Whenever you hear about the decline of manufacturing in advanced economies such as the United States, its usually in the context of the dwindling fortunes of giant conglomerates. Yet, the struggle is worse for small manufacturers as they are unlikely to have the same depth and breadth of options that large corporations do.
The following are the major difficulties persons venturing into small manufacturing in the US must be prepared to deal with.
Dearth of Skilled Workers
Manufacturing companies rely on skilled workers to perform tasks ranging from configuring automation systems to welding. Unfortunately, the decline in manufacturing has created a vicious cycle whereby fewer people are interested in skilled trades due to the lower prospects of gainful employment.
For large manufacturers, there’s a solution: internal training programs where new staff are taught the skills they’ll need. While some newly trained workers may quickly leave the organization, the size of the enterprise means there’ll always be enough trained personnel remaining to fill the gap.
The same cannot be said of small manufacturers. They can scarcely afford running a training program and even when they do, the exit of just one trained worker can significantly disrupt operations.
The rise of automation in manufacturing has been a hot industry topic for several years now. Certain manufacturers such as car makers have long relied on robots to improve efficiency, reduce errors and cut costs.
Now automation is set to move into manufacturing sectors it hasn’t been to before while developing even deeper roots in areas where it was already well established. It’s not just about incorporating robots in production but also leveraging applications such as PhotoModeler photogrammetry software that ensures remotely taken measurements are accurately applied.
But automation won’t be the blessing it’s touted to be for all manufacturers. Small manufacturers will be particularly hard hit. Automation costs money and some of the systems and equipment are out of reach for smaller enterprises. This impairs their ability to stay afloat since they are not only outcompeted in production volumes but in precision too.
Stricter Trade Regulations
The 80s, 90s and 2000s saw a relentless drive toward globalization and the removal of trade barriers. This accelerated even more dramatically when China, the world’s most populous country, joined the World Trade Organization.
Over the last few years though, some countries are starting to become more inward looking. The United States is the most prominent example. On the face of it, protectionism would seem like a good idea for US manufacturers. However, any benefits from rising trade tariffs are likely to be far more beneficial to large US manufacturers than small ones.
Large industries have the financial muscle, distribution network and contacts to maximize market opportunities quickly. Smaller players derive part of their competitive advantage from low cost imported inputs thus diminishing the economies of scale larger companies enjoy.
If the trend towards greater protectionism by the US persists, it could herald tougher times for small manufacturers.
More Demanding Customers
Due to a combination of rising support for local brands, growing environmental concern and increased scrutiny of a company’s ethics, customers are a lot more keen on who they are buying from. At first glance, this looks like something small manufacturers could take advantage of.
Often, they have a more intimate connection with their host community and greater flexibility in altering their operations or product to conform to local preferences. Yet, this flexibility can be a small business’ biggest nightmare. It can create a sense of entitlement in the local community who then demand for ever more concessions if they are to continue buying the product.
At some point, these concessions can become unsustainable and make it difficult to continue running the business.
Overall, none of these issues is insurmountable. What’s important is for anyone currently in or planning to go into small manufacturing to recognize them and develop a well-thought-out strategy to overcome them.