Continued Industry Pain Points

Manufacturers have faced several challenges in the last few years (COVID-19, supply chain shortages, labor shortages, inflation) and have had to evolve to stay current and remain competitive in the market. While they have overcome these challenges, there are still several pain points the industry is faced with and must deal with going forward.

Automation Challenges

A very common challenge manufacturers face is the high costs of automation. The upfront costs for the machinery are extremely high and limit the size of the company that can utilize or implement automation in their business. In addition to the high costs, the machinery requires additional infrastructure which increases the price tag of automation. With the high upfront cost, the expectation is that it would also significantly reduce labor costs, but often it creates a new challenge. While it does reduce labor costs somewhat, it does not eliminate the labor force and due to the complexity of the automation, manufacturers will need a highly skilled and technical workforce able to work with the robots as well as troubleshoot issues as they arise. With the continued skilled labor shortages, it is challenging and expensive to hire and retain skilled labor. Due to these factors, businesses need to assess the up-front costs as well as the costs to hire and retain the skilled labor necessary to operate the machinery.

Interest Rates

Due to record inflation in the economy, the Federal Reserve has been fighting to control inflation and it has resulted in rising interest rates. Companies will need to seriously evaluate any large capital outlay or expansions to make sure it makes sense for operations and will need to evaluate the return on investment and compare it to the borrowing costs to make sure it is worth it to go forward. This will also affect customers’ purchasing ability. With higher rates, businesses may reconsider large purchases and may hold off on these purchases until the interest rates and inflation have leveled out.

Continued Labor Shortages

While COVID-19 is in the rear-view mirror, the industry is still experiencing labor shortages. Not only has the skilled labor pool shrunk, but the non-skilled labor pool has also been very competitive for companies to hire and retain employees. Companies need to evaluate how they can retain their current workforce and recruit highly qualified labor to determine what solution fits best for their company. The manufacturing industry is built on cost-effective, time-sensitive and safe products that require their labor to be top notch and until companies evaluate how they can retain and recruit talent, they will struggle to accomplish these objectives.

While these pain points are not new to the industry, companies need to evaluate their operations and assess how these will affect them. These challenges are not going away any time soon and if companies want to remain competitive, they will need to address them sooner rather than later.

To contact a team member, please call 330-758-8613 or email manufacturing@hbkcpa.com.