The Top 4 Technology Challenges for Small to Midsized Manufacturers in 2020

Small to medium-sized manufacturing is truly the cornerstone of America. It makes up 11.7% of the U.S. economy, and 98.6% of manufacturing companies are considered small businesses.

At Imagine IT, we are proud and fortunate to be the IT and technology for many small to medium-sized manufacturing companies in the Twin Cities. Our manufacturing partners are producing some of the most incredible and life-saving products that are being created here and shipped both nationally and internationally!

In this piece, we will address some of the top technology challenges that small to medium manufacturers will deal with in 2020.

1. Leveraging technology for growth

The manufacturing landscape continues to be driven by new technologies. From cloud computing, to artificial intelligence, to the internet of things (IoT), to new collaboration tools like Office 365 that allows manufacturers to manage all these new innovations. Technology has the ability to create more efficient operations, allow better communications internally and externally, and connect manufacturers with their now smart customers.

For small to medium-sized manufacturers, technology and the connectivity it empowers is vital to growth. Technology gives smaller manufacturers the ability to communicate better, understand and deliver value to both customers and collaborate more efficiently with their own people.

Technology is a major differentiator

Technology helps level the playing field for smaller manufacturers. Companies that have adopted the digital transformation of manufacturing realize better outcomes, attract more customers, earn respect from those customers, and can significantly increase their market share.

Technology enables growth

Technology within manufacturing allows connectivity. And this connectivity drives growth by allowing remote work and giving quick and reliable access to employees. This connectivity also provides customers important access to products and services, which cements their relationship and further drives growth.

For small manufacturers to grow, they must identify which technologies are priorities

Attracting and retaining top talent

Technology enables smaller manufacturers to be ‘tech-savvy,” improving customer perception of their company but also seeing higher rates of employee satisfaction and a dramatic improvement in company culture. BYOD (bring your own device) is imperative to Millennials, and with 10,000 Baby Boomers retiring every day, attracting skilled Millennials is the key to the future.

Challenges with technology

Smaller manufacturers are in a precarious position. They must identify and deploy what will keep them competitive against their direct competition, as well as the large enterprises with their billion-dollar budgets.

Smaller manufacturers that wait 3-5 years to adopt some of these new technologies may never catch up! That being said, smaller businesses have little room for error when choosing the correct technology for their company.

While it is easy to believe that having the latest and greatest technology is the answer, that is not always the best choice. It is more important to have the right technology for your specific operation and your specific customers. And it’s critical to have a technology partner that can help you with those decisions.

Path to the future-how to stay ahead of the pack

To grow and move forward, small manufacturers understand the importance of having a laser-focus on customer needs. Technologies that help them serve their customers better and serve their own employees will be critical in competing with large national and international manufacturers.

Smaller manufacturers that embrace technology, invest the time, resources, and focus on utilizing these technologies will see themselves earning larger market share. Also, embracing this new digital transformation will make them more agile, efficient, and profitable, and help them attract and retain top people!

2. Cybersecurity

The biggest challenges small to medium-sized manufacturers have regarding cyber-security is the lack of time, budget, and resources to create a proactive-defense, creating the perfect scenario for cyber-criminals to breach their company.

Half of all cyber-attacks are targeted at small to medium-sized businesses. And because so many things inside the factory floors are now connected to the internet, manufacturers are quickly becoming the industry of choice for cyber-criminals.

3 of the biggest concerns regarding cybersecurity are …

  1. Loss of critical data
  2. Losing customers
  3. Loss of reputation!

Industry statistics show that by 2021 cybersecurity damages will cost manufacturers over $6 trillion.

Cybersecurity has become a business-critical and extremely dynamic factor in manufacturing

The fact is most smaller manufacturers do not prioritize cybersecurity

It’s ironic when small to medium-sized manufacturers don’t think they are a real target for cyber-criminals. But when you ask them if they are personally concerned with being hacked, they emphatically say yes! As a matter of fact, most people have been personally hacked multiple times in the past year or two! So while personal accounts get their attention, their customers and business data and intellectual property seem to be a bit ignored.

The face of the cyber-criminal has changed

No longer is your attacker a hacker sitting in his parent's basement trying to hack into anything and everything he can because it’s fun and challenging. The face of the cyber-hacker is no longer the kid in the hoodie!

This view of who the attacker is was more accurate 10 years ago, but no longer! Today’s cyber-attackers are professionals. They are well funded, often by nation-states like North Korea and Russia … and are the brightest of the bright in the tech world. They use the most advanced technologies available, including the most expensive, state-of-the-art equipment with an endless supply of resources.

How much does a breach cost?

The cost of a cyber-attack that breaches your organization can vary quite a bit. But because so many small to mid-sized manufacturers have been breached over the past year, we can easily extrapolate some numbers that are important for you to contemplate.

Recent studies have reported that the average cost of a breach too small to medium-sized manufacturers can range from $100,000 to $1.25 million. And that number is not inflated, given the fact that an average breach of a Fortune 500 company is closer to $4 million. And even though $4 million is a huge number, smaller businesses are affected even more because the cost percentage relative to the size of the company is much higher, causing a much more negative impact on smaller manufacturers.

Research shows that 60% of SMB’s that are breached close their doors within 18 months

The real costs of breaches are often underestimated

There are both direct and indirect costs associated with a cyber-attack and breach. Some are obvious and fixable, others are hard to see and can be irreparable. They include …

  1. Compliance and regulatory fines
  2. Monetary theft
  3. Downtime
  4. Loss of customers
  5. Loss of reputation
  6. Repairing the system
  7. Legal fees
  8. Insurance increases
  9. Loss of data

Budgeting for cybersecurity

Cybersecurity covers a lot of things in your company, so defining specific goals can be very challenging. So challenging in fact, that it is estimated that 92% of small to medium-sized businesses do not allocate enough budget to protect their company.

Are you locking your doors, but leaving your windows open?

In our almost 25 years here in the Twin Cities, it is still surprising and a bit puzzling to us that so many IT support companies use an “almost good enough” cyber-security strategy. To put it simply, it’s like if you were protecting your own home. Would you put expensive locks on both the front and back doors … but leave all the windows unlocked?

Protecting your customers

It is critical to understand that it isn’t just your company that is vulnerable, it is all your customers, employees, and suppliers that can be attacked and breached. And the only way to prevent an attack from affecting all of them is to make sure you know your strengths and weaknesses when it comes to cyber-security. And the only way to know for sure is to have a cybersecurity assessment to see exactly where you are at!

Cybersecurity continues to be the number one “outside threat” for Manufacturers as the number of cyber-attacks increases every year, and manufacturing is second only to healthcare when it comes to the number of cyber-attacks and breaches.

3. Attracting & retaining top talent

Finding and retaining the right people is one of the biggest concerns in 2020 for manufacturers, especially smaller manufacturers. The Manufacturing Institute claims that 22% of manufacturing workers will be retiring in the next few years, meaning 3.4 million workers will need to be found to replace the ones leaving. This is a huge challenge to the manufacturing industry!

The 2 main reasons for a worker shortage in manufacturing

  1. Retirement of Baby Boomers

    The first cause is the recent retirement of so many Baby Boomers that work in manufacturing, that filling their shoes is at a critical juncture!

    10,000 Baby Boomers are hitting retirement age every day

    Statistics show that 76 million Baby Boomers will be retiring over the next few years and that 10,000 Baby-Boomers reach retirement age every single day!

  2. Millennials and their disinterest

    Millennials (born 1980-1996) make up the next generation, and are not flocking to fill these jobs, making it much more difficult to get workers. It is no secret that Millennials are moving away from blue-collar jobs and are leaning towards technology, engineering, science, and math positions.

Technology and the workforce--a game-changer!

The digital transformation is happening in every industry in the world, and no industry is more affected by these technology innovations than manufacturing, …especially small to medium-sized producers.

The ongoing innovations around the factory floor that includes both electrical and mechanical processes are increasingly being handled more and more by state-of-the-art sensors and robotics. But along with this digital transformation, comes the challenge regarding the labor force.

Although these sensors, robotics, and automation are a boom to SMB manufacturers, at the same time, these new technologies require a new skilled workforce to handle it. Skilled workers are in high demand, allowing smaller manufacturers to create jobs that both pay well, and offer these Millennials the work-life experience they are searching for.

What is a Digital Native?

As the manufacturing workforce evolves, the experience and expectations of the workers also are dramatically changing. The large number of Millennials joining the workforce are well-versed in the cloud and online technologies…and expect to use these technologies as part of their job.

These tech-savvy new-hires, known as “Digital Natives,” will stick together in an organization and create two distinct types of workers; those who use digital and connected technologies and those who don’t! As a SMB manufacturer, it is something you need to be prepared for, and if handled correctly, will create something not seen in the workforce before, “reverse mentoring.”

Using reverse mentoring

When your workers are broken into Digital Natives and non-Digital Natives, your organization can employ something seldom seen in the business world, “reverse mentoring.” Your new generation of workers will be able to help and train the previous generation in all the online and connected tools needed during this digital transformation. These tools will include the internet, social media, cloud collaboration tools, and other technologies to help unify the entire workforce!

Mobility is the number one requirement to attract top talent and retain employees

To these “Digital Natives,” mobility is one of the biggest requirements for accepting a position at any company. The new workforce, especially Millennials, have now become accustomed to BYOB (bring-your-own-device) policies giving them the opportunity to work remotely. Cloud technologies will continue to give workers and their customer’s global-mobility abilities.

This Millennial-driven workforce expects more of a work-life balance, and technology will be a big part of attracting and retaining them.

4. Creating a technology culture

The digital manufacturing revolution, often referred to as “smart manufacturing or “Industry 4.0,” refers to a host of technologies and processes that can improve your company…and your bottom-line.

Smart manufacturing includes connected devices, cloud computing & cyber-systems

While this digital transformation includes many different parts, most are characterized using “connected devices.” These connected devices can generate new data, provide a clear picture of your floor processes and machine performances, simplify and enable communication between humans and machines, and give new tools to workers to allow them to be more efficient and effective.

Culture change for any size company is difficult, but the technology change of your company can be one of the most significant cultural changes you will ever experience. For example, changing a new tool on the line is fairly easy, but it is much more difficult to change how things are handled throughout the entire company.

Understanding how to adopt a digital and technology culture is critical to being profitable in this new technology-driven world.

The transformative power of cloud computing

Over the past 10 years, the internet and the interconnection of people and machines are completely changing every aspect of the factory floor and the administration connected to it. Cloud computing and the cyber-connection of physical systems truly holds the key to small manufacturers, allowing them to create new interactions between people and the machines they use.

People are the most vital piece of this digital transformation

Yes, factory floors are greatly improved by IoT (the internet of things), robotics, and new technologies. But it is your people using this technology that will drive greater efficiencies and is where the culture shift needs to happen!

People are also responsible for 75% of all production failures

In the end, the manufacturing workforce is responsible for most failures in a manufacturing facility. And the largest part of those failures or human errors is caused by an organizational inadequacy, not mistakes made by individuals.

Using technology to help your people solve these challenges

Small manufacturers need to embrace these new technologies, so they don’t fall behind their competitors. But they do not need an overabundance of new tech and digital production facilities. They need to invest in new technology for their human workers, so they can solve the most critical problems in real-time.

The struggle of smaller manufacturers with creating a technology culture

Small to medium-sized manufacturers are often more cautious and even late adopters to technology changes. Smaller manufacturers often struggle with how to keep up with new technology and how to integrate them into their current IT structure.

Their reluctance is rooted in the concern with costs, and how the overall risks of adding new technology can disrupt their entire operation. These challenges often make smaller manufacturers so cautious that they are often “late to the party,’ regarding technology innovation, which not only negatively affects their bottom line but also how their customers perceive them.

Having a digital and technology roadmap is critical

As a manufacturer, having a clear technology roadmap is the only way to move your organization forward in this new digital world. New innovations and technologies are being developed quicker than smaller companies can keep up with, let alone afford.

The first place to begin is sitting down with your current IT company and create a 3-5-year technology roadmap for your entire organization. If you do not feel your current technology support company can do this, obviously, you need to find one that can. This digital transformation is not going to slow down. As a smaller manufacturer, you need to have a clear picture of where you are going and exactly what technologies you should embrace to get you there.

Conclusion

Technology for a smaller manufacturer can be a two-edged sword. There is no question that The Cloud, the internet, and the inter-connectivity of people and machines has improved your productivity and efficiency, and your ability to customize products and services to your customers.

But along with this digital transformation, comes the challenge of how to keep up with the always-advancing technologies within manufacturing. It feels like you invest your entire operation into new technology, and a year later, something new comes along.

Also, with this inter-connectedness of the world, comes cybersecurity concerns for both your company and your customers. As a smaller manufacturer regarding security, you want to know what is hype, and what is absolutely necessary to protect your company?

We hope that the information we have provided here gives you some insights into the technology challenges your manufacturing company deals with, and helps you be better prepared for 2020.

If you would like to have a further discussion about your concerns with IT, technology, cyber-security, or the collaboration tools that can improve your bottom line, please click on this link, and let’s start a conversation.

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