28 February, 2023
When a sector is experiencing supply issues, for example due to increased cost of raw materials or labour shortages, businesses look internally to improve efficiencies. Investing in artificial intelligence (AI) can increase profitability for manufacturing SMEs. Embracing the shift towards digital innovation will allow manufacturers to grow their business and remain competitive in the market. In turn, the utilisation of AI could add value to your business and be attractive to potential investors or buyers, as this demonstrates that the business is innovative and will be sustainable in the future.
We consider two different types of AI that could add value to manufacturing SMEs below:
MRP calculates materials required to manufacture a product. MRP manages inventory by predicting when materials are required and how much is needed. Investing in this type of AI can improve production efficiency because the business is able to plan the need for supplies and the labour required whilst maintain a balance for the supply and demand.
SCM manages the processes involved in transforming raw materials into final products. Each business has a different supply chain so there are different models that a company can adopt. For example, a continuous flow model relies on the same product being manufactured with limited variation in demand. Investing in this type of AI allows for control over the manufacturing process which will improve product quality and reduce the risk of product recalls.
Generally, the main benefit attributed to investing in AI is an increase in profits due to errors being minimised during the manufacturing process. However, these streamlined processes also demonstrate that there are efficient in-house systems in place, which can be a key differentiator in taking a manufacturing SME to market.
When preparing a business for sale there will several different considerations from a tax and legal perspective depending on the type of exit strategy adopted. A professional valuation of your business will consider the business assets, and AI can be a desirable asset which could increase the proposed purchase price. Taking the time to review these internal processes prior to a sale will enable you to present an appealing business proposition to a potential buyer.
For more information contact David Filmer in our Manufacturing & Engineering department via email or phone on 0333 207 1132. Alternatively send any question through to Forbes Solicitors via our online Contact Form.
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