3 Challenges Today’s Manufacturers Face

old school manufacturing in black and whiteIt seems as if there’s a new survey every week regarding indications of optimism, success, and employment in Nebraskan manufacturing. Recently, these surveys have been fairly positive, thanks to Nebraska’s low unemployment rates and relatively bright future in both education and manufacturing job growth.

Last week, the Omaha World-Herald even reported that Nebraska should see “consistent economic growth into early 2016.” The state’s Leading Economic Index rose by 0.17 percent last month to complete the fourth consecutive increase.

However, there was a dark spot. There has been a decline in manufacturing hours coupled with an increase in the value of the U.S. dollar. This, according to director of the Bureau of Business Research at the University of Nebraska-Lincoln, Eric Thompson, reduces the competitiveness of Nebraska’s export-oriented businesses—particularly in the agricultural and manufacturing sectors.

Why is this the case? Why, when economic growth is increasing, is there a decline in manufacturing hours and our competitive edge? This is just a small moment, and the sector will likely rebound soon, but it’s important to understand why these tiny bumps in the road happen, and how to fix them.

There’s no one magic solution to ensure consistent manufacturing success and growth. The world economy is like a massive web, and many factors can contribute to an overall tiny change on an index. However, these are a few of the primary changes that Nebraskan manufacturing is facing today, in 2015, that can improve the optimism and growth in survey reports.

Skills Gap: This is probably the most obvious challenge that the manufacturing industry faces today. You can read more about it in a past blog post, but the moral of the story is that companies could, and would, expand if they had enough skilled workers to fill all of the available positions. Manufacturers are realizing the importance of training laborers for both future and immediate needs. When surveyed, 92% of executives believe that there’s a skills gap, according to CNBC. It’s real, and it’s problematic, and until educational institutions can inspire more workers to do the jobs that exist, not to mention jobs yet to be created, manufacturing growth will be hindered by this gap.

Foreign Outsourcing: Again, this may seem obvious, but the problem of outsourcing has been somewhat stifled by buzz around reshoring efforts. However, according to Congressman Jeff Fortenberry for the Nebraska City News-Press, the assumption that offshore manufacturing is cheaper and more efficient continues to prevail for many customers: “A Nebraska small businessman manufactures a simple product that could be made anywhere…while most production has shifted to China, he has created a viable [Nebraska-made] entity. There’s a problem, though. One major retailer wants to buy the product from China. Not because of price, not because of quality—simply because the corporate culture has disturbingly acclimated to foreign outsourcing.”

Inventory Management Discrepancies: According to Tom Bonine, the president of National Metal Fabricators, “Discrepancies in inventory are a big problem for manufacturers … you’re losing profits. Asset-based lenders are not going to advance nearly as much for inventory as they will for accounts receivable. This means small and midsized manufacturers will have even fewer options for keeping inventory available.” Manufacturers must work on more effective inventory management solutions to minimize waste and maximize efficiency.

Questions? Comments? Need to learn more about any of these areas? Leave a comment in the section below, any time!

photo credit: Mt. Holyoke, Massachusetts – Silk. William Skinner and Sons. Quilling rayon, 1936 via photopin (license)