Editor’s Note: The following post was originally published in June 2020 and has been completely revised and updated in order to ensure accuracy and comprehensiveness.
In this article, we will look at the importance of scaling up manufacturing and how it can help your business not only in good times but also in bad ones. We will also discuss the distinction between scaling up manufacturing operations and capacity building, as well as the importance of scalability in a manufacturing operation and how it will bring you into contact with others to help you grow your manufacturing business.
You should not be fearful of success as a manufacturer; you should plan on scaling up production from the very beginning. The method of doing this will depend on the type of products that you manufacture. But one thing that can be planned for is finding a manufacturing partner who will be able to help your business grow or scale back as needed.
The Difference Between Scaling Up and Capacity Building
When defining capacity building in manufacturing, it is important to distinguish between scaling up manufacturing and building capacity. Although scaling up and capacity building are different methodologies, there are some similarities between them. Why should I lean towards scaling up manufacturing and what is the difference? According to Thomasnet:
“By definition, the difference between scaling up and capacity building is that in the latter, a company is expanding its ability to manufacture more to meet a higher demand. On the other hand, scaling up is the ability to manufacture to meet market demand — in other words, the ability to scale up or scale back without great cost or risk to the organization while maintaining margins. Scalability, when applied to manufacturing, is the ability to reconfigure manufacturing systems, allowing production capacity to be quickly adjusted to abrupt changes in market demand while maintaining cost efficiencies.”
Simply put, when scaling up your business, you should not be planning to reach higher demand, but to meet more market demand. Demand may increase or decrease, and the ability to scale in either direction without affecting your bottom line should be the goal of all businesses, not just manufacturers.
If one builds capacity for a market when times are good, one runs the risk of overproducing, and when times are hard, they are stuck with products they cannot sell. Those manufacturing businesses that model themselves on being able to scale up or down do not fall victim to this problem.
The Importance of Scalability
In order to maintain growth and profitability, you must be able to adapt to the changing demands of the market. In the course of expanding your manufacturing operation, your primary focus will be on meeting the needs of your market and customers. According to a post by the Clydesdale Bank:
“Many successful entrepreneurs are constantly thinking of how to scale their business for growth. Whether you’re developing new products or services, taking on larger orders or moving into the export market, business owners need both the capacity and capability to do this successfully.”
According to a recent McKinsey survey of 1,240 business leaders worldwide, nearly 80 percent say capability building is extremely or very important to the long-term growth of their organizations.
This action, however, is complicated by the fact that market demands are always changing; they are constantly in flux, so your manufacturing production may be impacted by interest in your business, new products, and the availability of materials to meet your product’s demand.
As a result, if you wish to remain competitive in the face of these conditions, your manufacturing operation must be able to adapt the model in terms of scalability in order to meet current market requirements.
The Supply Chain and Scaling Manufacturing Up
Your supply chain, which is one of the most critical aspects of your business, will also benefit from scaling up manufacturing operations. With shortages and delays in your supply chain, how will you manage production in your manufacturing operation?
Your supply chain partners will play an important role in determining the flexibility and scalability of your manufacturing operation. Your supply chain partners must be able to meet your growing demand if you are going to scale your operations correctly. By asking questions and providing long-term thinking during your due diligence, you can determine whether your supply chain partners are capable of scaling their operations in parallel with yours. According to Thrive Global:
“It can often be too easy to overlook your suppliers, but by fostering good relations with them, you can easily save money on material expenses, which is integral in the production line as you build up your small business.”
Working With a Nearshore Manufacturing Partner for Scaling up Manufacturing
To be able to spend more time concentrating on scaling up your manufacturing operation, you should consider reshoring manufacturing to North America by working with a nearshore manufacturing partner like NovaLink.
By partnering with a manufacturer, you will be able to take advantage of one of the most important aspects of scaling up manufacturing: Scaling up involves hiring more employees. Finding the right talent is the challenge. Approximately 400% of the productivity of high-performing employees can be attributed to them, according to McKinsey. It is estimated that productivity increases by 800% when roles become more complex. Using maquiladoras in Mexico, an educated and skilled workforce with an average age of 26 years, Novalink manufactures sophisticated products for our clients in Mexico.
In addition to scaling up manufacturing operations from small to large ones, NovaLink has also scaled back operations that require a smaller workforce when the seasonal demand for their product is less strong.
Turtle Fur, a manufacturer of cold weather accessories, required garment production, but they also required the manufacturing output and labor pool to scale up and decrease for their seasonal production (up to a 20% increase or decrease depending on the season). It was not economically feasible to maintain a large labor force throughout the year. Further, Turtle Fur required its workers to be capable of working on several different types of products based on demand, and not to be specialized.
Turtle Fur’s greatest need, flexible staffing, was met immediately by NovaLink. With NovaLink, they were able to provide them with cross-trained staff in the 20% increase/decrease they required for seasonal production runs and demand.
With a cross-trained staff, Turtle Fur is able to move labor between production lines (sometimes daily) as needed: the same core group of employees makes knitted hats, electric socks, ski neck warmers, gloves, and children’s mittens from the same production line. Turtle Fur is able to meet their seasonal sales deadlines due to the adaptability of their staff and the ease of access to the Mexican market.
The flexibility of Turtle Fur’s production enables it to increase production as e-commerce demand increases; Turtle Fur is able to increase production as e-commerce demand increases.
Conclusion: Your Manufacturing Business Should Be Planned for Growth From the Onset.
However, you should also choose a manufacturing partner who can assist your business to grow or scale back as needed. With over 30 years of experience, NovaLink has provided shelter and contract manufacturing services to a wide range of industries. NovaLink believes that full service manufacturing in Mexico is the best choice for cost, quality, productivity, and delivery. As a manufacturing partner, NovaLink would be a perfect choice for your company as it looks to grow and scale-back its operations.