Where Did My Profit Go?

While the last few years have seen significant events like COVID-19 and other disruptions impact profit for companies in every industry, staying profitable and maximizing profit is a never-ending pursuit.

Companies often audit, implement improvement initiatives, and pressure suppliers to lower the cost of raw materials to increase their bottom line. But hidden in the weeds is a cumulative set of issues that has more impact than many realize.

These issues create an undercurrent that erodes profitability. And often, managers miss other important cues that add to significant cost centers that impact profit. The cumulative threat of death by a thousand cuts is just as troubling, if not more so.

How Profits Go Missing

Manufacturing companies are under intense pressure to increase efficiency and profitability while improving product quality and reducing lead time. Many companies need help achieving these goals due to challenges that may not be obvious.

Each of these hidden challenges can reduce cash flow and impact profit. But together, they can add up to significantly impact a company's bottom line. Here are seven ways that profit can go missing.

1. Manual Production Forecasting - Traditional production forecasting methods are time-consuming and require a lot of manual labor. The process is error-prone, leading to delays and inaccuracies and increasing production costs.
2. Disparate Software Systems - When different departments within an organization use disparate software systems, it can create communication gaps. Production systems like MES, maintenance CMMS software, and quality and inventory management systems are sometimes interoperable. Outputs must be standardized or rationalized to be consumable for the big picture, leading to yet another opportunity for error or omission and delays in decision-making.
3. Data Silos - When data is siloed, getting a complete view of the supply chain can be difficult. This can lead to missed opportunities and increased costs. Those disparate software systems that create communication problems often utilize different terminology, data structure, units of measure, and analytics capabilities.
4. Poor Inventory Management - Poor inventory management can lead to excess inventory, tying up capital and increasing costs. It may also lead to shortages because demand was manually forecasted. The results of overstock tie up cash flow, while understocking leads to lost or delayed order fulfillment.
5. Shipping and Logistics – Shipping and logistics are integral to the supply chain, alongside inventory management, demand and supply planning, and purchasing. Managing everything as separate entities means losing vital data and connectivity, and transparency suffers. The result is higher shipping costs, delays, or expedited freight.
6. Lack of Supply Chain Visibility - Companies can only maximize opportunities to optimize operations and reduce costs with real-time visibility into the supply chain. This problem is significantly compounded when departments within the supply chain are managed separately and rely on disparate software or siloed data.
7. Ineffective Supplier Management - Poor supplier management leads to delays, quality issues, and increased costs. This mismanagement is also often the result of disconnected processes and missing or dated data.

How Automation and Software Help You Find Missing Profits

All the negative variables above reduce profit by impacting the external supply chain. But companies have an opportunity to mitigate these forces, bring the supply chain under control, and put profit back to the bottom line.

A robust Manufacturing Execution System (MES) like Plex MES monitors, tracks, and controls the entire manufacturing process from the raw material stage to production and shipping. The dynamic software operates at or near real-time, enabling the management of supply chain processes throughout the entire production cycle.

It allows simple, low-code automation through customized apps to automate complicated process flows and drill down to the most important steps. The system can also be configured to capture operational data and apply it to quality checks, work instructions, change orders, and other workflow components.

The key to this process is connectivity through advanced edge computing. Machine assets organize and analyze data on the factory floor the moment it’s generated, reducing latency and powering automation. Plex MES is interoperable with other software and creates an ecosystem whereby your internal manufacturing supply chain has accurate, real-time, and actionable data.

Securing Your Internal Supply Chain

When your production processes are agile, automated, and optimized, it creates a ripple effect that flows to the external supply chain. 

Plex MES secures these internal forces with automation and analytics so you can focus on solutions to improve and empower the rest of the supply chain with real-time data.

Learn more about empowering your supply chain with automation and software in our Smart Manufacturing Software Buyer’s Guide.