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Manufacturers face ongoing pressure to cut cost

03 August 2020

One in three (33%) of senior decision-makers at mid-market discrete manufacturers identified 'rising costs of raw materials and components' among their two main economic challenges over the next three years, while just under a quarter (22%) highlighted 'rising costs of shipping goods'. That’s according to a recent independent study commissioned by advanced technology solutions and services provider, delaware.

In light of this, it is unsurprising that 26% of the sample referenced ‘reducing operating costs’ among the top operational challenges they are facing in their supply chain, ahead of getting products or services to market faster (22%) and improving product quality (21%).  Cost is a challenge even in streamlining manufacturing operations. 39% reference it among their top two, ahead of employee training (22%) and regulatory restrictions (21%). The need for enhanced management and control of costs is, of course, being brought into ever-sharper focus by the ongoing COVID-19 pandemic.

“Keeping costs down across their operations is an overriding concern for every manufacturer in these uncertain times,” said Richard Seel, Managing Director (UK & US) at delaware. “In our survey, more than a quarter (28%) reference that ‘labour costs have risen’ as an impact of company-implemented or regulatory driven sustainability requirements on their supply chain. In addition, 38% of respondents identified that rising cost prices will be one of the biggest impacts of Brexit on the supply chain.

“Added to this, spending cuts and much tighter cost management will be an inevitable and pragmatic response to the virus outbreak,” continued Seel, “as manufacturers look at ways in which they can improve the bottom line.  Yet, the pandemic is set to have a far-reaching, long-term impact on the manufacturing sector, so manufacturers will also need to look at how digital transformation and the use of the latest advanced technologies can keep costs under control over the longer term.”

That’s why it is positive that cost reduction is widely regarded as a driver of innovation by the survey sample. Nearly half of the survey sample (47%) ranked it among their top two reasons for why they wanted to innovate or make changes to their organisation.

According to Seel: “Implementing innovative technologies is increasingly seen as a way to reduce costs by businesses today and that is going to be crucial in the pandemic recovery. Just under a third (31%) of our sample referenced that the perception is that these technologies will improve productivity, while 24% said the perception is that they will reduce costs.

“The potential of innovation to drive operational efficiencies is clearly there but it is important that manufacturers make the right technology choice as the economy continues the process of recovering from the virus,” he added. “ERP and EAM offer a positive route forward in this regard.”