The road ahead for manufacturing

Manufacturers of every size and across every industry, here in the Worcester area and elsewhere, are weathering unforeseen economic forces rising from the coronavirus pandemic. Demand for products has been upended, relationships with suppliers and customers are being tested, and liquidity issues have multiplied. Some have had to increase the production of goods, such as grocery items, household products and essential medical and protective equipment. Others, like aerospace, automotive and energy, have seen a decline in demand.  In addition, manufacturers must consider the health and safety of their people. They need to find a balance between keeping factories running and not subjecting employees to unnecessary health risks. The pandemic has highlighted the need to take forward-looking measures such as retooling technology systems to handle supply chain issues, inventory management and shifts in production processes. Areas to address: Employee health and well-being To protect employees, manufacturers should consider leaving extended periods between shifts and conducting remote handoffs, which reduces face-to-face interactions. Some are monitoring employees’ health by checking temperatures, setting up health centers, and hiring onsite medical professionals. Because these decisions are both critical and unprecedented, sharing experiences is key. Industry leaders should engage in continuing dialogue to address shared issues, like frequency of employee health screenings and steps to take if an outbreak occurs. These considerations are vital, and working with industry colleagues can help companies implement solutions. Manufacturers should consider the economic health of employees. While short-term challenges can be acute, manufacturers should think about how they want to be positioned as a business in the long-term and consider the importance of their employees. Given how challenging it can be to acquire good talent, many are looking at how to maintain their workforce, by temporarily freezing or cutting pay rather than laying off. This can help to build loyalty and retain talent. Short- and long-term business transformations In response to declining demand for certain products, some manufacturers have quickly pivoted. Hockey mask companies are making face shields, fashion designers are selling masks, and distilleries are producing hand sanitizer. This is a smart short-term strategy for those who can retool existing facilities, and it allows manufacturers to reallocate resources toward most pressing needs. It enables them to consider longer-term objectives when future demand is uncertain. To guide strategy, it’s essential manufacturers track orders, inventory and other internal data. For some companies, this will require upgrading or acquiring analytics systems to deliver more robust predictive models. Manufacturers should closely watch indicators including national retail sales numbers, housing stocks, building permit numbers and consumer confidence levels. Financial stability Many businesses are facing liquidity issues and other financial concerns. As they navigate the path forward, manufacturers can consider implementing more systematic credit checks to ensure customers can pay for orders or requesting advance payment terms. Banking partners can offer insights into best practices for credit management, working capital and cash management. These practices include running sensitivity models and stress tests to project how long cash will last. While companies may not need relief immediately, setting thresholds can be helpful when it’s time to seek assistance. While manufacturers currently face a host of challenges, there are opportunities to make changes now to benefit companies in the long-term. Policies retaining top talent and build loyalty, technology and process changes making companies nimbler and more adaptive, and financial practices lending greater insight into risk can help manufacturers develop a stronger business foundation for the long-term. John Sundborg is the senior relationship manager of commercial banking for Bank of America in Worcester.