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manufacturing industry

Exploring Critical Challenges Facing the Swiss Manufacturing Industry

Manufacturing industry

As the center of gravity of manufacturing has gradually migrated to Asia over the past decade, it has become acceptable in more developed nations to assume that manufacturing industry can no longer play a substantial role in the expansion and continued sustainability of their economies. Switzerland is known for setting itself apart internationally by being a highly competitive and attractive market to do business. The Swiss manufacturing industry has come under increased pressure over the past couple of years. The global financial crisis and the subsequent strength of the Swiss franc posed several manufacturing industries challenges. In the view of these manufacturing industry challenges, the questions to find answers to here is how long Swiss manufacturing companies can remain competitive and how they are going to do so.

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Manufacturing industry challenges in Switzerland

Economic volatility

The Swiss economy is characterized by rising volatility and increased uncertainty since the global financial crisis almost a decade ago. Subsequently, there was an increased pressure on margins of companies in the manufacturing industry due to the strengthening of the Swiss franc. This situation was stabilized to a considerable degree when the swiss national bank implemented the EUR/CHR exchange rate floor. However, the increasing pressure has resulted in several companies in the Swiss manufacturing sector to make additional operational adjustments. Manufacturing companies exporting primarily to Europe are most likely to shift their focus outside traditional markets to growth regions.

New growth markets

During recent years, strong economic growth has occurred in emerging markets rather than developed markets. In this scenario, the key challenges for Swiss manufacturing industry companies will be to expand their operation further into new growth markets and at the same time compete effectively with existing players in these markets.

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Rising global competition

Amidst rising global competition, innovation, the need to introduce new and innovative products are becoming paramount for companies in the manufacturing industry. While targeting new growth markets, manufacturers must ensure that their products are tailored to suit local needs. Product innovations are essential in developed markets to survive despite the rising competitive pressure. The challenge here for companies in the Swiss manufacturing industry will be to reinvent themselves amid these tensions, especially because new products from emerging markets are increasingly being imported to developed countries and has become a source of competition for manufacturers in domestic markets.

Shortage of resources

Another critical challenge for Swiss manufacturing companies involves issues such as shortage of resources, which is prominent in case of talent and energy. Firstly, the Swiss manufacturing industry has long experienced shortage of labor and this needs to be addressed immediately in order to remain globally competitive. Secondly, Switzerland’s energy policy provides for phase-out of nuclear power and promotes renewable energy sources. This entails both risks and opportunities for the Swiss manufacturing industry. The challenges here would be to restructure the energy industry as an opportunity while staying prepared for contingencies such as electricity prices or uncertainties in terms of supply securities.

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manufacturing sector

How the US Manufacturing sector Compares to Other Nations

After several years of falling output and diminishing labor force, the industrial manufacturing sector in the United States has been enjoying resurgence over the past couple of years. According to manufacturing industry experts at Infiniti Research, factors including the strengthening economy, better workforce quality, favorable tax policies and regulatory environment, and reduced transportation and energy costs are catalysts for this revival. In order to move forward, it is essential to understand how the manufacturing industries across the world are performing in comparison to that of the U.S. manufacturing industry. In this blog, experts at Infiniti Research provide insights on the manufacturing trends and some of the manufacturing challenges faced by different nations. They also highlight how the US manufacturing sector compares to these nations.

China has one of the strongest manufacturing industries in the world in terms of manufacturing output and the percentage of its national output that is generated. Meanwhile, Poland has the highest percentage of its workforce employed in manufacturing.

United Kingdom

The drop in the value of the British pound against the U.S. dollar and the euro has strengthened the U.K.’s manufacturing sector, thereby facilitating an increased demand overseas for goods from the country. Furthermore, the manufacturing sector holds a strong presence in the country due to its significant role in the export economy. In fact, the manufacturing sector contributes to a good majority of the U.K.’s overall exports. One of the key manufacturing trends in the U.K. is the rising efforts made to capture a significant share of the overseas market. However, the weak pound can impose manufacturing challenges as it may increase the import cost of certain supplies. Furthermore, as Brexit negotiations unfold, the future of manufacturing in the U.K. will experience significant turbulence.

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Switzerland

The effective governance policy in Switzerland has played a favorable role in shaping its strong manufacturing g sector. As a result of their long-held international neutrality, the country has transparent and fair processes, strong judicial effectiveness, and good economic and political stability. Moreover, Switzerland prioritizes being a strong trading country. The country has also got a top-notch manufacturing talent pool with a large number of highly-skilled workers. The key manufacturing challenges faced by companies in Switzerland include the cost of production and the strong franc value that could hamper exports.

Brazil

The rising corruption in Brazil is one of the primary factors that has plagued the country, resulting in a flailing manufacturing sector. Corruption makes investors reluctant to pour money into business operations due to chances of long-term uncertainty. Consequently, this dampens the chances of long-term investment and business growth. This can have adverse effects on the country’s manufacturing sector. A healthy manufacturing sector is contingent upon transparency in financial transactions, relative certainty in a country’s political environment, and individuals being held accountable for illegal action.

Indonesia

Although a decade ago Indonesia’s manufacturing sector contributed a significant amount of their GDP, Over the years the industry’s contribution has considerably dipped. Indonesia is largely hampered by anemic labor productivity. The sizeable proportion of small and unproductive firms in Indonesia are dragging down the entire sector. To improve their global competitiveness, Indonesia needs to develop its workforce and advance its manufacturing sector. They must focus on incentivizing manufacturing companies with low productivity to either exit the industry or improve their productivity through technology and skilled labor.

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Manufacturing sector in the US

Skilled workforce, advanced technology, and pro-business policies have propelled the growth of the manufacturing sector in the U.S. Manufacturing contributes to over $2 trillion to the United States economy. The labor costs in the United States are significantly higher than in other countries. However, the levels of productivity found in the United States make up for this difference, making the country an attractive location for manufacturing investment. Furthermore, disruptive technologies including additive manufacturing, 3D-printing, robotics, and the utilization of the IoT and Big Data are revolutionizing the U.S. manufacturing sector. This has not only increased levels of productivity but has also made the United States one of the most attractive locations for high-technology manufacturing firms. The United States has, benefited from open trade policies, and in order to attain continued manufacturing growth, the country should avoid tariff wars or overly restricted trade policies.

The gap in labor costs in the United States in comparison to other countries has started to drop and is expected to continue as the cost of industrial robots falls.

Learn more about how manufacturing sector challenges vary from region to region and how our market intelligence solutions can help overcome them.

workforce management

Drilling Down the Workforce Management Challenges of the Manufacturing Sector

The manufacturing industry in the U.S. has made impressive strides in the past couple of years. The country has witnessed a rise in public awareness about the modern manufacturing industry, increase in jobs returning to the country, and also the advent of new technologies that are driving the industry forward. However, the ongoing struggle to find skilled labor due to the rapid retirement of baby boomers from the sector is proving to be a major workforce management challenge for companies in the manufacturing sector. Apart from this, there are several other challenges that manufacturing companies must tackle in order to sustain the future scalability of the sector.

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Top workforce management challenges

 Hiring the right workforce

Manufacturing operations today are largely different from what it was a decade ago. The advent of digital technologies including robotics and advanced enterprise software are paving way for a new manufacturing environment. The modern workforce must have the skills and expertise to handle the digital systems which have become a part and parcel of the manufacturing sector.  Fewer schools offer shop classes and more students shy away from manufacturing, posing as a workforce management challenge for manufacturers to find the right talent.

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Consistent training and education

With rapid changes taking place in the manufacturing industry, even well-trained employees may face difficulties in keeping pace with these disruptions. Another key workforce management challenges for companies in the manufacturing sector is to ensure consistent training and education that would ensure that employees are up-to-date with the new tech trends and other market changes.

Overcoming stigmas related to manufacturing jobs

Throughout the United States, manufacturing has fallen out of style. High Schools, teachers and parents alike are steering children away from a career in the industry. This sector is currently bogged down by outdated stigmas such as being a dark, dangerous, and an ominous industry creating serious workforce management challenges for this sector. 

Cybersecurity threats

Technology continues to change how manufacturers develop products and interact with customers. As a result, information technology security risks have increased. Despite this, several manufacturers fail to take the necessary steps to protect their data. The number of connected products in manufacturing operations is on the rise, consequently, external and internal vulnerabilities are also increasing in the industry.

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workforce management

 

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contract manufacturing

Why are Top manufacturers moving to Contract Manufacturing?

What is contract manufacturing?

Contract manufacturing is often used interchangeably with the term ‘outsourcing.’ outsourcing is the technique of transferring portions of work to outside sources and suppliers, instead of undertaking the entire work within the company, resulting in lower costs and expenses. Contract manufacturing is a form of outsourcing where a manufacturer enters into a formal agreement with another manufacturer (contract manufacturing organization) to produce parts, products, or components, which the former will then use in its own manufacturing process, to complete its own product. They then undertake their own marketing, sales and distribution, and customer service to bring the final product to the end-users or consumers. In some cases, contract manufacturers may also be specialized organizations that provide contract manufacturing services to more than one business. 

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Different types of contract manufacturing

The different forms of contract manufacturing vary based on nature and operations involved in a business. Some of the most common forms of contract manufacturing agreement includes:

Production of the entire product

As the name clearly suggests, this involves contract manufacturing organizations building the entire product for a company under the brand name or label of the latter. This type of contract manufacturing is also called as ‘private label manufacturing’.

Production of parts or components

In this type of contract manufacturing, companies depend on a contract manufacturing organization to produce parts or components that will be incorporated into the final product of the company. For instance, a computer hardware manufacturer can use contract manufacturing for producing smaller computer parts and components, which is then assembled into their final product.

Hiring service or labor force

This involves subcontract for labor. If a business does not possess enough manpower in their company to carry out production processes smoothly and quickly, then they can outsource labor. Take the example of big multinational companies in the US who set up their manufacturing unit in Asian countries and subcontract their labor forces to Asian human resource companies. The key reasons why companies adopt this form of manufacturing is the specialized skills that these labor forces have and the comparatively cheaper cost of labor when compared to their home countries.

Using manufacturing equipment or facility

Companies that do not have the facility or the equipment to manufacture can transact with a contract manufacturer for the use of their facility. This saves the company capital investment needed to set up a manufacturing unit.

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Why do top manufacturers favor contract manufacturing?

The decision to make or buy a product/ parts of a product can often prove to be a tough decision for companies. They often undertake feasibility studies for the management to gain a better understanding of what would be more beneficial for them. One of the key benefits that companies can derive from contract manufacturing is the reduction in cost and expenditure. But this is not the only reason companies opt to get into agreements with contract manufacturing organizations. Some of the other reasons include:

  • Improved allocation of resources
  • Greater focus on core business functions
  • Increased innovation and enhanced product quality
  • Reduction in manufacturing time
  • Streamlined business relationships

 

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