Regardless of industry, no company is immune to the pressures resulting from the ongoing inflationary environment. But for manufacturers, higher costs present a specific set of challenges.

“The biggest pressure point that manufacturers are dealing with right now is reduced operating margin. Everything is more expensive than it was a few years ago,” said Mark Tambussi, sales leader in PNC Equipment Finance. “While companies have been able to absorb some of the cost increases in raw materials and cost of operating, there’s a limit to how much they can pass that through to their buyers and ultimately to consumers. We’re reaching an inflection point, where there’s only so much a company can absorb and do to take costs out, without having some level of systemic impact on the entire supply chain, from production to end product to the consumer.”

There are tried and true tactics manufacturers are using to protect margins, including putting pressure on raw materials suppliers to reduce their costs. But this tends to lead to a battle of what the new, accepted norm or price will be and ultimately does little to alleviate inflationary strain on the consumer. A more strategic approach for many companies may be to invest in technology to optimize operations and lower costs.

Technology as a Resource

Leveraging technology has always been a mainstay in manufacturing, an industry predicated on finding ways to do things better and faster. But in the current cost environment, manufacturers may need to be thoughtful about the types of technology they implement and for what purposes. For most, the goal comes down to finding ways to do things more efficiently.

To that end, digital platforms can provide solutions to help improve productivity and efficiency. Enterprise Resource Planning (ERP) systems have become integral to modern manufacturing, as they centralize data and processes related to production, inventory, and finance. Adopting digital treasury management solutions can also provide enhanced visibility to a company’s overall financial position, which may help identify areas for cost savings.

One of the main technology topics on the minds of manufacturers today is artificial intelligence (AI), as companies are embracing its potential to help in decision making. The full impact of how AI is likely to impact the industry remains to be seen, but, according to Tambussi, it’s important to realize its limitations. “AI is ultimately a decision-making tool, but it can’t work in isolation. I think a lot of manufacturing companies need to keep in mind they have a tremendous resource: experienced employees,” Tambussi said. “As companies move forward with AI, they’re going to need employees with institutional knowledge to litmus test if AI decisions are in line with what their years of experience will attest. It’s good that companies are embracing new ideas, but in terms of AI it can’t be at the expense of years of foundational experience.”

AI may also play a significant role in managing supply chains, which is increasingly critical in terms of distribution and logistics. In addition to operating and manufacturing at a lower cost than their competitors, one of the biggest challenges currently facing manufacturers is to meet consumer expectations in delivering products consistently, reliably, and quickly.

Looking Ahead in 2024

While elevated inflation and interest rates continue to persist, scale will certainly matter in the manufacturing industry, as larger companies may be better positioned than others in terms of finding ways to offset costs. But scale is about more than just the overall size of a company relative to its competitors. Smaller manufacturers may be able to achieve some level of scale by considering bolt-on acquisitions of companies that are ancillary to their core business, but which allow them to achieve a greater share of wallet with clients. Vertical integration can provide advantages over horizontal integration in terms of helping reduce costs and drive revenue.

Ultimately, thriving in a challenging environment comes down to staying nimble, according to Tambussi. “Manufacturers have come through tough cycles like this before, and they’ve done it by staying inquisitive and being willing to act and change. As they continue to operate in the current climate, companies will need to be smart about how to innovate to be effective and efficient.”

Ready to Help

PNC Equipment Finance can facilitate the lease or purchase of advanced technology and help take the complexity out of capital expenditures. For more information, reach out to your relationship manager or visit