When setting up a manufacturing business there are a wide range of essential considerations that need to be accounted for. The manufacturing industry is different to many other sectors of industry for a variety of reasons. For example, when compared to other forms of business, such as retail or e-commerce, there is a need for substantial financial outlays for specific equipment and premises.
Many manufacturing firms rely on advanced machinery and production lines to ensure that they can produce goods to a suitably high level of volume output. This will require the need for substantial funds to invest in plant equipment and a suitable factory to operate from. These costs can run into millions of dollars for a large-scale manufacturing operation, so it is vital to have a clear understanding of these costs.
However, it is not just the financial outlays that need to be considered when setting up a manufacturing firm. A multitude of other factors must be considered to ensure that processes run effectively, and the long-term viability of the company can be assured.
In this article, some key top tips will be discussed that will help any entrepreneur who wishes to set up a manufacturing firm do so effectively and with the best chance of business success.
Create a comprehensive business plan
Before any funds are committed to a manufacturing business, it is of paramount importance that a complete business plan is created. This will be a document that is comprehensive and thoroughly researched as it may be used as a main piece of supporting evidence when seeking outside investment from lending organizations. The business plan should contain well-researched financial figures that outline the total costs involved in setting up the firm, its expected revenue levels for the first five years of trading, and who its target consumer market will be.
Research will also be required to thoroughly understand the legal and environmental considerations that your manufacturing firm will need to comply with. Many manufacturing firms need to process potentially hazardous chemicals in their production processes and will need to adhere to specific statutes for the storage, handling, and disposal of these chemicals.
In addition, any manufacturing firms in the food and beverage industry will need to demonstrate that they adhere to specific legislation in this field. A professionally researched and written business plan will also include the mission statement of the firm and what it wants to achieve in its early years of trading.
It is a key document in the formation of any business and time should be taken to ensure that it covers all the required aspects of the business formation.
Find your niche
A new manufacturing business should have a comprehensive understanding of the target market of consumers or other businesses that it is planning to serve. Research needs to be undertaken to determine how effectively the existing competitors in the market are serving this demand.
In any business, it is important to find a specific niche to operate out of that serves the target market and helps the firm to avoid direct competition with more established companies. This will ensure that price wars do not take place on goods and services as these aggressive marketing activities damage the profitability levels of both organizations.
Manufacturing firms can create their own niche that still serves their intended target market by differentiating on the attributes or qualities of their final products. For example, a component manufacturer could create products to a higher standard of quality and consistency then competitors and therefore give a longer product warrantee or guarantee for the product.
In short, producing a differentiated product will help a new manufacturing firm to create its own niche in the marketplace.
Budget effectively for specialist equipment
As previously mentioned, the startup costs for new manufacturing firms can be extremely high as they must consider the need to purchase specialist equipment. For example, manufacturing plants that process liquids or combine various substances into a final product will often need to invest in lines that feature circumferential piston pumps.
These devices are commonly used in food, beverage, and dairy manufacturing plants, where they are required to transport low-viscosity substances along the production line, using high pressures to achieve this.
Such pumps are normally created for a specific range of manufacturing tasks that require the movement of low-viscosity substances and may even need to be custom designed to suit the substance that is being transported. Such bespoke equipment can be expensive to purchase, and many forms of specialist equipment or componentry may be needed across the manufacturing operation. It is therefore vital to have accurate costs for all pieces of specialist equipment and componentry. Ideally, several specialist equipment firms will be consulted, and a range of quotes will be taken for specific equipment.
Train and retain your staff
The success of a new manufacturing concern is largely dependant on the skill and efforts of its workforce. Staff must be able to operate a range of machinery effectively to ensure that the highest possible levels of output can be achieved, whilst ensuring worker and environmental safety. It is incredibly important to train all staff in the correct operation of each piece of machinery, process, or specific production line. This will ensure that competency is high across the workforce, the risk of industrial accidents remains low, and productivity remains at the highest levels. You can read more about the importance of suitable training programs for staff in the manufacturing industry by clicking here.
In addition, staff should be paid competitive salaries and should have the opportunity to progress in their careers, ideally by learning new skills and being eligible for more senior roles in the future. These strategies will help to create a workforce that is motivated and feels valued; it can help to reduce employee churn. This is the phrase that is given when calculating the proportion of staff that leave a firm in a given period. A high rate of employee churn may indicate that working conditions are not ideal for the workforce (causing them to seek employment elsewhere). In addition, high staff turnover increases recruitment costs and will also lead to more time needed to train new starters.