How to Boost Your Manufacturing Productivity and Profits

The manufacturing industry has experienced rapid growth, with a value-add to the economy of $2.89 trillion in 2023. However, conducting business in this sector has also become increasingly complex due to workforce challenges, market trends, technology influences, and more.

Manufacturers looking to increase productivity and profitability must prioritize operational efficiency on their path to growth. This means refining processes to reduce waste, costs, and time without compromising on quality or output.

Operational Efficiency in Manufacturing

Manufacturers can boost their profits and improve their efficiency in various ways, including lean manufacturing processes, modern technologies, Industry 4.0 applications, data, AI, and more.

Technology

For manufacturers looking to get ahead, a strategic digital approach is paramount. Reliance on legacy systems creates obstacles for organizations as they compete with others who actively embrace and leverage the latest technologies. In fact, studies show manufacturers that add new digital technologies are the ones that hit their cost targets.

Smart Factory Technology

The Industrial IoT (IIoT) enables manufacturers to make informed, strategic decisions based on real-time data. Predictive maintenance and predictive resolution leverage data analysis to identify anomalies in equipment performance and provide insights on resolving issues with greater certainty. This interconnection of devices within an existing internet structure supports cost reduction, higher efficiency, improved safety, and product innovation.

And while there’s much opportunity, only about 7% of manufacturers say they have effectively implemented digital factory operations.

Operational Technology

Careful planning is crucial to ensure the success of any technology implementation, or you risk giving up the very efficiency you’re hoping to achieve. Nearly 70% of organizations say technical debt hinders their ability to innovate.

The key is choosing technology that actually targets process inefficiencies and folds into your bigger picture, not purchasing the solution in a vacuum.

The right business solutions can increase operational efficiency by helping manufacturers better understand:

• Expense forecasting. Technology gives visibility into the root causes of expenses to help manufacturers develop a more strategic approach to a better bottom line.
• Production costs. Technology applications can also monitor production costs in real-time, from raw materials procurement to delivery. For example, manufacturers can discern accurate margins with better insight into inventory costs.
• Inventory tracking. Manufacturers can use technology to track inventory levels and optimize the ordering process. The result is increased visibility, reduced inventory holding costs, lower volumes of stock-outs, and more timely customer deliveries.

Inventory Efficiency

Improving inventory efficiency is a pervasive industry challenge. Manual stock checks, for example, are inefficient and prone to mistakes, leading to inaccurate inventory levels and unidentified losses.

Common challenges include:

• Incorrect or poorly managed pick logic
• Warehouse layout
• Incorrect quantities
• Limited inventory visibility
• Inefficient inventory management processes
• Identifying misplaced materials
• Tracking waste and obsolete goods

With the threat of rising material costs, manufacturers must address these challenges head on. Businesses can optimize their inventory, reduce costs, and improve operational efficiency, ultimately gaining a competitive advantage in the market.

Take for instance, SkinScript, a skincare products manufacturer and distributor. By implementing an advanced inventory and warehouse management system, coupled with their ERP, the company was able to triple their volume without needing to hire, add space, or upgrade their technology.

Data-Driven Decision-Making

Real-time data can drive future impacts. Manufacturers can lower costs, predict future impacts, and identify inefficiencies.

With accurate, integrated data, manufacturers can:

• Predict equipment failures to prevent production disruptions.
• Assess rising cost areas like employee turnover or raw material procurement.
• Forecast the future based on current inventory, market fluctuations, and past consumer behavior.

Accurate, real-time data is especially crucial for supply chains. A McKinsey survey found that 45% of businesses have limited supply chain visibility. This lack of visibility, coupled with component offshoring, unfavorable business climates, and shipping delays, can lead to disruptions and inefficiencies across the manufacturing sector.

Improved supply chain visibility equips you with the data you need to make smarter decisions today and into the future. It will help you pivot sooner when an issue arises and identify areas to proactively manage risk.

Artificial Intelligence

Artificial intelligence (AI) is becoming commonplace in manufacturing. This includes investments in manufacturing, production, and inventory management assets like robotics, as well as language learning models in business functions.

From an efficiency standpoint, manufacturers are using AI to streamline processes, enhance production quality, and improve overall efficiency.

Recent research found that more than half of manufacturers (57%) plan to include AI in their production operations within the next few years. And for good reason. Studies have shown that manufacturers reduced machine downtime by 30 to 50% when utilizing AI.

While launching an AI initiative may seem daunting, there are ways manufacturers can increase efficiency right now for little to no dollar investment.

• Educate yourself. Invest two to four hours a week learning about AI and how it can improve your business.
• Develop use cases. Identify where AI can bring value to your organization. We’ve seen companies achieve success using AI for predictive maintenance, demand forecasting, and supply chain optimization.
• Start with data. AI runs off data. If your data isn’t in order, your AI strategy will fall flat. Prioritize a robust data infrastructure that collects, stores, and makes data easily accessible by conducting a comprehensive data assessment.

Operational Efficiency and the Workforce

Effectively addressing the challenges of a tight labor market and workforce is a top industry pain point. In fact, by 2033 approximately four million manufacturing jobs will likely be needed, with 2.1 million expected to go unfilled.

To attract and retain employees, many manufacturers are turning to technology to lighten the workload. Automation and robotics can help bridge the talent gap and help drive optimal performance. Having advanced, competitive technology in key areas of your operations – including your factory floor – can not only make you more attractive to up-and-coming industry professionals but also more efficient.

For example, introducing robotics to the factory floor can help employees be more productive. Implementing a co-bot for an otherwise two-person activity, allows one person to perform other tasks or enables manufacturers to double their output. Fully automating a strenuous, repetitive task allows employees to perform more higher-value work that requires more critical thinking and focus.

Manufacturers can also implement similar technology for administrative tasks. If the accounting department is bogged down by manual data entry and processing, automating those processes and integrating software to streamline data flow will boost both productivity and accuracy in financial processes. By recognizing the value of a skilled and engaged workforce, companies can foster an environment that leverages automation as a complement to human capabilities.

Manufacturing Operational Efficiency in Action

When manufacturers prioritize operational efficiency, they set themselves apart from the competition. Manufacturers with cloud-based supply chain management software, advanced analytics capabilities, and data-driven decision making will be able to respond more readily when there is a shortage upstream of their operations. This type of proactivity will ensure visibility, allowing manufacturers to quickly identify which customers will be affected, where else to source inventory, what alternatives they have, and more.

Operational Efficiency is Critical for Tomorrow’s Success

To cut costs, boost productivity and enhance quality, you need to focus on operational efficiency. But this requires careful planning across all aspects of your business.

Remember, operational efficiency is not a one-time goal, but a continuous process of improvement and innovation. Manufacturers who want to stay ahead of the curve and achieve long-term success need to invest in the right solutions that can help them optimize their operations and deliver value to their customers.

When done strategically, these technology investments can enable manufacturers to gain more visibility, agility, and flexibility across their supply chain and production processes. If you are ready to take your operational efficiency to the next level, Eide Bailly can help you transform your business.