Snap Agency is dedicated to helping mid-market B2B companies achieve digital success. Through research, we’ve uncovered some fascinating data on mid-market manufacturers. For example, manufacturers represent approximately 17% of middle market companies—and about 12% of the U.S. economy as a whole. The takeaway here is that manufacturing is a driving force behind the success of our country’s middle market and economy.
Our findings on mid-market manufacturers have also revealed a clean split between members of that general group and those experiencing rapid growth. The latter (or those that have achieved at least 10% gross revenue growth year-over-year) encounter similar challenges as other mid-market B2B companies; the difference is in how those issues are weighted as part of the overall focus each year.
After reviewing the data across today’s high-growth manufacturers, it’s clear that they have many challenges to overcome, even in their success. As such, we’ve divided these obstacles into five major categories: Competition, Up/Downstream Relationship Management, Product/Service Diversity, Technology, and Talent.
In this article, we’ll use data from The National Center for the Middle Market to describe how each of these five challenges is affecting mid-market manufacturers—and provide recommendations to help your individual business solve them. Let’s begin:
COMPETITION
As globalization and consolidation continue to drive down perceived value, manufacturers must find new ways to stave off degrading margins. In a poll of 250 strategic mid-market manufacturing leaders, 215 (or 86%) expressed a palpable increase in competition over the last five years. Those with the highest ratings were original equipment manufacturers (OEMs).
OEMs rate competition as the number one challenge to achieving their business goals. Even component part manufacturers (CPMs) are finding globalization to be an adversary. Moreover, consolidation is a factor found on the customer side as well. Losing an important customer to their own acquisition (or dissolution) can wreak havoc on future revenue.
RECOMMENDATION:
Continually drive documentation and understanding of how competitors encroach in your moat—even if through sideline acquisitions or mergers.
RELATIONSHIP MANAGEMENT
As customers demand more speed, transparency, and reliability in cycle times, manufacturers are expecting the same from their suppliers and support vendors. What started as a novelty is now a norm: just-in-time delivery and intense transparency on production cycles and speed. Because of this transition in the supply chain, 71% of manufacturers surveyed (and 81% of the fastest growing segment) self-report that their own role has become even more important. It’s easy to see that relationships up and downstream have to follow and demand cleaner, more deliberate interactions.
Concurrently, there is the overhead metamorphosis of digitization—and the demand it can unlock for shorter timelines. Though we’ll discuss this more in the Technology section, the digital move for what are traditionally seen as the most operationally innovative companies, like manufacturers, is netting varied outcomes. Of the fastest growing manufacturers, 51% stated that digitization has simplified the supply chain. Similarly, 54% expressed that digitization has shortened the expected turnaround time from suppliers and customers. Like all generational innovations, most happen because they must, but the outcome is the same: customers and supply chain relationships demand the shift to digital.
RECOMMENDATION:
Consistently evaluate and document the service level agreements of your suppliers and support vendors to ensure they are achieving the speed necessary to grow revenue.
PRODUCT AND SERVICE MIX
To stand out and proactively counteract competition, mid-market manufacturers are switching from a “product-only” model to selling value-added services. These offerings may include installation, maintenance, financing, consulting, and more. In reviewing the data, 79% of the fastest growing manufacturers have begun offering a value-added service—and 62% of those same companies have reported that revenue has grown because of these new offerings. What is most ironic in the addition of service is the other primary mover of additional revenue: specialization.
Though not the industry in its entirety, 41% of the fastest growing manufacturers have added some level of more focused product mix in the last five years. The inverse of this, more diversity of product, is much higher in mid-market manufacturers that are not fastest growing (24%). It’s not a significant leap to hypothesize that product specificity allows for greater revenue—given the discrepancy between fast-growing and average manufacturers. But of course, all businesses are different. Overall, the key driver seems to be the company’s willingness to challenge existing product lines and seek a better path forward whenever possible.
RECOMMENDATION:
Utilize digital research to determine what services or niche-focused products have the best ratio of demand and competitive moat.
TECHNOLOGY AND PROCESSES
Inevitably, the march of innovative technologies continues, impacting products and the many manufacturing processes used to create them. In those surveyed, 90% of manufacturers stated that integration of new technologies has been a net positive part of their stability and growth. Over the last five years, the majority of updates and upgrades have been focused around materials, process control, and robotics/automation. In the next five years, most manufacturers (especially those that are fastest growing) see cybersecurity as the most critical focus. This logical progression of new interconnectivity followed by updates to ensure the security of those devices will continue far into the future.
Overall, the movement of technology in manufacturing echoes the consolidation of integration between supply chain members: a focus on speed, transparency, and reduction of space between them. Those fastest growing manufacturers that seek to automate and embrace technology are the ones that will stand out in the coming half-decade.
RECOMMENDATION:
Evaluate the communication and automation from applicable systems, 3rd parties, and internal marketing tools to determine if more efficiency or value can be achieved.
TALENT MANAGEMENT
Each of the preceding areas of challenge overlap somewhat in the aspects of consolidation and innovation. In contrast, workforce management is a wholly unique challenge. Even with technology replacing some parts of manufacturing and at a head-turning speed, the lack of skilled employees is draining manufacturers’ ability to cope with growth. Of course, talent management concerns more than just manufacturers; the entire middle market is struggling to find individuals fit to operate in their systems.
As a way to overcome this challenge, many are turning to internal training programs to “level-up” their workforce and adapt to the new technology being integrated day by day. A second approach is to become more embedded at local schools and universities to develop a steam of new relationships and growth. Finally, many manufacturers have begun the important but stressful slope of increasing pay and benefits beyond market averages to win even average talent (average by older standards). All in all, a total of 94% of manufacturers surveyed are struggling to find workers holding technical skills or finding workers with even fundamental vocational skills.
RECOMMENDATION:
Marketing and targeted advertising of the values and benefits of your company to prospective demographics could yield a steady inflow of prospective employees.
EMBRACING CHANGE WITH SNAP AGENCY
As middle market manufacturers continue to innovate and adapt to the demands of their industry, the challenges they face will evolve in turn. Your individual business may list all or none of the issues we’ve explored today as priorities. But we hope these findings empower your team to reach its goals for efficiency and growth.
At Snap, we’ve built a dedicated team of strategists, analysts, leaders, and creatives to meet the unique needs of mid-market B2B companies, including manufacturers. We’re here to listen to your problems, understand your challenges, and create data-driven solutions to help your business overcome them. From SEO and web development to strategy and creative, we offer all the services your company needs to set itself apart from the competition and succeed online.
To learn more about Snap Agency and how we can support your mid-market B2B company, be sure to connect with us today. You can also explore our B2B case studies for insights on what our team can deliver—and the exceptional clients we support. We welcome the opportunity to serve your business.