5 Reasons Why Many Manufacturing Companies Fail To Make Impact

Nov 02, 2020

5 Reasons Why Many Manufacturing Companies Fail To Make Impact

Running a manufacturing company is not for the fainthearted as the risk of failure is quite high. Companies go out a lot of time for different reasons, but they are all too common. What can we learn from the rate of failure with manufacturing companies to avoid the common pitfalls 

Here are five reasons many manufacturing companies fail to make an impact.  

  1. Financing hurdles 

A primary reason manufacturing companies fail is insufficient capital. One of the causes is that business owners often don’t keep in mind how much revenue the company generates by the sales of goods, and this disconnect leads to funding shortfalls. A proper understanding of how much money is needed to run a business can aid financial planning and keep the company operational for a long time.  

Other times, it could be because of different forms of wastage, such as defects, overproduction, excess processing, and so on. Waste affects the number of goods that a company sells, which means it also impacts revenue generation. A company that wants to scale this hurdle must seek to adopt lean manufacturing, and one of the ways to do that is by investing in an ERP solution.  

  1. Poor management 

Another critical reason many manufacturing companies fail is poor management or leadership. A good management team will easily be able to avoid almost all the reasons for failure on this list. Weak management can be identified by an inability to develop a strategy, poor execution, lack of enthusiasm, and more.  

Your products might be high-quality, but if you don’t have a great management team that will be able to oversee the operations of the company and motivate the employees, the company will suffer as there are maybe confusion, conflict within the ranks, poor morale, and reduced productivity – all of which contributes to the failure of a company. The bottom line is that your employees look up to the management for great leadership.  

  1. Improper planning 

Many manufacturers often overlook the importance of business planning, and this makes them fail and go out of business. It’s okay to have a dream of growing the company but don’t fail to take the painstaking but necessary step of making a well-laid-out plan that will guide the operations of the business. 

A sound business plan should include, at a minimum, a clear description of the company, current and future employee management needs, opportunities and threats, capital needs, expense forecasts, and marketing budgets. It’s also important to have a solid understanding of the industry before the plan is made. 

  1. Marketing problems 

Manufacturing companies run into a problem due to their inability to properly their market their products. Some are just too caught up in trying to manufacture goods that they fail to make realistic projections in terms of target audience reach and sales conversion ratios. Other times, it could be that there is not a compelling enough value proposition to make buyers commit to buying the products. Either way, a company that wants to remain profitable must ensure that there is a market for the product that they have built.  

  1. Unprofitable business model 

Last but not least, manufacturing companies fail because they assume their business model isn’t the right one. They often start a business because they think it’s easy to acquire customers and stay ahead of the competition by splurging on adverts, but that often is a rather too expensive way to win. A great business model should be able to acquire and retain customers without spending a fortune. Think of it as an issue of the CAC cost of acquiring a customer and the LTV lifetime value of the customer.  


Many manufacturers don’t like to consider the possibility of their business failing to make an impact but ignoring these signs is a surefire way to end up on the wrong side of business survival statistics. The signs above can help your manufacturing company remain productive and profitable in the long run.  


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Topics: ERP solution, Manufacturing, manufacturing erp software, chemical manufacturing erp, chemical manufacturing plant software, plastic manufacturing erp, discrete manufacturing, erp software for manufacturing, building supplies manufacturing, erp for manufacturing