by Susan Hileman, NWIRC, COVID-19 Recovery Program Manager
Paul Harvey was an ABC News radio broadcaster who hosted a program called “The Rest of the Story”. The program offered true backstories about people and events. When we look at what COVID-19 has done to business, we can already fill in some of the backstories to complete “The Rest of the Story”. Here are some of the most common challenges and possible solutions we’re seeing within the COVID Recovery Program (CRP):
Lack of Diversification. Not surprisingly, manufacturers in subsectors where OEMs or entire industries were shut down have been hardest hit. These typically include non-essential businesses such as giftware, furniture, school-related items, print-screening & embroidery, nearly any business related to travel & tourism, but also automotive (since the big 3 were shut down for a time as well). The majority of manufacturers within the region did not shut down during COVID or, if they did, it was only briefly. How did they avoid it? They had previously diversified their customers, products & services, and markets. For some, it meant making a shift to online sales or focusing more on digital in-bound marketing. Unfortunately, we are still seeing too many companies who have too little diversification. While you can be successful with revenue sourced from just one or two customers, without continually looking for ways to diversify your customer base, it’s simply taking unnecessary long-term risks with your business. Market and customer diversification have become key recommendations in the CRP Tactical Action Plans as it allows companies to be successful throughout downturns in the economy.
Process Inefficiencies. Waste is so common in manufacturing. There’s downtime of employees who are waiting; machinery which isn’t working; storing and transporting product that adds no value; and inventory overproduction which is money in your pocket that’s just sitting on the shop floor…even defects and scrap causing rework. The list goes on and on. Process efficiency is the single most important area which can impact your bottom-line profitability. Whether you’re looking to eliminate wasted time spent searching for tools, information or approvals, or you’re seeking ways to address bottlenecks and streamline how you do things, identify a manufacturing expert outside the business to help the team focus on process improvements with a fresh set of eyes, as well as a new perspective and insight. This unbiased support can pull your team together in ways staff may not be able to. While there is an investment—time, money, and human resources—using SMART goals (Specific, Measurable, Attainable, Relevant and Time-Based) to improve the way you do things can give you a healthy return on investment (ROI) through improved productivity, morale and delivery. That’s why it is one of the more common recommendations made in the CRP Tactical Action Plans. It provides an immediate boost to your profitability when you’re trying to make every dollar count.
Supply Chain Issues. Material shortages and longer lead times resulting from shortages will continue to create problems going forward. While the first part of 2020 saw small material shortages, our research and discussions show this will become more significant through mid-2021. The challenge is that not only does it hold up your orders for completion and delivery to your customers, but it can also show up in cash flow shortages. Companies will need to have a good understanding of what is happening throughout their entire supply chain. For OEMs, that means not just tier 1 and tier 2 customers. Clearly identify your own cash flow situation and be prepared to talk with your suppliers, customers and bankers. One of the partners in the CRP program, Steel Valley Authority, is a good resource to discuss cash flow issues. Also, begin to think now about how and where you’ll be able to get raw materials and if you will have enough in inventory to build critical components that support production. Everyone will be competing for limited supplies, so the first recommendation is: if you have not talked to your supply chain up and down the line—do so now!
People. Another common issue continues to be the difficulty for companies to find good, qualified employees. Recruiting employees is harder than any time in the recent past. According to SHRM, one-third of all manufacturing HR managers say they cannot fill open positions. Here are several suggestions to help. Develop an authentic and accurate job description that describes the job demands. Use social media to advertise job openings. Build an early pipeline of potential employees by working with schools and vocational career centers. Create an apprenticeship program for existing employees and pathway for increasing skills. Review your policies and incentives offered. One company needed to cover weekend work so badly, they offered 4 days’ pay for two 12-hour days’ work. Several others offer bonuses for attendance. Be intentional about working on your company culture: the beliefs, attitudes, and resulting behaviors of the existing team around how management treats them. Do they ask for input? Do they respect employees? Is there trust established? This culture determines how well your team works together, how efficient they are, and how willing they are to help your customers, vendors and each other! Recommended solutions include apprenticeships; training on communications, diversity and decision-making; HR auditing & policy review and strategic planning.
Logistics. While we’re just now beginning to hear about logistics, especially as we start to head back into recovery, recognize that transportation and logistics companies will be hard pressed to be able to keep up. Freight costs are one of the largest expenses a manufacturer incurs. Twice in the last week we heard about lead times being extended—double, triple or even quadruple the normal amount of time allocated. An increase in sudden demand as everyone begins to ramp up will simply extend these lead times even more. If you’re looking for assistance, there are regional companies with this area of expertise who can be referred. Right now, we suggest everyone keep this one on your radar!
It remains to be seen what happens when business finally does get back to normal. Likely, there will be other challenges beyond what we can see or imagine now. But there are numerous resources available in the region, such as CRP, to help your company with the recovery.