Written by John Caplan, President of North America and Europe at Alibaba.com, for Forbes.
US small and medium-sized manufacturing was already on the cusp of major change before the global pandemic due to advances in technology, from artificial intelligence to robotics, were evolving. Since the pandemic took hold, change of all kinds is happening rapidly and in surprising ways. Here’s what you need to know and how to prepare your business for the future through this accelerated digital transformation.
The state of manufacturing today
Manufacturers — who create products from raw materials or components, either by machine or by hand, in plants, factories, mills, or even homes — are a significant driver of the US economy, and the vast majority of them are small businesses. According to SCORE, a nationwide network of business mentors, a whopping 98.6% of American manufacturing companies are small businesses, and last year, they generated an impressive 11.6% of the US economic output and employed 8.5% of the US workforce.
These businesses create everything from clothing and furniture to food and electronics, and are especially prevalent in states such as Ohio, Michigan, California, Texas, and North Carolina, where industry-friendly incentives, low tax rates, and educational programs fuel manufacturing booms. They’re incredibly important to our economy, and I was most recently reminded of this during a conversation with JJ Tartarini, a Co-founder of U-LUV Foods, a family-owned, Colorado-based cookie company.
“Manufacturing in the US employs American workers, which is important now more than ever,” says Tartarini. “At U-LUV Foods, we moved out of a rented space and opened our own facility in 2018 because we realized that the better long-term decision would be to have control of our own destiny. We can keep start-up costs down because we’re able to rent our commercial kitchen to other vendors. And since we have a unique product recipe free from all major FDA allergens, plus a proprietary baking operation, having our own space lets us control the entire process. There are downsides, like upkeep, but scaling is always an investment and needs to be done well to succeed.”
Pivoting to deal with disruption
To pivot well requires agility and forward-thinking. As an industry, manufacturing is in flux, and the recent proliferation of technologies like artificial intelligence, 3D printing, robotics, and more are disrupting the sector so much that many manufacturers are coming up with their own technologies and are even rethinking their business models — all of which promise to bring us closer to operational excellence.
The pandemic has created an array of new challenges — think supply chain disruptions, limited ability to travel, social distancing on assembly lines — forcing manufacturers to try to adapt as well as innovate at an unprecedented pace. “We’ve had to quickly change our internal operations to ensure we are adhering to the latest CDC guidelines on quality and cleanliness in light of the coronavirus,” shared Tartarini. The struggle is real: production in the US dropped 7.7% in July 2020 year over year, following an 11.1% slump in June.
However, it’s not all doom and gloom. While assembly lines have slowed down because of the coronavirus and with that sales from manufacturing, we’re seeing strong growth in B2B ecommerce sales. Last year, US manufacturer sales on ecommerce sites, log-in portals, and marketplaces grew at a record pace — nearly 21% to US $430 billion. That rate is almost 20 times faster than the growth in total US manufacturing sales, according to data and analysis in a report from Digital Commerce 360.
We’ve seen a similar acceleration even this year on the Alibaba.com platform with US B2B companies increasing transactions more than 100% over last year. One such business owner that has experienced growth in this health and economic crisis is Kheedim Oh, Founder of NY-produced Mama O’s Premium Kimchi. Because consumers realize that kimchi is a highly functional probiotic food, he recently launched new products and hired additional staff to cope with the demand. But given the uncertainty of today’s environment, Oh says he is focusing on keeping his overhead and operating costs down and building out his ecommerce sales channels to find new customers and markets. Oh emphasized that business owners must be agile and flexible for whatever is ahead, and most importantly, love what they do.
The takeaway? Harnessing the power of digitization and making ecommerce a priority for your manufacturing business, no matter its size, is critical.
Harnessing the power of digitization
Manufacturers have a long history of embracing technology to drive efficiency. Now they must also use technology to drive growth through data-driven, cloud-enabled platforms. Here are a few key tips:
- Move your data into the cloud to benefit from its low-cost, scalable infrastructure, and think big — use your data to do more than just manage assets, but also formulate strategy.
- Leverage technology to augment the expertise of your workers, not the other way around, and empower them to come up with solutions.
- Focus on cost is important, but focusing on your customer — and what will deliver the best customer experience — is the only way to achieve long-term growth.
One thing is certain: change and progress are inevitable. If you haven’t already digitized your small or medium-sized manufacturing business, the time is now.
Ready to start mastering the basics of ecommerce? The Alibaba.com Digitization Sprint for US Manufacturers offers tailored sessions to help you kickoff your digital journey and ensure your long-term success sourcing, selling, and marketing your business online. Apply here.
Take advantage of email marketing. Email is one of the most effective ways to reach your target market. Send monthly newsletters, solicit feedback with surveys, share product updates! This will help you stay in touch with customers and prospects.