Managing Supply Chain Issues & Financial Pressures In The Manufacturing Sector

It seems like the manufacturing sector has been facing unprecedented pressures from all sides in recent times. Workforce shortages, rising fuel prices, and supply chain instability have been reducing production capability and affecting profit margins.

Many businesses are still wearing the scars of the pandemic and the financial press is predicting that interest rates are set to rise further, forcing businesses to re-evaluate borrowing and spending plans.

There are, however, signs that industry challenges can be met with some innovative or resourceful thinking.

Improving efficiency and reducing costs in the manufacturing sector through digital solutions

The increased availability of digital solutions is helping businesses increase efficiency and save costs. They can drive not only production line speed and efficiency, but also faster product ordering processes or improved response time to customers.

The cost of digital capabilities does not have to be prohibitive to smaller and mediums sized manufactures and those that have embraced smart solutions can drive savings to avoid/absorb increasing costs pressures.

Manufacturers and suppliers reviewing and renegotiating contract terms

We have also seen an increase in manufacturers and suppliers working together, in order to ensure supply chains hold up. Onerous clauses in supply contracts, with fixed pricing and supply quotas, have traditionally caused friction between supplier and manufacturer.

However, in recent times, mounting cost pressures have caused suppliers to approach buyers in honest terms, setting out that they cannot meet their contractual supply obligations in the current economic climate. Both sides have, in a number of instances, successfully renegotiated terms, to share the pain and ensure mutual survival.

Our advice is that no matter where a business sits in a supply chain, it is worth reviewing contract terms. Where appropriate, an approach can be made to address any terms or obligations that prove prohibitive to continued supply. Any such discussions need not be confrontational and can lead to productive, strengthened business relationships.

Ultimately, manufacturers’ focus must remain on meeting production demand, and, in current times, they need a reliable supply chain more than ever.