Thursday 01/17/2019

Unique Challenges Manufacturers Have and Combating Those Challenges

Sal Caroniti is the Chief Operating Officer at Corrigan Krause.

Regardless of the specific industry within the manufacturing sector, today’s companies face a variety of challenges ranging from employment issues, international competition and margin compression due to pressures placed on them from their customers.

With the national and State of Ohio unemployment rates being 3.9% and 4.6%, respectively, companies are faced with increased competition for top talent, leaving manufacturers struggling to keep up with customer orders and production necessary to fulfill demand. As companies compete for skilled labor, the cost of overpaying individuals and the fear of rising labor costs are on the lips of most small business owners.  To combat these issues, companies are protecting their own by providing above trending annual pay increases and rich benefits.  Companies are also combating labor shortages by implementing robust training programs to strengthen their workforce’s skill set rather than overpaying for external employees. The cost of a formalized training program is huge, but the rewards reap many times more in returns.

Unless a company has a very unique product that it manufactures, more often than not, there is someone else out there (outside of the U.S.) who can make it cheaper.  The challenges that international companies face today are rising import duties, increased transportation costs and a strengthening U.S. dollar.  With all of this said, sometimes even those factors working against international companies can even result in an overall landed cost cheaper than a domestically produced product.  What U.S. companies are doing to combat these pricing pressures are to beef up their quality and engineering efforts that many of the low cost international companies struggle with in early stages of product development.  International companies with high-end engineering and product development initiatives often times are just as or more expensive as U.S. competition.  All in all, producing a cutting edge, well-engineered, quality product goes a long way to keep competition at bay.

Lastly, it is important to form relationships with your customers, so that they understand the mounting pressures of increased expenses while working with you on possible design changes to minimize or reduce unnecessary processes that drive up manufacturing costs.  Combating uncontrollable rising costs in labor, benefits and other overhead costs can be discussed with your customers up front, so that they do not expect year-to-year price concessions that would normally be expected by a customer who does not understand your industry pressures.

By using just some of these recommended ideas to combat these challenges of today’s manufacturers will benefit the overall success and longevity of the company for both the owners and employees.

Prior to joining the Corrigan Krause team, Sal spent 15 years as the president of a local manufacturing company.

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