Investment. It’s a strong word in manufacturing, especially with the speed of British manufacturing’s economic recovery slowing and more and more companies concerned about competing in the Eurozone.
But our fears of risk should not outweigh the potential benefits of investment at any level — from time invested to improve processes right through to multimillion dollar R&D projects designed to improve production and output. Here are our tips to help you invest wisely.
Understand the benefits for your business
Investment in new technology will benefit a growing manufacturing firm in two key ways:
it can form part of an automated production process that enables the company to meet its rising sales demand
it can accelerate research and development practice to ensure that the firm is innovating its product at an industry-leading rate
It’s important prior to any investment to understand what the benefits will likely be to your specific business. It’s wise to consider your existing processes and demand levels to identify whether there is a genuine need in the business at this time, or if your investment can wait. This needs to be balanced with the projected return on your investment, as it’s possible for your investment in technology to pay for itself quite quickly if the benefits are strong enough.
For example, as part of an automated production process, new technologies such as 3D printing can really boost the speed and accuracy of many existing processes, benefiting the end user and also producing cost savings and other benefits to the company itself.
Calculate the potential return on investment
As with any big business decision, it’s important that an investment in new technology has a tangible benefit to the bottom line.
Our investment in new technology has enabled us to increase the efficiencies around prototyping, for example, allowing us to do more to innovate and improve our products. By bringing down pre-production and production costs overall, manufacturers can pass the savings, in both time and money, onto retailers or end users, or use the extra profit to fund further investment and growth.
The new technology may, for example, perform a part of the production process which currently takes a certain amount of time and for which a number of people are employed. You can work out the per-hour cost of the human worker vs the machine automation to identify what saving you’ll make on your P&L by the end of the year.
Of course, the ROI may not be strictly financial. If you recognize that no one in your industry is yet using a technology in the way you plan to, or you can improve something within your business to deliver a better product to your customers, you may find that your investment contributes to you outperforming your competitors. In this sense, you may estimate the percentage increase in market share that may be obtained through the investment and therefore the additional revenue that will bring in.
Forecasting the potential results of the investment will enable you to measure the value of the input against the return you’re likely to get. If the return doesn’t outweigh the initial investment, you’ll know it’s not worth doing but if it does, it’s time to invest.
The importance of people
If you decide to invest, it’s important to have the right people managing the investment project.
This won’t be an easy project and you’ll need to consider costs of investment as well as the potential loss of productivity while you train your staff on the new technology, you’ll need to spend time with team members ensuring they understand the change and are bought into it, and there may be other stakeholders to manage too.
Martin Hurworth is a Technical Director at Harvey Water Softeners.