By: Bryan Porter
Business owners and key financial executives are increasingly focused on investing in new technology to stay relevant and arguably survive, in today’s manufacturing marketplace. Industry 4.0, the internet of things (IoT), automation, robotics, additive manufacturing and augmented reality are exciting new strategies to help manufacturers compete in the global economy. New and emerging technologies dominate industry conferences, publications, and knowledge sharing platforms; even the federal government encourages investment in physical assets through significant tax benefits. While decision makers have a myriad of options on how to spend their annual budget, now is the time to invest and re-invest in the industry’s greatest asset – people.
Shift of Power
There has been a long trend of manufacturing jobs leaving our country. U.S. labor costs historically have not allowed companies to be price competitive and consequently, wages have suffered and jobs have been eliminated. Developing countries, global human rights movements, quality control concerns, political issues, tariffs, immigration and many other issues are shifting leverage back to manufacturing employees in the United States. Skilled, dependable and knowledgeable workers are hard to find, and companies are willing to pay them a premium. Traditional manufacturing employees contain a wealth of knowledge of producing an organization’s key products. While there is no doubt that technology will continue its disruptive trend on low-level skilled jobs, long-time employees are key to implementing a strategy to successfully adopt new technologies. Annual budgeting should allocate appropriate resources to proactively training and retaining key employees given the likely increase in labor cost. Providing capable and motivated employees with the tools needed to succeed, is far more cost-effective than replacing vacated positions.
Focus on Development
To be clear, manufacturing will never return to the traditional factory scenario many envision or remember. And why should it? As noted above, technology is increasing with dizzying speed and will help employees to be safer and more productive, resulting in better products for customers and better margins for the business. The pace of change will require a strategy for continual employee development. Business owners and key financial executives need to quantify and plan for some level of investment in employees at all levels. Floor laborers will need safety and quality control training for the new equipment they operate. Production management will need to understand capabilities of and how to collaborate on new technologies. Engineers will need to stay current with industry developments and market trends to develop solutions for current challenges. Likewise, sales teams will need to understand better methods of interacting with customers or end users and how to interpret information obtained from the marketplace. Building the development and training plan into the annual budget will serve as a regular reminder of the important role employees play in future success. A proper plan will also motivate the rank and file by demonstrating the importance owners and executives place on people in achieving corporate goals.
Business owners and executives should not only focus on the labor team showing up to work every day. It is crucial they also focus on who is not on the factory floor. The ever-evolving landscape will require new talent and skillsets to succeed. Programmers, engineers, as well as experts in technology, cybersecurity, social media, and marketing may very well be just as important to growth and success as the individuals who create and build the products. As decision makers develop their long-term strategy, proper consideration should go into understanding additional costs related to new positions and the appropriate time to make those investments.
Business owners and key financial executives spend significant time and energy to ensure investments in new technology align with corporate strategy and make financial sense. So too should these same decision makers strategize, plan and invest in the team that will ultimately have the largest impact on the success of not only new technologies but also the company.
BRYAN C. PORTER, CPA, is a Director in the Audit, Accounting and Consulting Department of Ellin & Tucker in Baltimore, MD, where he advises privately held businesses in various industries including manufacturing, wholesale distribution, construction, technology and not-for-profit. Bryan is also a member of the firm’s Audit and Accounting Technical Standards Committee, which oversees programs designed to educate the firm and its clients on current accounting and business topics. Bryan can be reached at firstname.lastname@example.org.