Managing a business in the manufacturing industry is a challenge, and it demands more than willful spirit and motivation. Although more businesses survive the first year, 50 percent still don’t make it past the fifth year. By the tenth year, only 33 percent remain.
One of the biggest issues is finances, namely capital funding and profit. Sadly, businesses could have prevented both of these if only they avoid the following mistakes:
1. Poor Inventory
Costs of poor inventory are staggering. They affect almost every core process of the business, from manufacturing to sales and customer service. About six in every ten customers leave a business’ website due to out-of-stock items.
Many businesses now invest in ERP software to manage inventory more effectively, but it is often not enough. Since the problem usually begins in purchasing, enterprises also need to spend on cloud-based purchase order management software.
2. Wrong Hires
The cost of hiring a bad fit varies. Career Builder puts it at around $17,000. The US Department of Labor believes it’s at least 30 percent of the employee’s earnings during the first year. Zappos, meanwhile, has a very high estimate of more than $100 million.
Either way, a bad hire is extremely costly. Not only does it affect production; it also increases HR-related expenses, especially for re-hiring and training. It increases the risk of office conflict. It may then force good employees to leave.
3. Bad Free Shipping Strategy
According to National Retail Federation, around 60 percent of ecommerce sales in 2015 had free shipping. Although it sounds like a perfect deal for customers, it’s a huge expense — and loss — for the business. On the average, retailers spend $2.50 on delivery fees per purchase.
4. Lack of IT Security
Cybercrimes, which include hacking and ransomware, cost more than $400 billion annually. Most of them attack small businesses, but only 14 percent of them consider their mitigation strategies as effective. No more than 50 percent of enterprises in the US can handle cyber attacks.
Managing a business in the manufacturing sector is tough, and nothing guarantees its sustainability. Making good decisions, however, can alter this fate.