Manufacturing Profitability
Paul Trudgian Ltd | Supply Chain & Logistics Consultancy No Comments

Although supply chains, and specifically manufacturing, are becoming more and more adept at using technology, there are still some key problem areas. Technology has both created the solutions, and highlighted the problems. The three main areas that we see negatively affecting manufacturers in terms of productivity, and consequently profitability, are: data management (and how it’s enacted), inventory and gross margin management.

Whilst each has its own uniqueness qualities and brings specific problems, these aren’t completely independent areas – they all impact on each other. Solving problems in one may solve, or create, problems in another area. They need to be looked at collectively as well as independently, in order to facilitate solutions to improve productivity.

Data Management

The problem with data management for those in manufacturing is that it is an enormous and unwieldy beast. Taming data is akin to taming a rabid bear. It cannot be done without an expert hand, and of course, cutting edge technology. Typically in manufacturing this has been done on a somewhat piecemeal basis. Different areas and tools collect data, then different areas and tools again process the data, before it heads to some intelligence software, and management, who act on it. It’s not a linear process, and it’s rife with problems.

For a start, what the data says to one analyst frequently differs from someone else’s interpretation. Then there is the problem of deciding which data you will actually use. You can, in effect, actually have too much data so that it becomes useless. This problem only grows as your business grows.

This is a real problem, as data management should aid and facilitate improvements in the bottom-line, and help to increase productivity. You need to understand data management, and have the experts and tools on board to do so, or it is meaningless.

Visibility becomes key: you need to see and understand what is going on where, why, and when. Technology makes this possible. With smart manufacturing, data can feed through, automatically, to where it needs to go. Decision making becomes easier once more, and productivity increases.

However, simply throwing technology at the problem can exacerbate the problem. You need the right technology for your manufacturing business. This will require you assessing your needs and determining the right manufacturing data management technology solutions. For example, you will need to look at past data and see where visibility issues lie, where are the weak links in order fulfilment, where could changes happen? This ‘audit’ approach requires a skilled hand, as well as time and resources you may be lacking.

For help with getting your data management under control, the team at Paul Trudgian can help.

Inventory

Inventory is another area which can cause manufacturers an enormous headache. Getting the balance right between too much, and not enough, is a constant battle.

Too much inventory and you run in to problems with storage, manpower to organise it, insurance, and even things such as quality deterioration or fashion changes, or the item becoming obsolete. It’s profitably dangerous to hold on to too much inventory.

Conversely, too little inventory, and you run the risk of supply problems, not meeting customer expectations, and unfulfilled orders. All hit your bottom-line hard. If you’re part-way through the chain, and not at the end, too little inventory can compound problems throughout the whole chain. If a manufacturer runs out of one part, the knock-on effect ripples through the whole chain with tidal-wave sized problems. Operational costs mount, and suddenly inventory management is a huge problem.

At Paul Trudgian, our inventory optimisation consultants can help you get your inventory under control and optimised so that you can increase your productivity and profitability. We recognise the impact that good, or bad, inventory management can have on your manufacturing, and help you deal with the unpredictability of supply and demand. We do this through looking at, and optimising, cycle stock and safety stock by making sense of historical and forecast data on a product by product basis. We work with your inventory problems in whatever way you need us.

Gross Margin Management

Both data management problems and issues with inventory affect your productivity, and your profitability. Your bottom line is directly impacted by your success with data management and inventory management. Your profitability is at the heart of every element of your manufacturing operation. It’s not just a straight-forward by-product of sales, and your accountant’s hand with the sums. At the core of this, is your gross margin management, and its impact on your overall process.

Gross margin relates to the cash which is there for expenses, and integral to your inventory management. In our experience, how you manage the gross margin can affect the overall profits and cash flow of the business. Therefore, we recommend the following:

  • Choose and Manage Suppliers Carefully: In order to ensure that your margins are working in your favour, and under control, you need to keep a firm hand on your suppliers to ensure you are always achieving the best in terms of cost-effective materials.
  • Manage the Balance: You need to take a careful and skilled eye to striking the right balance between the amount you sell to a wholesaler for, and the amount it costs you in real-terms. This is a tricky balance to manage, and it may make more sense to sell direct to the consumer or retailer.
  • Look at Your Industry: When it comes to gross margin management, not all industries are the same. You need to look at others within your same industry in order to establish what works best in your instance.

Increasing Productivity in Manufacturing

By assessing and effecting worthwhile changes in data management, inventory management, and gross margin management, it is possible to identify and improve the areas where productivity has been hindered. This inevitably improves profitability. None of these areas should, or need, overwhelm a manufacturing manager, but it does take expert management and a careful approach.

At Paul Trudgian, we can help you increase productivity in your manufacturing. Our experience and expertise will drive your productivity. Get in touch to see how we can help.

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