Across the world, we’re settling into a new normal. But the truth is, that’s a moving target. Companies are manufacturing masks instead of t-shirts, and hand sanitizer instead of perfume – it’s anything but ‘business as usual’.
The impact of the pandemic continues to vary by sector, but is leaving its mark on manufacturers with 78 percent of manufacturing leaders noting COVID-19 is likely to have a financial effect on their business. As we move into the next phases of reopening across the U.S., manufacturers are finding a path forward. While many were deemed essential and have remained open during stay-at-home orders, others are identifying how to bring back furloughed employees, fully staff facilitates and resume more normalized operations. Manufacturers continue to face a set of uncertain challenges as they restore operations, keep up with changing demand, and in some cases reimagine operations to serve the business in new ways.
So, what comes next? As business leaders plan for the future, there are critical factors manufacturers should continue to consider, no matter what’s ahead.
Conduct a business model assessment
COVID-19 put a spotlight on shortcomings in the manufacturing sector – many of which existed previously but were further exacerbated in the current environment. Planning for the future requires an understanding of the elements within your operations that have been resilient to change and the ones that haven’t. A rigorous assessment and analysis into the business is needed, including a deep audit of every vendor and supplier, the way inventory is managed and ecommerce capabilities. Manufacturers must continue to plan for all scenarios as we operate in a largely unknown environment.
Extend your cash runway
Every business leader is keeping a close eye on cash right now. Whether you were impacted by mandatory closings or faced supply chain disruptions, cash flow is critical to survival. Businesses are facing difficult decisions, from gauging staffing levels, navigating a complex supply chain environment and balancing customer retention.
But one of the critical elements for any manufacturer should be having the right data to provide visibility and control into decision making with the goal of building out as much of a cash runway as possible. Leaders need a realistic assessment of working capital constraints including the most accurate snapshot of accounts payable, accounts receivable and inventory possible. On the payables side, manufacturers should be reaching out to suppliers, identifying the top 3-6 vendors that make up the largest portion of spend to evaluate and mitigate the risk involved with maintaining vendors as single or sole sourcing options.
Markets are rallying, optimism is increasing and economies are well into re-opening phases. Still, there’s little clarity on the trajectory for economy recovery, so it’s never too early to plan. What matters most is lengthening your cash runway to ensure your company lands safely in the new economic normal.
Plan for supply chain disruption
Forecasting in the current environment is more difficult than usual, forcing finance teams to assess liquidity and forecast more frequently to prevent surprises. Manufacturers must plan for a variety of scenarios to balance enough inventory and avoid tying up cash. The reality is global supply chains could take years to normalize which means manufacturers need to reevaluate their forecast for expenses, materials and sales to understand as many outcomes as possible. Leaders should use this time to audit suppliers, eliminate inefficiencies and cut costs. Manufacturers who have typically relied on single sourcing have now found themselves in a difficult position during the crisis due to significant delays and in extreme circumstances halted production. Where possible, evaluate second source suppliers, especially in long-lead projects where you have the flexibility to make a change. Continue to factor in interruptions and potentially increased cost into each scenario.
Keeping health & safety top of mind
Safety is more important than ever. Like many businesses, manufacturers must understand how many employees can safely work in the same environment. Questions leaders should be considering right now range from the number of people working each shift, dedicated shifts so employees don’t come into contact with eachother and how to manage the work environment if an employee does fall ill.
In many cases, executives are getting creative with facility space and redesigning the layout of shop floors to accommodate new social distancing and health protocols. Consider barriers between workstations to further protect staff, staggering arrival, departure and break times to discourage congregations of people. Many aspects of the shop floor will look and feel different as more employees return to work. Whether it’s setting up hand sanitizer or handwashing stations to encourage hygiene or installing touch free technology for clock in/out stations, investment in heightened health and safety guidelines will mean the shop floor and office experience will look different.
Eyeing new business opportunities
The status quo has disappeared and normal will no longer cut it. When selecting the top priorities for 2020 in a recent study, 52 percent of manufacturers highlighted new marketing efforts and 36 percent shared intentions to launch new products among their top five goals. Manufacturers should use this time to eliminate waste in processes and identify new business opportunities that are an easy shift into new or existing channels.
Putting off change is common when you believe you don’t have the time for it. The current environment is forcing businesses to adapt and has demonstrated how quickly change can come — at its best and at its worst. Eyeing new opportunities for revenue that may already fit within your channel can help extend customers you already do business with and reach new ones. Now is the time for manufacturers to align their business to goals that that will help them survive and maybe even offer a safety net no matter what comes next.
Ranga Bodla has over 20 years of combined product management and marketing experience in the software technology industry. As the Head of Industry Marketing for Oracle NetSuite, Ranga is chartered with driving the overall strategy and go-to-market success across all of Oracle NetSuite’s industries. Prior to joining Oracle NetSuite, Ranga led a global team focused on the successful go-to-market of SAP’s Governance Risk and Compliance Solutions. Ranga received a BS in Engineering from Trinity University in San Antonio.