Deltek 15th Clarity Government Contracting Survey: Trends Impacting Manufacturers

The manufacturing sector is undergoing a significant transformation driven by technological advancements, evolving customer expectations, and shifting market dynamics. This transformation is particularly evident in the tightly regulated manufacturing segment of government contracting, where the impact of the defense industrial base directly affects the government's mission readiness. Deltek's Clarity Survey of the Government Contracting Industry provides crucial insights into this evolving landscape, highlighting the challenges and opportunities ahead.

In its 15th year, Deltek has conducted the Government Contracting Industry Study annually. This comprehensive survey offers industry performance benchmarks, an analysis of impactful market conditions, and a forecast for the year ahead.

The latest edition highlights critical trends and findings based on responses from almost 650 firms, representing a diverse spectrum of small, medium and large companies.

Understanding Manufacturing Challenges

The Talent Tug-of-War: Attracting and Retaining Skilled Workers

Attracting and retaining talent is the number one challenge for manufacturers this year, with 33% ranking it in their top three. The manufacturing industry requires a highly skilled and specialized workforce, but changing demographics are causing a labor shortage. Experienced workers are ageing out, and the replacement rates are not keeping pace, driving competition for skilled labor. Automation, while beneficial, needs to catch up quickly enough to compensate for the labor deficit.

Quality Control Quandaries: Tackling Persistent Issues

Quality control remains another significant challenge, ranking second among manufacturers' concerns. Many manufacturers continue using legacy systems and paper-based operations, contributing to quality escapes and compliance issues. These outdated systems are not robust or sophisticated enough to meet stringent regulatory requirements, making quality management a persistent challenge.

Legacy Systems: A Double-Edged Sword

Managing legacy systems is the third major challenge. While businesses find it easier to continue with legacy systems than invest in new technologies, these systems can hinder operational efficiency, pose cybersecurity risks, and impede innovation. The reliance on outdated technology creates significant barriers to progress and modernization within the manufacturing sector.

Automation to the Rescue: Overcoming Manufacturing Hurdles

To address these challenges, manufacturers are increasingly turning to automation. Nearly half of the survey respondents (44%) view automation as a critical strategy for overcoming workforce and operational challenges. Automation can manage repetitive tasks, creating a more attractive work environment for potential hires by offering opportunities for skill development and engagement with advanced technologies. It also helps retain existing talent by fostering innovation and reducing the burden of monotonous tasks. Automated inspection systems and quality monitoring tools enable manufacturers to maintain high quality and customer satisfaction standards by swiftly identifying defects. Additionally, automation facilitates the interoperability between legacy and modern systems, reducing manual interventions and mitigating risks associated with outdated technology.

With a growing awareness of the long-term benefits of automation, 35% of respondents have identified investing in new manufacturing software solutions as a key strategy to tackle their challenges.

Navigating the Risk Landscape: Identifying and Mitigating Threats

The survey highlights several critical risks that manufacturers must address to maintain performance, product quality, and business resilience.

Supply chain issues continue to dominate the risk landscape, with 51% of respondents citing them as their top three concerns. Disruptions remain significant due to raw material shortages, supplier-related issues, and geopolitical factors impacting production schedules and product availability.

Security risks, including cyberattacks, data breaches, and unauthorized access, pose substantial threats to sensitive information, proprietary technologies, and critical infrastructure. This is becoming a significant concern because modern manufacturing centers on digitization, and manufacturers must invest in robust cybersecurity measures to protect their operations and data.

Quality issues, while a challenge, also represent a significant risk. Implementing rigorous quality assurance practices and fostering a culture of continuous improvement are essential for mitigating these risks. Similarly, the talent shortage poses both a challenge and a risk that manufacturers must address through strategic planning and workforce development initiatives.

Addressing these risks requires collaboration with supply chain partners, investment in security and quality infrastructure, and a proactive approach to risk management. By prioritizing these efforts, manufacturers can enhance their competitiveness and deliver greater value to their customers and stakeholders.

Measuring Success: Key Performance Indicators (KPIs) in Focus

In addition to addressing strategic challenges and risks, manufacturers consistently monitor key performance indicators (KPIs) to evaluate operational efficiency, customer satisfaction, and overall performance. These metrics provide valuable insights into what is working, what is not, and where adjustments are necessary.

Capacity Utilization is a critical KPI, with 47% of respondents measuring it. By monitoring this metric, manufacturers can identify underutilized resources and allocate them effectively to meet fluctuating demand dynamics. Given the need to balance workforce challenges and costs, tracking this KPI is essential for optimizing resources.

Another essential metric is the Customer Return Rate, which represents the percentage of products customers return due to quality issues, defects, or dissatisfaction. A high return rate indicates underlying quality problems or mismatches between customer expectations and product performance, necessitating corrective actions.

Overall Equipment Effectiveness (OEE) is a comprehensive metric that assesses equipment performance, availability, and quality. Tracking OEE enables manufacturers to evaluate equipment effectiveness, identify bottlenecks, minimize downtime, and optimize asset utilization.

By focusing on these KPIs, manufacturers can enhance resource utilization, improve quality, increase customer satisfaction, and achieve cost savings. These metrics are integral to the core of manufacturing operations and provide a roadmap for continuous improvement.

Industry 4.0: Embracing the Future with Digital Transformation

Despite the challenges in the manufacturing industry, we are truly in the era of Industry 4.0, where digital transformation is no longer a trend but an essential business tactic. The survey indicates a strategic shift towards leveraging advanced technologies to drive progress and innovation.

Artificial Intelligence (AI) and Machine Learning (ML) are being embraced by 41% of the survey respondents as top initiatives. These technologies are proving useful in predictive maintenance, quality control, and supply chain management, providing data-driven insights, automating complex tasks, and enhancing the agility of manufacturing operations.

Process Re-engineering is another focus area, involving redesigning workflows and operations to eliminate inefficiencies and optimize resource utilization. Manufacturers aim to align processes with evolving business needs by leveraging digital tools and methodologies.

Robotic Automation is increasingly adopted to automate repetitive tasks, improve precision, and enhance productivity on the factory floor. This includes robotic arms for assembling complex components and autonomous mobile robots for material handling and warehouse operations. Robotic automation optimizes manufacturing processes and supports workforce augmentation.

Moving Forward with Confidence

With the government contracting landscape being a dynamic one, it necessitates a focused approach across all company sizes to maintain competitiveness, optimize resources, improve profitability, and ensure compliance. Deltek's 15th Clarity Survey of the Government Contracting Industry provides a comprehensive overview of the current state of manufacturing in government contracting. As the manufacturing landscape evolves, these insights will be invaluable for driving meaningful progress and supporting the government's mission readiness. Whether it is identifying the roadblocks ahead or strategies to manage them, this study is a valuable resource for businesses to assess their strengths and areas of improvement.

Deltek is more than just a software provider; it is a trusted partner committed to helping companies achieve and sustain operational excellence. By leveraging the latest innovations and industry expertise, Deltek empowers customers to navigate complex challenges, optimize processes, and innovate confidently, driving their success in an evolving marketplace.