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How can manufacturers decrease margin pressure without dramatically upping prices?

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How can manufacturers decrease margin pressure without dramatically upping prices?

The rising prices of raw materials, increasing wage costs, escalating energy tariffs and supply chain disruptions are all putting pressure on manufacturing profit margins.

But how can manufacturers reduce the pressure on their margins without significantly raising prices?

There is no doubt that inflation is on the rise globally, and according to the Organisation for Economic Co-operation and Development (OECD), the monthly Consumer Price Index showed that year-on-year inflation in the OECD rose to 9.6 per cent in May, compared with 9.2 per cent in April, largely driven by food and energy prices. Meanwhile, energy price inflation jumped to 35.4 per cent year-on-year in May, up from 32.9 per cent in April.

Compounding these cost challenges are the rising labour wages and serious skills shortages. With many cost control and operational hurdles on the horizon, how can manufacturers improve productivity and efficiency as they navigate workforce challenges and control hidden costs?

Focus on high-impact areas

So how can businesses limit their exposure to hidden costs? To start, they should focus on a few key operational processes, including planning, procurement, inventory control, quality and compliance and governance, and traceability. These are all areas where hidden costs can negatively affect the bottom line. Consideration is also the hidden costs of the brand reputation should there be the need for a recall.

That said, it’s unlikely that a business can completely revamp all its processes to reduce or eliminate hidden costs altogether, so the best approach is to apply the 60/40 rule to identify and focus on improving high-impact areas in the business. 

It is also important to remember that an impactful strategy is a marathon, not a sprint. It is best to start with one of two key initiatives, get those in place and work efficiently first to gain some “wins”. From there, they can build on that momentum to affect positive change in areas of the business that will have the biggest impact on their margins.

Improving supply chains and inventory management to reduce waste

Every single factory has the ongoing challenge of inventory management to deal with. Getting control over inventory optimisation will mean that there is no overproduction, resulting in too much stock and an excess amount tied up in working capital.  Factories need to ensure they have proper triggers in place to optimise their inventory fully.

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One way of overcoming the waste reduction challenge is to manage obsolete stock by reducing write-offs as new products are developed, and new stock is available for distribution. Controlling and reducing obsolete products and raw materials will minimise the impact of not having enough raw materials to manufacture new products. By utilising demand and manufacturing forecasting, factories can ensure this process is more streamlined.

Avoiding staff shortages during busy periods with high consumer demand means factories need to ensure that labour scheduling is done accurately to ensure that demand forecasting is optimised. Labour scheduling needs to ensure a balance between having too many people on the shopfloor with no work for them and the challenge of finding new labour with the necessary digital skillset. 

Digitalisation is the key to achieving productivity gains

Investing in the ongoing development of employees is one way to drive productivity, but digitalisation is equally beneficial as this will help manufacturers improve internal and external operational efficiencies. To ensure collaboration and success from the start, implementing a digital strategy requires buy-in across the business, from the C-level management to the factory floor staff and all the support and admin staff in between.

An Enterprise Resource Planning (ERP) system can have multiple benefits to help with overall business performance management for any organisation by providing intelligence, visibility, analytics and efficiency across every aspect of their manufacturing business. Broadly speaking, ERP refers to the automation and integration of core business to help them focus on effectiveness and simplified success.

An ERP system automates and integrates core business processes such as taking customer orders, scheduling operations and keeping inventory records and financial data. It will give a manufacturer one source of the truth and enable the digitalisation of their business. 

The 2021 SYSPRO CFO Study revealed half of manufacturing CFOs had built strategies in response to ongoing disruptions by focusing on the investment in machinery, robotics, and technology automation and have aimed to improve internal efficiencies. However, only 27 per cent of businesses plan to increase external collaboration over the next 12 months.

While improving internal efficiencies is vital for any business, a lack of investment in external collaboration tools could have dire consequences for businesses in the long term. 

Despite the challenges that remain for manufacturers and distributors, it is possible to manage productivity and operational efficiency if ERP is central to their operations. As the supply chain disruptions have taught us, operating reactively is not viable. Business models are evolving rapidly to maintain customer satisfaction while managing profit margins. Being equipped with accurate, real-time and actionable data will help reduce the pressure on profit margins.

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Michigan farmworker diagnosed with bird flu, becoming 2nd US case tied to dairy cows

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Michigan farmworker diagnosed with bird flu, becoming 2nd US case tied to dairy cows

A Michigan dairy worker has been diagnosed with bird flu — the second human case associated with an outbreak in U.S. dairy cows.

The male worker had been in contact with cows at a farm with infected animals. He experienced mild eye symptoms and has recovered, U.S. and Michigan health officials said in announcing the case Wednesday.

A nasal swab from the person tested negative for the virus, but an eye swab tested Tuesday was positive for bird flu, “indicating an eye infection,” U.S. Centers for Disease Control and Prevention officials said.

The worker developed a “gritty feeling” in his eye earlier this month but it was a “very mild case,” said Dr. Natasha Bagdasarian, Michigan’s chief medical executive. He was not treated with oseltamivir, a medication advised for treating bird flu, she said.

The risk to the public remains low, but farmworkers exposed to infected animals are at higher risk, health officials said. They said those workers should be offered protective equipment, especially for their eyes.

Health officials say they do not know if the Michigan farmworker was wearing protective eyewear, but an investigation is continuing.

In late March, a farmworker in Texas was diagnosed in what officials called the first known instance globally of a person catching this version of bird flu from a mammal. That patient reported only eye inflammation and recovered.

Since 2020, a bird flu virus has been spreading among more animal species — including dogs, cats, skunks, bears and even seals and porpoises — in scores of countries.

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The detection in U.S. livestock earlier this year was an unexpected twist that sparked questions about food safety and whether it would start spreading among humans.

That hasn’t happened, although there’s been a steady increase of reported infections in cows. As of Wednesday, the virus had been confirmed in 51 dairy herds in nine states, according to the U.S. Agriculture Department. Fifteen of the herds were in Michigan.

The CDC’s Dr. Nirav Shah said the case was “not unexpected” and it’s possible more infections could be diagnosed in people who work around infected cows.

U.S. officials said they had tested 40 people since the first cow cases were discovered in late March. Michigan has tested 35 of them, Bagdasarian told The Associated Press in an interview.

Shah praised Michigan officials for actively monitoring farmworkers. He said health officials there have been sending daily text messages to workers exposed to infected cows asking about possible symptoms, and that the effort helped officials catch this infection. He said no other workers had reported symptoms.

That’s encouraging news, said Michael Osterholm, a University of Minnesota epidemiologist who has studied bird flu for decades. There’s no sign to date that the virus is causing flu-like illness or that it is spreading among people.

“If we had four or five people seriously ill with respiratory illness, we would be picking that up,” he said.

The virus has been found in high levels in the raw milk of infected cows, but government officials say pasteurized products sold in grocery stores are safe because heat treatment has been confirmed to kill the virus.

The new case marks the third time a person in the United States has been diagnosed with what’s known as Type A H5N1 virus. In 2022, a prison inmate in a work program picked it up while killing infected birds at a poultry farm in Montrose County, Colorado. His only symptom was fatigue, and he recovered. That predated the virus’s appearance in cows.

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The Associated Press Health and Science Department receives support from the Howard Hughes Medical Institute’s Science and Educational Media Group. The AP is solely responsible for all content.

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At collapsed Baltimore bridge, focus shifts to the weighty job of removing the massive structure

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At collapsed Baltimore bridge, focus shifts to the weighty job of removing the massive structure

BALTIMORE (AP) — Teams of engineers worked Saturday on the intricate process of cutting and lifting the first section of twisted steel from the collapsed Francis Scott Key Bridge, which crumpled into the Patapsco River this week after a massive cargo ship crashed into one of its supports.

Sparks could be seen flying from a section of bent and crumpled steel in the afternoon, and video released by officials in the evening showed demolition crews using a cutting torch to slice through the thick beams. The joint incident command said in a statement that the work was being done on the top of the north side of the collapsed structure.

Crews were carefully measuring and cutting the steel from the broken bridge before attaching straps so it can be lifted onto a barge and floated away, Coast Guard Rear Adm. Shannon Gilreath said.

Seven floating cranes — including a massive one capable of lifting 1,000 tons — 10 tugboats, nine barges, eight salvage vessels and five Coast Guard boats were on site in the water southeast of Baltimore.

Each movement affects what happens next and ultimately how long it will take to remove all the debris and reopen the ship channel and the blocked Port of Baltimore, Maryland Gov. Wes Moore said.

“I cannot stress enough how important today and the first movement of this bridge and of the wreckage is. This is going to be a remarkably complicated process,” Moore said.

Undeterred by the chilly morning weather, longtime Baltimore resident Randy Lichtenberg and others took cellphone photos or just quietly looked at the broken pieces of the bridge, which including its steel trusses weigh as much as 4,000 tons.

“I wouldn’t want to be in that water. It’s got to be cold. It’s a tough job,” Lichtenberg said from a spot on the river called Sparrows Point.

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The shock of waking up Tuesday morning to video of what he called an iconic part of the Baltimore skyline falling into the water has given way to sadness.

“It never hits you that quickly. It’s just unbelievable,” Lichtenberg said.

WHAT HAPPENS NEXT

One of the first goals for crews on the water is to get a smaller auxiliary ship channel open so tugboats and other small barges can move freely. Crews also want to stabilize the site so divers can resume searching for four missing workers who are presumed dead.

Two other workers were rescued from the water in the hours following the bridge collapse, and the bodies of two more were recovered from a pickup truck that fell and was submerged in the river. They had been filling potholes on the bridge and while police were able to stop vehicle traffic after the ship called in a mayday, they could not get to the construction workers, who were from Mexico, Guatemala, Honduras and El Salvador.

The crew of the cargo ship Dali, which is managed by Synergy Marine Group, remained on board with the debris from the bridge around it, and were safe and were being interviewed. They are keeping the ship running as they will be needed to get it out of the channel once more debris has been removed.

The vessel is owned by Grace Ocean Private Ltd. and was chartered by Danish shipping giant Maersk.

The collision and collapse appeared to be an accident that came after the ship lost power. Federal and state investigators are still trying to determine why.

Assuaging concern about possible pollution from the crash, Adam Ortiz, the Environmental Protection Agency’s mid-Atlantic Regional Administrator, said there was no indication in the water of active releases from the ship or materials hazardous to human health.

REBUILDING

Officials are also trying to figure out how to handle the economic impact of a closed port and the severing of a major highway link. The bridge was completed in 1977 and carried Interstate 695 around southeast Baltimore.

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Maryland transportation officials are planning to rebuild the bridge, promising to consider innovative designs or building materials to hopefully shorten a project that could take years.

President Joe Biden’s administration has approved $60 million in immediate aid and promised the federal government will pay the full cost to rebuild.

Ship traffic at the Port of Baltimore remains suspended, but the Maryland Port Administration said trucks were still being processed at marine terminals.

The loss of a road that carried 30,000 vehicles a day and the port disruption will affect not only thousands of dockworkers and commuters, but also U.S. consumers, who are likely to feel the impact of shipping delays. The port handles more cars and more farm equipment than any other U.S. facility.

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Collins reported from Columbia, South Carolina. Associated Press writers Sarah Brumfield in Washington, D.C.; Kristin M. Hall in Nashville, Tennessee; Adrian Sainz in Memphis, Tennessee; and Lisa Baumann in Bellingham, Washington, contributed.

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The Texas attorney general is investigating a key Boeing supplier and asking about diversity

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The Texas attorney general is investigating a key Boeing supplier and asking about diversity

DALLAS (AP) — The Texas attorney general has opened an investigation into a key Boeing supplier that is already facing scrutiny from federal regulators over quality of parts that it provides to the aircraft maker.

The office of Texas Attorney General Ken Paxton said it began looking into Spirit AeroSystems because of “apparent manufacturing defects” in parts that “have led to numerous concerning or dangerous incidents.”

In a statement Friday, a Spirit spokesman said, “While we do not comment on investigations, Spirit is wholly focused on providing the highest quality products to all our customers, to include the Boeing Company.”

Paxton asked the Wichita, Kansas-based supplier to turn over documents produced since the start of 2022 about communication with investors and Boeing about flaws in parts and corrective steps the company took.

The request goes into detail in seeking internal discussions around Spirit’s efforts to create a diverse workforce “and whether those commitments are unlawful or are compromising the company’s manufacturing processes.” Paxton asked for a breakdown of Spirit’s workforce by race, sexual orientation and other factors, and whether the makeup has changed over time.

Since a Spirit-made door-plug panel blew off an Alaska Airlines Boeing 737 Max in January, some conservatives have tried to link aviation safety to diversity at manufacturers.

Paxton is a conservative Republican who this week agreed to pay $271,000 in restitution to victims and take 15 hours of training in legal ethics to settle felony charges of securities fraud. Paxton did not admit wrongdoing in the 9-year-old case.

The Federal Aviation Administration launched an investigation into Boeing Spirit after the Alaska Airlines incident. An FAA audit of manufacturing procedures in Spirit’s factory gave the company failing grades in seven of 13 areas.

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Boeing is in talks to buy back Spirit, which it spun off nearly 20 years ago, as part of a plan to tighten oversight of manufacturing in its supply chain.

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