Starting a manufacturing business isn't as easy as starting many other types of businesses. In addition to coming up with a novel product that people want or need, you'll need to acquire or lease physical properties to establish your manufacturing centers, master the art of process engineering, and even come up with a strategy for distribution.
How do you solve these biggest challenges and make your business profitable?
The Biggest Challenges to Overcome When Starting a Manufacturing Business
These are some of the biggest challenges for new manufacturing businesses to overcome:
1. Finding real estate. First, you'll need to find the real estate. Depending on the nature of your business, you may need a factory to serve as your manufacturing hub, as well as a warehouse to store your products, and potentially a secondary distribution center. As you expand, you may need more industrial buildings in more areas. Availability may be limited, prices may be high, and you may have to contend with zoning restrictions on top of everything else. This makes it very hard to find a perfect piece of real estate that fits within your budget and the scope of your business.
2. Tackling process engineering. Process engineering encompasses the analysis, modeling, simulation, optimization, design, control, and operation of process systems, from micro-sized systems to huge industrial facilities. You know how to physically manufacture your products; however, your production process may not be the most efficient or cost-effective. Fortunately, this challenge can be solved as long as you're willing to pay for experienced process engineers to step in and handle some of these matters for you.
3. Acquiring funds. Starting any business is expensive, but starting a manufacturing business is even more financially difficult. In some cases, you may need millions of dollars to get going – all before you generate your first dollar in revenue. There are many viable routes to procuring funds, such as tapping into retirement accounts, taking out business loans, and attracting venture capitalists and angel investors, but you'll likely need more than one if you want to succeed.
4. Pricing correctly. Manufacturers often have to contend with slim profit margins. Price the product too low, and you won't make anything. Price the product too high, and your competition will gobble you up. You'll need to do your due diligence long before you commit to any business strategy.
5. Dealing with supply chain issues. Supply chain issues can instantly disrupt your plans for your manufacturing business, and unfortunately, supply chain disruptions have been common since the COVID-19 pandemic. Finding more reliable partners, securing backup strategies, and minimizing reliance on external variables can all help you mitigate risk here.
6. Managing the growing labor shortage. It’s estimated that by 2030, there will be 2.1 million unfilled manufacturing positions in the United States, and it could get even worse from there. Without skilled, experienced laborers to fill your most important positions, your manufacturing business won't be able to operate. Recruiting aggressively can help you fill the void, but it's also going to increase your cost basis.
7. Utilizing automation appropriately. When utilized responsibly, automation can greatly improve the productivity and efficiency of your manufacturing business – and it's arguably necessary if you want to be competitive in a modern environment. However, it's also possible to overspend or overengineer your automation, resulting in further complications. Work with automation experts and thoughtful planners to minimize that possibility.
8. Contending with competition. Unless you've come up with a truly unique new product, you're probably going to have competition to deal with. Even if you don't, you probably will soon if your idea has any merit. How are you going to get the edge over these competitors? Through pricing? Better quality? Better customer support?
9. Balancing inventory management. Nearly all manufacturing businesses need to solve the problem of inventory management. Without proper tracking, organization, and storage, your entire business is going to fall apart. At the same time, it's not only possible, but common for manufacturing businesses to make unwise investment choices in these areas, ultimately compromising their efficiency while draining their bank accounts.
10. Staying sustainable. Consumers increasingly care about sustainability, and governments increasingly push for it. Accordingly, your manufacturing business should make it a priority – but with so many other priorities in the mix, it can be a massive challenge.
Unlimited Possibilities
After reading about all these challenges, it’s natural to feel a bit intimidated. But it’s also important to remember that these challenges are all solvable – and solving them is the path to practically unlimited business potential. With the right product, the right business model, and plans to compensate for obstacles and setbacks, your manufacturing business could make a ton of money – and potentially even change the world.
Don’t be discouraged by the possibility of a few bumps along the way.
