The economy has taken a tremendous hit as a result of the Covid-19 pandemic, and many small manufacturers are feeling an impact. But some manufacturers have pivoted to meet customer demand, and more may be able to do so if they can take advantage of (1) increased access to market trends and (2) technology. Even more opportunities may exist for manufacturers than are apparent at first glance.
Creating Opportunities Pre-pandemic, globalization made imported goods cheaper than U.S.-made goods. Manufacturers happily took advantage of that as they looked to increase their profit by buying cheap component parts. The pandemic changed that as it caused interruptions to the supply chain, resulting in a lot of pain for a lot of companies.
But this disruption also created opportunities. Clothing manufacturers, including high-end designers, turned to manufacturing items like masks. Manufacturers using 3D printing also stepped up. For example, NASCAR’s research and technology arm pivoted from using 3D printing of composite parts for stock cars to using it for PPE. Ford also switched gears and manufactured items ranging from respirators to testing kits. Small manufacturers began printing face shields.
These manufacturers all had one thing in common: they were able to find a way to meet the new demands of the marketplace. And they did this in the following ways.
Using Automated Processes Manufacturers used new technology to automate processes and make them more efficient. Many were already moving in this direction even before the pandemic. The JDA 2018 Intelligent Manufacturing Survey showed that many companies had been reprioritizing and refocusing their technology investments to meet quickly changing client needs. Survey respondents focused on inventory optimization solutions, integrated planning and execution technologies. The pandemic accelerated the need for improved forecasting and greater collaboration across the supply chain.
Being Innovative Innovation includes trying new ways of doing things, seeing “holes” in the process that need to be filled and finding new products that meet client demand. Everything has changed, and companies that don’t change — and that continue to do things the way they’ve always been done — are less likely to be able to meet the demands of a disruptive environment.
Making Smart Investments Making smart investments in the business is essential. But manufacturers investing in new technology or new markets face the problem of knowing how much to invest in something they haven’t tried before. Should they try a small-scale test project or go full steam ahead? How long will it be before the technology needs to be updated? It isn’t always easy to find financing for these innovations in an uncertain world.
Forecasting Cash Flow
- Looking at cash flow in a period of unprecedented uncertainty is challenging, but some guidelines help:
- To prevent unpleasant surprises, estimate cash flow on the basis of a worst-case scenario.
- Review projections on a weekly basis over a 13-week timeline.
- Closely manage accounts receivable.
- Consider possible changes, such as PPP loan forgiveness, staffing changes and changes to pricing.
Manufacturers who are willing to take a hard look at their operations will find plenty of opportunities. The effects of the Covid-19 pandemic may be felt for a long time, and the earlier companies adopt new ways of remaining sustainable in an uncertain world, the better off they will be.
At CironeFriedberg, our experienced advisors perform audits and provide tax and advisory services for a wide range of privately held manufacturing, distribution, and retail businesses. Since our founding, we have provided services to many top industrial companies in our region and make it our business to stay abreast of tax and other regulations that may affect your operations and profitability.
Call us today for trusted guidance to help uncover more opportunities to improve your company’s ability to innovate. Learn more about our services.
If you need assistance or have any questions on the information in this article, please call your CironeFriedberg professional. You can reach us by phone at (203) 798-2721 (Bethel), (203) 366-5876 (Shelton), or (203) 359-1100 (Stamford) or email us at info@cironefriedberg.com.
