Earning a top position among manufacturing companies is becoming increasingly difficult due to the rapidly changing landscape of the manufacturing industry. Amid the many challenges facing manufacturers today are employee skills gaps, cash flow hindrances, and keeping up with innovation. Here at altLINE, our team specializes in factoring for manufacturing companies. Below we look at the top three challenges facing companies as they strive to prosper in the increasingly competitive manufacturing industry.
Challenge 1: Skills Gap
Since the end of the recession in 2009, job postings in the manufacturing industry have increased 280% while the percentage of people hired has risen at a small fraction of that rate. The Wall Street Journal and other sources point to a skills gap to explain why thousands of manufacturing jobs were unfilled despite the number of open positions being the highest since 2001. Specifically, today’s manufacturing jobs require a host of technical skills which applicants lack.
While manufacturers do not have direct control over the statistics above, they can meet the skills gap challenge head on with a strong commitment to robust on-the-job training. Employers must be more willing to hire motivated job candidates who display basic proficiency for a manufacturing position and a strong aptitude for learning. Then, they must follow through by keeping employees engaged in the training process.
Challenge 2: Cash Flow Problems
Cash flow problems can present a serious threat to manufacturers, especially when they arise during peak seasons. Many factors cause cash flow problems, but there are several reasons why manufactures find themselves short on cash. The majority of these problems relate to slow paying customers or the receipt of an unexpected large order that becomes difficult to fill.
The good news about cash flow problems lies in the wide array of options to resolving them. The key to conquering cash flow problems is to adopt one or more of the following strategies:
- Screen new clients more carefully before extending payment terms
- Offer discounts or other incentives to customers who pay in advance
- Strengthen your collections efforts to obtain payment from delinquent clients
- Utilize invoice factoring to revitalize your cash flow
Invoice Factoring for Manufacturing Companies
Unlike the first three strategies, invoice factoring can make a big impact in a short amount of time. Invoice factoring is particularly effective because it can generate cash quickly with little impact on the customer relationship. Since a factoring company advances funds against outstanding invoices, customers do not feel pressured to pay invoices more quickly than originally stipulated. A manufacturer should consider a customer’s credit quality, payment history, and longevity prior to using invoice factoring to address cash flow problems. Factoring companies will use those criteria to assess a manufacturer’s fit for invoice factoring. Take a look at this table to see which type of financing fits your business.
Challenge #3: Increased Automation and Innovation
The benefits of automation are undeniable. Increased efficiency, a reduction in errors, and faster production comprise three of the most impressive benefits offered by automation. However, automation requires investment and a culture of innovation. Manufacturers must be ready to address these potential growing pains associated with the introduction of automation:
- Resistance to change exhibited by long-time employees
- The need for increased emphasis on training of employees to oversee complex automation tools
- The possibility that they will ultimately need to reduce the number of full-time employees due to automation
Successfully introducing automation to an organization requires an employer be prepared for potential employee resistance and to develop a more robust training platform. Additionally, manufacturers should highlight the ways that automation will benefit each individual employee. If employees see how they can benefit from automation, they will be more accepting of innovative changes.
Here at The Southern Bank, our team understands the industry specific needs of our clients. Our manufacturing clients rely on us to know their business’s unique challenges.
Contact us today to discuss invoice factoring for your manufacturing company.