Currently, production companies in the manufacturing industry experience several bottlenecks that contribute to increasing operational costs in the supply chain. In this blog, we discuss 5 bottlenecks that negatively impact the profitability of your manufacturing business.
Since Covid-19, there has been a global scarcity of raw and other materials. The shortage of manufacturing resources and materials has tripled to almost 20%, leaving customers underserved. You cannot solve material scarcity directly, but you can stockpile a buffer. Or even better, you solve error-prone production processes by investing in smart technologies. This solution is much more sustainable and delivers significant savings.
Rising inflation also leads to a continuous increase in the cost of raw materials, finished products and various materials. Resulting in extreme stock fluctuations and smaller profit margins. Some companies are trying to capitalize on this by predicting inflation using data models. However, this is not without risks. Focusing on a flexible production process, on the other hand, makes your company a lot more agile when faced with unexpected market fluctuations.
High labor costs
There is not only an increasing shortage of materials, but also of skilled labor. The increasing demand for technical staff is accompanied by a rapid decline in the supply of qualified ‘digital natives’. This makes it difficult to continue producing sustainably. An automated production process can save a lot on labor costs, but it is not the only solution. Consider also, for example, an integration of operational systems.
Increasing numbers of product variants
Increasing demand for new product variants due to new trends and market developments increases the diversity of Stock Keeping Units (SKUs). What does this mean? It means that manufacturing companies have to have more pallet storage, more picking locations and more movements, leading to slow and less efficient warehouse operations. Smart technologies play an important role in improving this response speed.
Stricter environmental legislation
In recent decades, European governments have introduced stricter measures regarding environmentally friendly production. New European Commission legislation to protect human health and the environment states that the impact of environmentally unfriendly production should be reduced. This brings new challenges for manufacturing companies in various industries, including reducing energy consumption and waste in the production process. At the same time increasing market demand, reduced material supply and rising energy costs also play a role in the capacity to change. This increases the need to optimize production and logistics processes as much as possible and minimize energy consumption and material waste.
Get started on an optimal business process!
You cannot directly influence these five supply chain bottlenecks, but you can make the production process as efficient as possible. Would you like to find out about smart technologies that optimize your business process and increase the profitability of your company? Download our new eBook: 7 Cost-Saving Technologies for Manufacturing Companies.