{title} icon

Articles From Lumsden McCormick

Build a Balanced Manufacturing Business Model

The technological revolution in the manufacturing sector, commonly referred to as “Manufacturing 2.0,” is enabling companies to operate faster and more efficiently than ever before. But embracing the future doesn't mean you need to throw out everything perceived as “old.” Your company's business model will likely be best served by balancing current practices with future-oriented initiatives. As you approach the end of 2019, focus your business's planning sessions on achieving such a balance. 

5 Aspects

During year-end business planning sessions, concentrate on these five key aspects of your business model:

1. The skills gap. The need to attract qualified workers remains one of the most daunting challenges in the manufacturing industry. Some manufacturers are moving away from traditional recruiting methods and building new corporate cultures that appeal to tech-savvy Millennials. As a result, your company might need to make cutting-edge technology available to workers and encourage them to apply it in unique ways. 

But remember, it's not just about attracting young talent — you also need to retain it. In addition, cultural shifts risk alienating older workers who have the experience and expertise you can't afford to lose. So be careful when making significant changes to ensure they're meaningful and that they include all of your factory's workers. Reverse mentoring can help bridge the generational gap. The idea behind it is that younger employees have a lot to teach older ones about work-related matters, especially those that relate to the use of technology and the Internet of Things. 

2. Supply chains. These days, the term “supply chain” is a bit of a misnomer because systems are no longer strictly linear. In fact, the supply chain is migrating from the office or factory to the cloud. Thanks to cloud-based data, the supply chain is more responsive and demand-based. In turn, companies that use these capabilities won't need to tie up as much working capital in inventory. To take full advantage of the cloud, you'll need to invest in big data and organizational restructuring. Also, while digital processes facilitate customer responsiveness, increased connectivity can threaten your supply chain's resiliency. These considerations are all part of the bigger balancing act. 

3. Customer service. In an increasingly competitive marketplace, customer relationships are critical. Many manufacturers are adopting greater interactivity and awareness to engage their customer base. What does this mean in practice? If you're trying to boost both quality and speed, enhance avenues for placing orders and find new ways to coordinate existing products with services.

For example, you might provide cloud-based access to sales data and inventory records with supply chain partners. If a supplier sees you're running low on a raw material, it might contact you about ordering more — or you might instruct the vendor to automatically reorder more material if your inventory level falls below a predetermined amount. Likewise, if you can check a key customer's upcoming orders, you might be able to anticipate its need for a particular part and ramp up production. This kind of change requires a revised business model, including exclusive long-term contracts with certain customers and suppliers. Over time, the supply chain may shift as economies of scale emerge. However, this connectivity will also provide new risks for manufacturing companies to factor into the equation.

4. Big data. The importance of big data can't be overstated. However, it's one thing to collect the data and another to analyze it and implement your findings. Make sure you allocate enough of your budget to data projects that enable you to get a leg up on the competition. To do this, you'll need a comprehensive management system. This includes platforms for gathering data, integrating it into your operations and examining the data to produce actionable insights. 

5. Enterprise protection. To take advantage of strategic opportunities, you must first manage compliance, operational and strategic risks. Even if you know how to head off traditional manufacturing risks — for example, mechanical failures, worker injuries and growing competition — you may not be prepared for current and emerging threats. For example, data breaches or denial-of-service (DOS) attacks can strike your systems without warning. If you haven't made network security a priority and aren't prepared to react to an incident 24/7, cyberattacks can shut down factory operations and lead to major financial losses and negative publicity. 

Distinctive Challenges

Though technological advancements can bring opportunities for improving performance, manufacturers can't afford to abandon their core strengths. Success as a 21st-century manufacturer requires a careful balance between time-tested business models and innovative, technology-driven improvements. Diligently assess where you are today and where you plan to go tomorrow.

Build a Balanced Manufacturing Business Model

for more information

Jon has been an active member of the auditing and accounting group for the past twelve years and manages audits, reviews, compilations, and consulting services for manufacturers, contractors, and other commercial business entities. With extensive experience in planning and performing these services, Jon is responsible for managing fieldwork performed. He also manages the Firm’s pre-qualification to perform third-party reviews of tax credit applications for the Film Industry according to agreed-upon procedures established and published by Empire State Development (ESD), and serves as the audit practice leader for the Firm's manufacturing niche. In addition, Jon serves  a variety of exempt organizations.

SIGN UP TO RECEIVE OUR LATEST ARTICLES, NEWSLETTERS, AND EVENTS. SIGN UP

Comprehensive. Proactive. Accessible.
How Can We Help?