Complacency is Killing U.S. Manufacturers

Buyers prefer to source, vet and purchase from suppliers they find online, yet manufacturers continually fail to meet them there.

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Manufacturing represents the best of us – fueling the U.S. economy with good jobs, good pay and the path to a secure future for millions of Americans. That’s why it’s heartbreaking to watch an industry almost deconstruct for one simple reason – a failure to meet its customer’s buying expectations.

The numbers are pretty astounding. Today, eight out of 10 manufacturers still primarily depend on their internal sales team to drive revenue; and less than one out of five offer a digital buying experience. It’s no surprise that buyers prefer to source, vet and purchase from suppliers they find online, yet manufacturers continually fail to meet them there. 

What's driving this complacency? Fear.

Why is it so hard for manufacturers to meet this new buying demand? Fear of change and technology, fear of losing revenue, fear of inadequacy and fear of risking relationships with dealers/distributors. This grappling fear is paralyzing manufacturers.  

Sure, change is hard, but manufacturers never shied away from investing in the quality of their products. However, the average manufacturer lags behind 10-15 years when it comes to investing in sales and operational processes. 

What’s the answer?

Digitizing an operation is more than building an e-commerce platform – it’s tying together all the back-end processes within a company’s supply chain to create a seamless experience. Companies are finding that selling direct requires commitment to the back-end operation to make sure all areas (sales, finance, engineering, production, logistics, marketing, HR, etc.) are collaborating and the infrastructure is thoroughly in place.

Most U.S. manufacturers have an overwhelming amount of manual administrative processes engrained in their employee culture.  For many employees, especially those with a decade or more at the company, a new way of operating is often stressful, and many people are just resistant to change.

Yet, of all industries, manufacturing benefits the most from e-commerce. According to Digital Commerce 360, in 2019, U.S manufacturers’ B2B ecommerce sales grew by nearly 21% to $430 billion. That growth rate is nearly 20 times faster than the growth in total U.S. manufacturing sales.

While there are other options to list their products on third-party vendors’ sites, this often removes pricing controls and dilutes the brand, while forcing manufacturers to meet tight delivery deadlines.  

COVID-19 impact on manufacturing

The manufacturing digital divide, exacerbated by the Coronavirus disease (COVID-19), is leading to a surge of bankruptcies. The pandemic has forced a number of manufacturers to digitize their operation and offer a self-serve experience from their website.

According to McKinsey and Company, more than 75% of buyers and sellers say they now prefer remote human engagement over face-to-face interactions. They appreciate the ability to research information, place orders and arrange service. In fact, the majority hope to continue the self-serve model as business returns to “normal.”

E-commerce is not just for smaller ticket-items, according to another study by McKinsey & Company. In fact, 70% of B2B decision-makers say they are open to making new, fully self-serve or remote purchases in excess of $50,000, and 27% would spend more than $500,000.

Add to this a changing demographic among buyers for vendors, dealers and distributers. These professionals are now Millennials with less brand allegiance. Outside the United States, manufacturers in Asia have also been quickly capitalizing on this change to game the market and drive out American competitors.

COVID-19 has revealed the gaping holes in supply chains and caused havoc among those manufacturers who have not been able to keep up with demand. The good news – and light at the end of the tunnel - is that companies with digitized operations are taking the lead and experiencing record growth during these hard times.

Manufacturing’s traditional selling processes are broken. The next chapter requires a savvy digital approach backed by a deep understanding of buyer expectations. In turn, this empowers manufacturers to focus on what they do best – building amazing products.