Part of a series based on the National Center for the Middle Market’s new research report, Middle Market Manufacturing: How to Thrive in a Transforming Environment, our third post outlines several new risks today’s manufacturers face and offers tips for rising to the challenge.
In a recent survey of 250 middle market manufacturing executives, the Center learned that key changes in the industry—increased globalization, new technologies, greater supply chain integration, and the addition of value-added services, to name a few—result in exposure to risks that simply did not exist just a few short years ago. For example, manufacturers must now be aware of customs regulations and foreign and domestic trade policies. Cybersecurity is an increasingly important issue. And the more they install, monitor, and service the products they make, the more their liability grows.
By finding ways to successfully and efficiently manage and mitigate these risks, manufacturers can free up resources to better focus on the opportunities at hand. According to our research partners at Chubb, the largest commercial insurer in the U.S., there are several steps manufacturers can take to develop sound strategies for risk mitigation.
Key considerations include:
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Developing a comprehensive enterprise risk management strategy.
As a first step, manufacturers need to talk with their advisors—insurance partners, bankers, auditors, and lawyers—to fully understand the risk environment they currently face. This can be the basis for a risk management strategy, which should be regularly reviewed and updated as operations continue to become more global, new services are added, and processes becoming increasingly digitized.
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Emphasizing enterprise resource planning and lean operations.
Increased integration along the supply chain, faster turnaround times, and greater product customization all reduce the margin for error to next to zero. Companies wishing to compete need to streamline their manufacturing operations as much as possible, eliminate waste, and maximize the potential of all their resources. Increasing the focus on operational excellence can help companies better meet their growing obligations to customers.
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Sharpening finance capabilities.
The more manufacturers do business overseas, the more skills and resources they need in their financial toolkit. The need to understand issues such as currency risks and trade credit insurance will escalate, and manufacturers can benefit from ensuring their finance team gets the training and development opportunities it needs to succeed. Similarly, manufacturing CFOs will need to understand the economics of services.
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Creating a cybersecurity plan.
The research shows that the importance of cybersecurity is on the rise, and for good reason. As digitization increasingly becomes the name of the game in manufacturing, businesses need new, sound strategies to protect their operations and their customers’ and suppliers’ information. Smart products need to be made secure. Greater integration between IT and operations (including robotics, process controls, and data analysis) is a must. This will not only strengthen safety and security; it can also improve productivity and profitability.
Get more insights into the evolving manufacturing environment.
For the whole story on how the manufacturing industry is transforming and what middle market businesses are doing to remain competitive, download our full research report, Middle Market Manufacturing: How to Thrive in a Transforming Environment.
Next in this series
Spinning Challenges into Gold: What the Fastest-Growing Manufacturers Do Differently to Succeed in an Evolving Industry