At age 17, Warren Buffet took a $25 investment in a single pinball machine and turned it into a $1,000 company in just a year. How? By reinvesting his profits, Buffet’s venture only continued to grow in value.
Manufacturers who don’t want to see their company growth stall out would be wise to follow the young Buffet’s philosophy. For those willing to capitalize, investing in Industry 4.0 technologies will lead to better efficiency, supercharged productivity as employees work hand-in-hand with automation or turn their attention to value-add tasks because of it, and a better overall product. For those who aren’t, well, the good times you’re experiencing now likely won’t last.
In other words, the time to invest is now. Here are five reasons why.
Don’t look now, but many of your competitors are already ahead.
Whether they’re your neighbor down the road or halfway across the globe in China, manufacturers are already taking the plunge and leveraging technology to their advantage.
Of course, you may currently be selling record amounts of product, and wondering why you should care about other manufacturers wasting cash on fancy tech. But don’t forget to put your returns in context: shortages abound, the infrastructure bill is directing business toward manufacturers, and pandemic-fueled spending patterns have yet to truly slow. What happens when things even out?
The truth is that every day you don’t invest, someone else is. That means your company is progressively becoming less competitive right before your eyes—if only you could step back and see it from a distance. When supply catches up and demand levels off, more forward-thinking companies are coming for your customers.
There will never be exactly the “right time.”
Interested in investing in technology, but just waiting for the “right time” to strike?
I have some unfortunate, but perhaps freeing, news. Try as we might to find the best possible time to plant our money in technology, it simply doesn’t exist. The good part? There’s not really a bad time to do it, either. Manufacturing leaders were sure they were too busy fulfilling orders to assess their technology strategies back before the pandemic. After it struck, suddenly they spent their time and attention on recovery, once again sending technology upgrades to the back burner.
Big investments inherently involve some risk. And make no mistake, transforming into a modern manufacturer capable of capturing the cost savings that Industry 4.0 promises will require considerable time and resources. But before you fall back on tried-and-true excuses about timing, consider easing your way into advanced technologies.
As I’ve written previously, the hardest part is often simply getting started. So, begin with a manageable step—such as introducing real-time data tracking—and then build your knowledge and confidence as you go.
Capital is cheap. For now.
Looking to take on financing to deck out your manufacturing floor? Now’s a good time to do it.
Yes, that dirty ‘I’ word, inflation, is rearing its ugly head at the gas pump and grocery counter. It’s also soon going to pop up in the form of higher interest—another enemy ‘I’—as the Fed gradually increases rates to try to curb spending without spinning us into a recession.
With those inflation-driven corrections on the way, you’d be wise to hop on financing now while rates are relatively low, and banks are still flush with cash.
If you’re not going to invest, you might as well sell now.
This is the hard reality about owning a business, which is very different from investing in the stock market. If you fail to invest money into the stock market, you’re merely missing out on the returns that money would bring. Conversely, each year you fail to invest back into your business, you’re effectively reducing the value of the company. You’ll notice that your EBIDTA (Earnings Before Tax, Interest, Depreciation, and Amortization), which is often multiplied to come up with a sale price for your company, will begin to sink.
There’s no shame in wanting to enjoy the fruits of your labor. After all, you’ve earned it by creating a thriving manufacturing company. But if you are not ready to plow much of your profit back in, you might as well prepare for a sale. Absent continued investment, your company will never be worth more than it is today, which means that both for your own financial future and for the livelihood of the employees that rely on you, you’re better off being acquired by a company that will come in hungry to upgrade.
If not now, you’ll still likely end up selling somewhere down the road. With all the advancements in technology your competitors will have made by then, you may be selling for scraps.
The talent shortage you’re experiencing isn’t temporary.
Manufacturing is not the only sector experiencing a dearth of talent tied, in part, to pandemic disruption. While it’s tempting to believe more workers will come out of the woodwork the further we’re removed from COVID-19’s impact, the reality is that the underlying factors causing the shortage are not going anywhere. With less people entering the workforce these days, as many as 2.1 million manufacturing jobs will go unfilled nationwide by 2030, according to Deloitte and The Manufacturing Institute.
When you can’t find people, machines can help fill the gap. Automation can help manufacturers augment human workers and free them up to focus on more valuable tasks, enabling a new level of productivity. Over the long haul, this efficiency will allow companies to increase their salaries above competitors like Target or Amazon and become more attractive to talent.
As long as we focus on building great places to work and raising wages, I’m optimistic manufacturing companies are on the right track to bring more talented people to the industry. But the larger demographics—an aging manufacturing employee base combined with fewer young people entering the workforce—will continue to make hiring a challenge, one that technology can help us solve.
So, there you have it – five reasons to start reinvesting your profits the way Buffet did at age 17. Follow in his footsteps and you may be surprised at just how many of your company’s challenges can be solved by new technology.
Investing in your business will always require a leap of faith. It’s never easy. But I promise you this: it will be much easier today than five years down the road. Start now, and you’ll remember the era of post-pandemic demand not as your production peak, but as the launching point for a decade or more of company growth.
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April 27, 2022 at 10:33PM
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5 Reasons Now Is The Time To Invest In Manufacturing - Forbes
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