete inventory and can impact a business’s ability to fulfill customer orders. For all of these reasons, manufacturers should improve their inventory cycle counts in 2024, whether that’s by increasing their overall accuracy target, focusing more on location accuracy, or increasing the scope and frequency of their cycle counts.
5. LEARN HOW AI CAN ENHANCE YOUR BUSINESS
Everyone could stand to learn more about artificial intelligence (AI) this year; this is especially true for manufacturers, though, where AI can improve operational efficiency through predictive maintenance and quality control. Additionally, automation through AI can streamline routine tasks and enhance overall productivity. Furthermore, AI-driven insights enable manufacturers to forecast demand more accurately, optimize supply chain logistics, and adapt swiftly to market fluctuations.
Tying this into resolution #4, there are warehouses utilizing drones equipped with AI technology to perform inventory cycle counts at a rate of 300-600 locations per hour. That’s only one example, but clearly as competition intensifies, manufacturers leveraging AI will have a competitive edge.