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The top 8 challenges facing manufacturers

Manufacturers face many challenges in today’s data-driven economy. Here are the challenges most likely to disrupt operations and impact company growth.

Aging workforce

In early 2017, The Future of the Manufacturing Labour Force in Canada report was released and revealed Canadian manufacturers are facing a talent gap of 129,000 skilled workers by 2026. This gap is worsened by the reality that skilled employees on Canadian factory floors are, on average, older than the overall labour force – in some cases, 20 per cent are over the age of 55.

Fewer young adults are entering the right programs to replace these retiring workers, and the industry is changing so rapidly that training for new roles isn’t widely available. Manufacturers can’t hire workers who don’t exist.

And this challenge extends beyond Canada. In the United States, a report from the Manufacturing Institute and Deloitte LLC forecasts a potential skills gap of 2 million jobs over the same period, for much of the same reasons.

Converging IT and OT networks

In the past, Information Technology (IT) and Operational Technology (OT) professionals maintained separate networks within a manufacturer’s organization. IT owned the organization’s technology network and all associated connected devices. OT owned the hardware and software that monitored and controlled production.

IT worked in the office, OT worked in the factory. IT focused on network security, OT focused on plant productivity.

That was before the Industrial Internet of Things. Now IT and OT networks are converging, creating new opportunities and driving digital transformation. However, with convergence comes confusion, and many organizations are unsure of how to bring together IT and OT leadership.

Factory security

The introduction of the Industrial Internet of Things to the plant floor has created new challenges for IT and OT professionals. Most significant of these challenges is keeping the data – and machines – on the floor secure in an environment accustomed to closed networks. Where only wired networks existed before, Wi-Fi networks now flourish – and the cybersecurity risks are significant.

For example, in PLANT Magazine’s 2017 Outlook Report, 17% of Canadian manufacturers admitted they have not taken any steps to defend themselves against cyberattacks. This is of particular concern once you realize that manufacturers are among the most attacked companies by industry, and that security professionals expect attacks to extend from IT to OT networks in 2018.

New Product Introduction (NPI) and Time to Market (TTM)

According to a survey by Sopheon, 79% of new products miss their launch date. The financial implication of this is significant; with data suggesting that up to 33% of profits may be lost if a product is delayed by 6 months.

The pressure on manufacturers to innovate and create new products in a short timeframe is immense, with little room for error. And a manufacturer’s worst enemy in all of this? Themselves.

 

"Legacy IT systems, antiquated technologies, complex system and project-management processes, and uncoordinated actions by disconnected teams are undermining even the most determined business leaders."

McKinsey & Company

Operating costs

Manufacturing operations are expensive. Simply to keep production running – sometimes 20+ hours per day – manufacturers need materials and parts onsite at all times. They also need electricity and other resources, such as staff.

Operating a production environment is a huge strain on a company’s bottom line. In the province of Ontario, for example, a recent report concluded that 64% of jobs lost in the manufacturing sector from 2008-2015 were the result of high electricity costs. Manufacturers simply could not pay for both people and electricity.

Product Quality

The average cost of a recall in the food industry is USD $10M. In the automotive industry, 390 million cars have been recalled in the United States alone since 1966, and every year car manufacturers lose 3-5% of sales due to warranty claims.

The quality of what manufacturers produce directly impacts the company’s bottom line. Yet with an increased focus on producing – and innovating – as quickly as possible, manufacturers are faced with the challenge of maintaining high production standards despite less time for quality control. Add a convoluted supply chain with little visibility between parties to this, and the result is an environment where product quality decreases rapidly, and consumer confidence falls with it.

Shadow IT

Shadow IT is the use of IT-related hardware or software by a department or individual without the knowledge of the IT department. It can encompass cloud services, software, and hardware.

For manufacturers, shadow IT has emerged as a significant concern on the factory floor as operations teams leverage traditional IT networks and technologies to improve manufacturing processes. As machines and equipment are purchased, placed on the floor, and connected to the network, the risk of cyber attacks and network strain increases.

How big is the cybersecurity threat facing manufacturers? Gartner predicted that by 2020, one-third of successful cyber attacks will be on an organization’s shadow IT resources.

Unplanned downtime

When manufacturing production stops for an unplanned reason or event, it accumulates downtime. Although most often associated with equipment failures, unplanned downtime also includes non-equipment causes for shut down – for example, a material or staffing shortage.

Given that manufacturers continue to use production equipment that is 10, 20, and even 30-years-old, unplanned downtime due to equipment failure or maintenance is a very real problem for operators. And since unplanned downtime can cost manufacturers up to $20,000 a minute - $333 per second – the cost is potentially crippling for small and mid-size manufacturers who are already feeling the effects of other challenges on this list.