Mid-sized manufacturers comprise about 30% of the overall manufacturing labor market and represent 15% of the total manufacturing revenue or just over $1 Trillion in the US (source). More than 22,000 mid-market manufacturers – defined as companies with revenue between $10 million to $1 billion – contribute to the 10% impact manufacturing has on overall US GDP. The number of mid-sized companies is growing despite the challenges of the last several pandemic-influenced years. Software applications can play a significant role to help grow and scale a business, provided you have the right deployment strategy. When designing their technology architectures and selecting the tools to help them modernize, mid-sized manufacturers need to stay true to form and view software the same way they have typically grown their business.
Just like Tier One manufacturers, mid-sized firms have also been challenged by supply chain and labor-related issues ever since the pandemic began. And, like the larger companies, mid-sized manufacturers have turned to technology to cope – with over 80% of recently surveyed firms reporting increased spending on technology (source).
Mid-sized Manufacturing Growth
Most mid-sized manufacturing companies get that way by growing from a small business. Some are created when larger manufacturers spin off a portion of their business such as the auto industry did in the late twentieth century with their electronics and non-engine related drivetrain components groups. For smaller companies, the path to becoming a mid-sized supplier often starts in one of several market expansion techniques.
According to the Harvard Business Review, mid-market growth is best achieved by understanding how to grow in a sustainable way (source). Whether it is by incremental product expansion, adjacent industry expansion with core products, or geographic market growth, the key to successful growth is a measured approach.
Treat Software Acquisition Like Production Expansion Investments
Mid-sized manufacturers that have grown from the ground up did so by incrementally expanding. Unlike companies that were spun out of larger entities and likely have inherited software systems, these manufacturers typically are moving from paper or spreadsheet-based operations management tools, or small PC-based applications that are incapable of supporting the growing organization. Unlike a Tier One enterprise with large IT staffs and budgets to hire consulting firms to drive multi-million-dollar implementations, mid-sized firms should acquire and deploy technology in a way that mimics the way they grow the rest of their business, one capability at a time.
For example, a mid-sized machining operation would typically only buy new CNC machines as product demand outpaces their existing capacity. They would not buy more machines than they could reasonably expect to require in the near to mid-term. Nor would they buy a machine with so much surplus capacity it tied up the capital they might need in other areas. They should approach software applications, particularly those on the shop floor, in the same way. Rather than buying a large monolithic application, mid-sized manufacturers should deploy software for managing their shop floor (Manufacturing Execution System or Quality Management System) by buying just what they need now. Then, in the future, as more capabilities are required, their functional footprint can grow as their business needs grow.
The Era of Modular Operations Management Systems
The advent of Cloud-based software solutions makes this incremental purchase option economically viable. Also, if the solutions they choose are built on a microservices architecture, it becomes technically feasible as well. Provided the vendor of your MES or other operational software has designed the product to take advantage of microservices and structured its licensing fees properly, a mid-sized manufacturer can buy just what they need, when they need it. So, as you look to move away from paper or spreadsheet-based solutions or replace an older PC-based package, deploy your operational software the same way you have grown your business since its start – incrementally.
Learn more about the importance of a microservices architecture in this article, IDC Research Confirms Value of Microservices Architecture.