Published Thursday 13th January 2022
Manufacturing organisations are facing a huge range of pressures as we enter 2022. Some of these are a result of COVID, whereas others come from emerging opportunities in technology.
In an increasingly cost-driven world, the amount you’re spending in these cost areas can make the difference between having a tough 2022 or making it your most successful year yet.
Our advice is not to blindly accept any cost increases you’re facing as part of the current business landscape. As we explain below, there is always the opportunity to make worthwhile savings.
Supply Chain Disruptions
The COVID pandemic has laid bare the connectivity of our world like nothing else before.
One of the biggest impacts of COVID-19 for businesses has been the various types of lockdowns enacted by governments worldwide. These lockdowns have led to staff having to stay at home and factories working at reduced capacities or, in some cases, not at all.
The impact of lockdowns isn’t just direct for manufacturing organisations. Its impact is felt as much, if not more, through the ripple effects in the global supply chain.
Almost all major organisations have dealt with supply shortages over the last 12 months. As a result of the uncertainty, many businesses have had to downgrade their expectations going forward.
However, with every challenge comes opportunity. Many manufacturing organisations have used the last few months as a chance to take stock and perform some much-needed analysis on their current supply chains.
By improving supply chain visibility, utilising current data and forecasting potential risk scenarios, manufacturers can ensure their supply chains are future-proofed or make necessary changes if otherwise.
As the pandemic has proved, ensuring a robust supply chain is crucial to long-term cost optimisation.
COVID pressures have hit many areas, some of which don’t immediately spring to mind. Packaging is a particular area where costs have steadily climbed over the last 6-12 months.
A significant issue has been the spiralling costs of papers, putting intense pressure on the price of cardboard packaging. However, the packaging sector has also suffered from the same supply chain issues as other industries.
A slowed packaging supply has led to companies stockpiling, which has further compounded the issue. Now, packaging costs have increased so much that they can no longer be ignored by organisations that rely on these products.
Before blindly accepting any increases, it’s crucial that you have discussions with your suppliers. You should also look to see if you’re using the right packaging most efficiently; with our help, you may find that you can save much more on your packaging than you thought.
Automation & MRO
Automation has been a key part of manufacturing efficiencies for many years. With technological developments in many areas, the opportunities for more improvements will only increase.
However, while automation is key to development, an area that is often overlooked is the increasing importance of MRO: maintenance, repair and operations.
MRO can often be a small cost when taken in isolation. However, with more dependence on informational and operational technology, these expenses will only increase. If left unchecked, these once minor expenses can spiral into hugely damaging costs on your organisation’s final balance sheets.
Automation is a vital pillar of any manufacturing organisation’s strategy, and MRO should be considered part of this. Having an advanced MRO strategy doesn’t only save you on unexpected costs, but it can also open up more opportunities for savings through negotiations with suppliers.
One of the biggest priorities for governments worldwide is transitioning to a carbon-neutral society. The general public is also increasingly aware of the importance of sustainability and is starting to make more purchase decisions with this in mind.
As a notable contributor to this international effort, the manufacturing sector is likely to be at the forefront of governments’ attention. All organisations need to be taking steps to achieve carbon neutrality for themselves.
For manufacturing organisations, achieving carbon neutrality will need multiple strategies that look both inwards and out. Combining internal efficiencies and investments with an external approach involving carbon offsetting can help businesses reach their sustainability goals effectively.
Cyber security has gone beyond being an emerging threat. The consequences of not being adequately prepared are very real for many major manufacturing organisations.
However, as mentioned before within automation, factories are becoming increasingly connected. Technology presents many opportunities, but it will also increase the number of potential security threats for which organisations need to be prepared.
An organisation-wide approach encompassing both information technology and operational technology is required to avoid cyber security threats. Manufacturers must ensure all staff are aware of and adequately trained against any potential threats. It is also worth checking that you are insured against cyber threats.
While the worst of the COVID pandemic might have passed, the number of potential concerns for large scale manufacturers shows no sign of reducing. However, with a focused and long-term approach supported by sector-based expertise, it is possible to combat all the obstacles mentioned above.
Here at Expense Reduction Analysts, we have a team of experts with decades of experience in the manufacturing sector. No matter your ambitions for 2022, our specialist team can help you reach your goals through practical and long-term cost reduction strategies.