Andrew Mamonitis, Vice President – APAC, Manufacturing Division, ECI Solutions

In today’s volatile business landscape, small and mid-sized manufacturers (SMBs) are navigating a minefield of cost pressures.

Inflation may be easing, however supply chains remain erratic, and the modern workforce demands greater flexibility. Many SMBs, desperate to stay afloat, are tempted by aggressive cost-cutting. Yet experts warn blunt force cuts can do more harm than good.

For many SMBs, the question isn’t whether to modernise operations – but how fast. Leading SMBs are adopting modern precision strategies – leveraging real-time data, automation, and smarter planning tools – to trim waste without jeopardising growth. Eight key strategies they are embracing are:

1. Making data-driven decisions:
   Modern enterprise resource planning (ERP) systems have transformed how SMBs uncover inefficiencies. With integrated analytics, businesses can now detect underperforming products, costly customers, and process bottlenecks that erode profits.

   Consider the case of a building supply firm. By analysing inventory data, they discovered specialty mouldings (long considered essential), were costly and slow-moving. By shifting these to a special-order model and doubling down on core items, they cut inventory costs while improving customer satisfaction.

2. Inventory as a Strategic Asset:
   Many manufacturers still treat inventory as a necessary evil, overstocking to avoid shortages or running lean to conserve cash. But modern inventory management systems offer a better path.

   With AI-powered forecasting and unified inventory views, companies can optimise stock across multiple locations. One distributor, plagued by stockouts in one warehouse and excess in another, solved the issue by synchronising inventory across five sites. The result was lower overall stock levels and higher availability.

3. Production planning that plays in harmony:
   Inefficient production planning is among the costliest problems for SMBs. A reactive approach (scrambling to meet yesterday’s demand) leads to overtime, delays, and wasted resources.

   A homebuilder suffering from poor coordination turned to ERP tools to map out dependencies and visualise project timelines. This allowed them to schedule subcontractors and materials with precision, cutting down on idle labour and rushed deliveries.

4. Automation: Slaying the paper dragon:
   Manual processes still dominate many SMB back offices, slowing productivity and increasing errors. With low-cost automation tools readily available, this reliance on paper and spreadsheets is both outdated and expensive.

   An industrial distributor, once infamous for shipping errors, adopted barcode scanning and automated documentation. The improvements were immediate: returns dropped, complaints dwindled, and efficiency soared.

A metal fabricator specialising in mining equipment cut lead times by automating quoting and production scheduling, utilising historical job data paired with real-time supplier lead times and material pricing.

5. Financial insights that guide growth:
   Financial management in many SMBs remains backward-looking. Reports tell what did happen, not what will This leaves leaders flying blind when making strategic decisions.

   Upgraded financial systems are changing that. A tech retailer, puzzled by declining margins despite rising service revenues, used ERP insights to uncover a money-losing support package. The fix – adjusting pricing and service terms – restored profitability.

6. Supplier Strategy: Partnering for Efficiency:
   Vendor relationships are often transactional, with buyers focused solely on securing the lowest price. But a growing number of SMBs are realising the benefits of strategic supplier partnerships.

   A manufacturer reduced procurement costs by consolidating purchases across fewer suppliers, improving order consistency and unlocking volume discounts. With better data on supplier performance and total cost of ownership, the company streamlined its supply chain while improving service levels.

7. Serve smart, not equally:
   Not all customers are equally valuable, however many SMBs provide uniform service regardless of profitability. A smarter approach is emerging: using data to tailor service levels based on true value.

   A distributor found that a handful of clients generated most of its profits, while others drained resources. Implementing a tiered service model – with premium support for key accounts and modified terms for high-cost customers – helped reverse profitability trends without alienating clients.

8. Core vs. context: Focus where it matters:
   The most competitive SMBs draw a sharp line between “core” activities (those that generate differentiation and revenue) and “context” tasks that are necessary but not unique.

   For example, a homebuilder identified custom trim work as a drain on time and quality. By outsourcing these specialised tasks, they reduced project delays and refocused internal teams on core construction work.

A smarter path to efficiency

The days of across-the-board cuts are fading. Today’s leading SMB manufacturers are adopting a targeted, data-driven approach to cost management. Instead of weakening their businesses to save money, they’re using insight and strategy to trim fat while protecting muscle.

This transformation is not a one-time project. It requires embedding a culture of continuous improvement and giving teams the tools to distinguish between value-creating and value-draining work.

The SMBs who win in the next decade won’t just cut costs – they’ll build smarter, more resilient businesses ready for whatever comes next.

 

 

 

 

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