We talk with manufacturing businesses of all sizes and differing industries on a daily basis and hear first-hand about problems they face. Their struggles are very real, and with that in mind, we have outlined the most pressing hurdles and give insight into how manufacturers can and have addressed them head-on.
Lower costs overseas: Competition
British manufacturers face competition not only from our own island but further afield. China in particular has been a source for intense competition as they're able to produce products for a fraction of the price compared to here in the UK. That said, whilst the cost of manufacturing may have risen in recent years, so has quality. In fact, nations such as the UK, tend to be known for the quality of the products and can therefore demand a higher cost.
British manufacturers must ensure they can outperform the competition on this front - they have to up their game and remain at the forefront of quality assurance. A key factor is market research and small-scale testing of the market. A popular tool for this seems to be social media in its many different guises.
Lacking a real-time view of inventory means it is hard to know whether customer demands can be met. Without such, it's almost inevitable that you and your business will find yourself without the necessary stock. One solution would be to carry extra stock, however, the downside to this is the increased costs and subsequently the cuts made into profit margins.
The amount of waste caused by a production line can cause ongoing headaches. It's difficult to minimise waste when other priorities seem more pressing - we understand that. With customers holding you to high standards of product quality, when a particular batch doesn't pass standard, you may have to repeat the production process. Each time this happens, you put your production goals at risk and cut even further into profits. Quality assurance procedures and processes are key but over cautiousness can be costly, too.
Businesses that import or export should also consider key factors when transacting in foreign currencies. Foreign currency transactions are sensitive to fluctuations within the exchange rate. Prices agreed with customers or suppliers on one day, will likely rise or fall, when the exchange rate changes.
Are you best placed to price your goods in the local currency of the country with which you're trading?
Importing components priced in a foreign currency, which form part of the product you're selling in sterling poses a different issue: you'll need to decide how to price those goods to reflect the exchange rate. Unfortunately, currency is a business risk that will not disappear for any UK company who have desires to trade with or even expand overseas.
Venturing into the unknown comes with risk, and SMEs will often face daunting logistical and financial challenges in reaching such far-flung markets. It is often in those initial exploration stages that manufacturers start reaching out for guidance about appropriate strategies and tools to avoid financial headaches. Furthermore, if you are trading with companies in the Eurozone there is even more to think about regarding Brexit - a conversation we will revisit another day.
The preceding issues inevitably boil down to pounds, shillings and pence. As mentioned, this subsequently has an impact on what we all go to work for - profit. Sometimes it may feel like a catch 22 but there are ways to mitigate these risks.
These are just a few of the most hard-hitting issues, which face many of the manufacturing businesses we work with today. Whilst they're not exclusive, we'd like to hear your thoughts on hurdles you've overcome and how.