Starting a new manufacturing company requires a lot of forethought and planning. Before starting a new company, there are many complexities to consider, and any one of them can define success or failure in running a manufacturing company.
Each manufacturing industry has specific requirements, but almost all manufacturing companies share some basic challenges. The new startup manufacturing companies that do a better job of understanding the challenges tend to do better.
Key Challenges Starting a New Manufacturing Company
Some common challenges must be met for success, Whether starting a new appliance, metal, steel, auto, or any other manufacturing company.
These are more complex and common challenges for a new manufacturing company:
1. Funding
A unique challenge to any manufacturing startup is raising enough capital for proper funding. The scarcity of investors for funding new manufacturing startups is one of the first challenges to overcome.
Also contributing to the challenge of obtaining funding, is how effectively the company’s business plan communicates the goals and aspirations of the founders.
Does the plan highlight compelling manufacturing forecasts and how they intend to achieve success while dealing with expected issues? The business plan should showcase everything you know about running a manufacturing company
2. Labor Market
Another challenge for new manufacturing startups is the availability of skilled labor within the labor market.
Although the manufacturing industry is the leader in creating manufacturing jobs, it also, in turn, requires a significant availability of skilled laborers for the entire manufacturing process.
There are many contributing factors to a lack of skilled labor, from older skilled laborers retiring and younger laborers not understanding, nor are interested, in learning new skills to replenish the labor pool.
3. Inventory Management
Understanding what your customers want and ordering necessary supplies in the correct volume to manufacture a product is always a major challenge of inventory management. And inventory management is one challenge that needs to be managed correctly.
Inventory control is critical for maintaining efficient and profitable manufacturing. Products are manufactured to fulfill orders, and maintaining a balanced inventory of necessary supplies can be challenging.
Too much inventory and profit are tied up in idle inventory. However, having too little inventory can disrupt the entire manufacturing process, causing extreme financial stress and the inability to ship products.
4. Access to customers
It is important to have well-defined access points to the customer and manufacturing parts suppliers. Access requirements for an automobile manufacturer can differ from those of an appliance manufacturer.
Access points can be accessible to railheads, transportation companies, or easy access to interstate highways. Access can be receiving parts from suppliers or shipping products to customers
New Appliance Manufacturing Challenges
There are myriad challenges a new small appliance manufacturing company must overcome and continue keeping the focus on making a profit. These are some specific startup challenges about running a manufacturing company and how to compete in the market.
1. Competitive market
Small appliance manufacturing is very competitive, and a successful new startup company must have a unique product or market niche. And this is after meeting all the startup challenges previously discussed.
It is hard to compete with price when established appliance manufacturing companies can manufacture products in a batch manufacturing process where many products can be made in a shorter period.
2. Regulatory compliance
There are many regulatory regulations a small manufacturing company must adhere to, and they become more challenging for a small company with limited resources.
3. Labor market challenges
Labor market shortage for small manufacturing companies worsened during COVID-19, and recruiting skilled labor is still a substantial challenge.
4. Common Elements for Running Small Appliance Manufacturers
There are common components required for running small appliance companies, including:
Product development – Small appliance manufacturers must have a product to make first, which requires designers working on, for example, their particular product and engineers on staff to create the designed products.
Manufacturing processes – Next, the appliance manufacturing company has to take the product design and have the necessary equipment and supply chain for product creation, although some companies may outsource much of the process.
Sales and marketing – Product marketing is often accomplished by creating a sales channel, distribution through various stores and chains, or directly through company online platforms.
Customer service – It is crucial for small appliance manufacturers to have dedicated customer service representatives to answer questions and complaints and handle repairs or replacements.
Manufacturing Industry Job Skills
Typical job skills for working in the small appliance manufacturing industry are:
Digital tool operators – knowing how to operate digital equipment in the manufacturing process.
Programming and coding experts – small manufacturing companies need skilled coding and programmers to create the code and understand how to work with CAD, CAM, and CNC software.
Basic skilled and on-the-job employees – Workers with basic skill sets for necessary, lower-level jobs like heavy lifting, forklift drivers, assembly line work, or workers willing to advance their knowledge for higher paying positions with on-the-job training.
New Metal Manufacturing Challenges
Metal manufacturing, or fabrication, companies provide manufactured products, parts, and structures from either finished or semifinished materials.
The metal fabrication process may require machining, welding, cutting, assembling, bending, shaping, or molding metal into various items. The list of metal-manufactured products varies from kitchen appliances and military applications to custom steel art designs but they are still about running a manufacturing company.
Metal manufacturing companies have different issues than many other companies. Some of the metal manufacturing unique challenges are:
1. Capital funding
Metal manufacturing plants can vary but are quite reasonable to other industries in this field, like steel manufacturing. A typical capital investment required for the necessary plant, equipment, and machinery to produce fabricated metal products should be in the $60,000 range, although it can rise rapidly to $500,000 or more if using the latest 3D printers.
Also, the plant may have a certain niche and require the use of specialized equipment for hydraulic fabrication. Hydraulic equipment may require industrial epoxy flooring or specialized floor coatings to mitigate vibrations.
2. Raw materials
Metal manufacturing requires a lot of raw materials that are heavily regulated and can be challenging to obtain on a regular schedule, especially coal and iron ore. These materials can be imported, but many regulatory issues must be resolved before importing.
3. Energy and environmental regulations
The metal manufacturing industry consumes tremendous energy, leading to extremely high operational costs. When the energy costs are added to the environmental impact regulation costs, a metal manufacturing plant becomes very expensive.
4. Skilled labor pool
Processing metal requires skilled labor and continuous safety training in dangerous environments. When a new metal manufacturing plant opens, there is an assumption that a deep skilled labor pool is within the plant’s operational area.
Demand fluctuations and overcapacity
Demand for metal manufacturing can be adversely affected by different business sectors like automobile manufacturing, construction, or infrastructure expansion. When the demand suddenly drops from a market sector, the manufacturing plant may be overcapacity with more products than demand, adversely affecting pricing and resulting in a weak profit.
New Glass Manufacturing Challenges
Glass manufacturing requires significant upfront funding, anywhere from $1,350,000 – $4,350,000, with glass manufacturing equipment being $500,000 – $5,000,000. Also, a dependable supply for the glass manufacturing process of quartz sand, limestone, soda ash, clarifying agents, and coloring.
Challenges that impact the successful operation of a glass manufacturing plant are:
1. Supply chain problems
Glass manufacturing has a supply chain issue disrupting the manufacturing process. Initially caused by the COVID disruption and slowly mending, it now has issues with weather, labor shortages, and shipping issues.
2. Sustainability
Some uncertainty persists in the glass manufacturing industry and presents real challenges in running a manufacturing company, with demand rising and production not meeting demand. Recycled glass has adverse effects on raw materials supply and disrupts distribution.
3. Quality regulations and requirements
Glass manufacturing constantly changes with new applications or compositions for the finished product. In addition, there are new and more stringent quality control requirements, which ultimately increase manufacturing costs.
However, on the upside, the glass manufacturing industry continues to evolve with innovations in equipment, processes, and glass chemistry.
4. Energy intensive
The process of manufacturing glass is extremely energy intensive, with natural gas 73% and electricity 24% being the dominant energy source. The bulk of energy consumption is due to firing large heating furnaces to melt raw materials to create the finished glass product.
New Automobile Manufacturing Challenges
Starting a new automobile manufacturing company has many challenges to overcome, and one big challenge is to understand all about running a manufacturing company.
understanding how to run an automobile company is very important since a manufacturing facility has typically thin margins on average of 7.5% – 9.2%. The biggest challenges encountered in opening an automobile manufacturing plan include:
1. Extremely high startup costs
Starting new automobile manufacturing plants is one of the most expensive ventures to undertake today. Small manufacturing plants require $250 million to $1 billion, but a world-class facility can cost $8 billion to $10 billion.
2. Fluctuating market priorities and uncertainties
The automobile manufacturing industry is uncertain about manufacturing the final product. An auto dealership with a strong client for ordering pickup trucks now requires the pickup to be fully electric with autonomous driving technology.
Production for the basic gasoline or diesel truck has been disrupted with demand shifting to all-electric vehicles with autonomous driving options.
3. Product development timelines
Automobile manufacturing has several challenges, and one of the biggest challenges is creating or designing a new vehicle from the ground up.
Also, designing a new vehicle requires all legacy components used in the new model to have any necessary modifications.
Another consideration is updating all servicing procedures, such as what collateral will be needed for the local garage providing transmission service. How to update training and parts for the new production model for the auto dealership and small repair shop as well.
4. Marketing the brand and short-term sales
The automobile manufacturer must balance establishing the brand and generating short-term sales volume for production continuity.
New Steel Manufacturing Challenges
Steel manufacturing is about running a company that processes iron ore or scrap into steel. Many structures contain steel, a staple for companies such as metal roofers or construction companies.
The steel manufacturing process requires a lot of machinery, including lathes, planers, grinders, milling, and drilling machines. Due to the heat associated with steel manufacturing’s blast furnace, an added expense may be contacting industrial floor coating companies‘ teams of specialists to have recommendations for the correct floor type.
The list of steel-manufactured products varies from railroad rails, large structural sections, automobile components, construction, and farm equipment.
Steel manufacturing companies have different issues to deal with, especially in their industry. Some steel manufacturing industry’s unique challenges are:
1. Capital intensive
Due to the unique requirements of steel manufacturing, startup costs may be higher than many other industries. A significant capital investment of $1 billion – $4 billion is required for the necessary plant, equipment, and machinery to begin manufacturing steel.
2. Raw materials
Steel manufacturing requires raw materials that are heavily regulated and can be challenging to obtain on a regular schedule, especially coal and iron ore. Iron ore can be imported, but many regulatory restrictions must be addressed before importing.
3. Energy and environmental regulations
The steel manufacturing industry consumes tremendous energy, leading to extremely high operational costs. When energy costs are added to the environmental impact regulation costs, a steel manufacturing plant becomes costly.
4. Skilled labor pool
Steel manufacturing requires skilled labor in a challenging production environment. When a new steel manufacturing plant opens, there should be a labor pool of qualified employees
Demand fluctuations and overcapacity
Demand for steel manufacturing can be adversely affected by different business sectors like automobile manufacturing, construction, or infrastructure expansion. When the demand suddenly drops off from a market sector, the manufacturing plant may be in a state of overcapacity and will require everything you know about running a manufacturing company. This status will result in more products than demand and adversely affect pricing, resulting in a weak profit.
Takeaway
Being a new business owner and starting a new manufacturing company can be vastly rewarding.
And at the same time, tax everything you know about running a manufacturing company.
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