How To Make More Money Now

August 29, 2016 4:50 pm
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posted within Continuous Improvement, General, MPI

Fastlane MEP

It’s easy to get preoccupied in manufacturing these days with so many technologies emerging at the same time — the Internet of Things, cloud computing, additive manufacturing, robotics, etc. Can these new technologies transform your company?  Maybe— but only if you’re ready for them.

Manufacturers who focus on developing a strategy to prioritize improvements can put more money in their pockets now.  And, position themselves for a more lucrative tomorrow. Developing an improvement strategy is even more important if you are a small manufacturer.

Improvement Methodology

A recent study determined that 17% of manufacturing companies have no improvement methodology in place at their plants. And, two-thirds of those facilities belong to small manufacturers (revenues of less than $25 million).[1]

The findings show a correlation between the manufacturing facilities improvement methodology and their performance.  The manufacturers with “No improvement methodology” seriously under-perform compared to those who have an improvement methodology in place:

  • They lag in sales by $105,315 per employee per year with an average of $168,844 vs. $274,159 at plants that have an improvement methodology in place.
  • They’re much less likely to lower production costs: 22% reduced manufacturing costs (excluding purchased materials) over the past three years vs. 37% of plants with an improvement methodology.

Small manufacturers have major advantages and opportunities when adopting improvement principles. First, the scopes of their efforts are smaller — which means fewer people to train and faster implementations. Second, most improvement methodologies emphasize creativity and process changes instead of capital investments — preserving cash while still generating high ROI. Finally, a commitment to improvement can fundamentally change how a company operates, improving a multitude of functions and initiatives (Figure 1).

 

improvement methodology chart

 

Do you have an improvement methodology?  How will you improve?

 

[1] All data from the MPI Manufacturing Study, The MPI Group, 2015.