Six Biggest Manufacturing Company Challenges In 2018

Political and economic uncertainty have profoundly affected the manufacturing industry in the last few years.

While this should be a time that manufacturing companies thrive, especially when considering the wake of the fourth industrial revolution, it is time when many manufacturing companies are facing significant challenges.

The fourth industrial revolution, or Industry 4.0, should be allowing manufacturers to adopt new digital technologies to become more competitive. However, there is a range of manufacturing company challenges affecting the sector which has lowered confidence for the success of 2018.

Here are six of the most significant manufacturing company challenges to face in 2018.

Six manufacturing company challenges for 2018

  • Rise and cost of automation

While automation is generally seen as a positive by manufacturing firms, the cost of implementing automation technologies is a distinct challenge for manufacturers. Automation and Industry 4.0 are sweeping across the globe. The ability to do more, at a higher quality in a faster time can make manufacturers much more capable.

However, with such a fast pace, the technologies are changing so quickly it can be difficult to know which is the right machinery to buy and when to do it. With constant updating, you do not want to have regular upheavals in the business. As well as this, it can be hard for firms to put up the necessary capital to purchase the new machinery that is needed for Industry 4.0.

  • Falling consumer demand

Unfortunately, consumer demand is one of the biggest challenges that manufacturers face in 2018. For consumers, essential spend has increased which threatens disposable income. With less disposable income available there is often less demand for manufactured products.  

In 2017, there was a significant period where household expenditure declined. At the same time, the Financial Conduct Authority also issued a warning that half of UK adults are financially vulnerable. With fewer sales, manufacturers may struggle to make a profit this year.

  • Drop in productivity

Worryingly, 2017 showed the real challenge that manufacturing companies face which is that of productivity. In the UK, overall productivity fell. However, in the manufacturing industry, in one quarter, productivity fell by 1.3%. The fall in productivity was coupled with the fact that working hours grew, meaning companies were spending more money on wages and receiving less output than before, creating an unsustainable business model.

While productivity may be increased with automation, the fact that lower productivity was prominent in 2017 and 2018 means it may be hard to ensure the right motivation and mindset to kick-start productivity again, added to the fact that there may be less money for investment due to the poor performance this year and last.

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  • Manufacturing skills shortage

If manufacturing businesses have not been affected by the drop in demand and productivity, then the fact there is a skills shortage across the manufacturing industry may be hampering their growth plans. The introduction of automation has led to a fragmentation in the manufacturing environment. With low-skilled jobs largely replaced by automating processes, there is still a demand for high-skilled jobs within the manufacturing sector.

Worryingly, the prominent skills shortage in the UK is expected to cost the UK economy £90 billion a year, which could leave the average worker over £1,000 worse off every single year. Investment in skills is failing to meet the needs of the industry. In fact, it is predicted by 2024 there will be a four million people shortage of highly skilled workers and six million people that are too low-skilled.

  • Brexit

With the March 2019 deadline for Brexit fast approaching, many manufacturing companies are still none the wiser of the implications that Brexit will have for them. So far, many manufacturing companies have suffered as a result of the weak pound when it comes to importing supplies. However, have proved stronger in export demand as foreign buyers have taken advantage of the weak pound to purchase goods cheaper.

With the potential end of tariff-free trading, this is the year that manufacturers need to have the right information so that they can make an informed decision for their future business plan once Brexit is finalised.

  • GDPR Enforcement

From the end of May, business across the European Union will be affected by the General Data Protection Regulation. Any companies found to be non-compliant could face a €20 million fine or a penalty of 4% of their global annual turnover, whichever is greater.

Manufacturers need to make sure that their data security plan is robust and secure and make sure there are plans in place to prevent data breaches. As many manufacturers gather a high amount of data for product research and design, there is likely to be a spotlight on manufacturers when it comes to data security.