As COVID-19 cases decline in many areas of the country, manufacturers are turning their focus from recovery to growth. Challenges remain; labor shortages, supply chain issues, and rising costs threaten manufacturers' abilities to capitalize on growth opportunities. However, with the right actions, many manufacturers are positioned for a strong year.
Consider six questions that manufacturers should ask they focus on growth:
1. Does your lender provide solutions that help you grow?
Having a strong lender relationship can provide manufacturers with benefits, including flexibility and increased borrowing power. This is especially crucial in times of growth as manufacturers may require capital to invest in improvements to their capabilities. Lenders offer a variety of solutions, including traditional loans, asset based lending arrangements, SBA loan access, and revolving credit lines. No matter the solution that works best for your operations, having a lender that understands your business - including its plans, seasonality, risks, and opportunities - is critical.
2. How will your business attract and retain workers?
Manufacturers are competing with all industries for new employees. There is no easy solution to finding available workers, especially those for skilled positions, so manufacturers must think creatively about their recruiting and retention strategy. While increasingly popular flexible working arrangements may be difficult to offer shop floor employees, competitive pay, incentives, training opportunities, and a culture with clear expectations, collaboration, and accomplishment recognition are some ways that manufacturers have grown or maintained their workforce.
Further, manufacturers may consider their long-term labor needs. According to The Ohio Manufacturers’ Association, “earn-and-learn solutions, like apprenticeships, have delivered measurable results for manufacturers, including accelerated learning and improved retention.” These programs, along with cross training, online training programs, and incentives to obtain external education can help employees develop skills and help the company continue critical operations in the case of employee turnover.
3. Will Biden Administration policies impact your business?
The Biden Administration, through its American Jobs Plan, introduced several proposals that could benefit manufacturers who produce goods for infrastructure, construction, and electric vehicles. These manufacturers may find growth opportunities if the plan is enacted.
However, manufacturers could also see their tax deduction opportunities reduced if Congress allows bonus depreciation to begin phasing out in 2023. In addition, the Biden Administration is proposing higher tax rates for certain corporations and high earning individuals, which may impact these businesses’ profitability and cash flow. As a result, it is important that owners and top management stay abreast of governmental proposals and legislative change.
4. What have you learned during the pandemic that can strengthen your operation long term?
During challenging times, businesses often look for opportunities to reduce costs. Many took these steps during the pandemic. Now, as many manufacturers pivot their focus from survival or recovery to growth, they can revisit these reductions.
Some reductions may reduce or eliminate certain internal controls, limit cross-training opportunities, or create other limitations for the operations environment. These reductions should be revisited; the cost reduction may not be a good one to make permanent. However, other reductions may have created inspiration to create a leaner, more productive, or more efficient environment. These reductions may be able to be made permanent. For each reduction implemented, analyze its pros and cons to determine which should be made permanent.
5. How do changing consumer demands affect your operations?
During the pandemic, some manufacturers pivoted capacity to support illness mitigating products, such as face shields, face masks, or workspace partitions. These manufacturers may consider reevaluating demand to determine whether to continue manufacturing these products. Manufacturers may also consider other consumer demand changes, even for those selling B2B. For instance:
- Contactless (or less contact) interactions may replace some face to face sales calls.
- Some administrative personnel could transition to a remote work environment, increasing the importance for electronic invoices or payments.
- Health conscious products and materials like antimicrobial additives could replace more traditional products.
- Robotics and automation may become more widely adopted, leading to the need for tighter, more consistent tolerances.
- The importance of rapid prototyping has been magnified by the pandemic, which could encourage adoption of technologies such as additive manufacturing.
6. Is your supply chain strengthening or threatening your business?
Suppliers should be partners to your business, offering goods and services that help you effectively service your customers. Recent supply chain disruptions due to pandemic related shutdowns and weather events have caused long lead times and rapidly rising costs. Further, as we approach hurricane season, the possibility of weather events further disrupting the availability of certain materials (especially plastics) , interrupting transportation, and increasing oil and gas prices is rising.
Secondary sources and alternative products can provide options that give manufacturers flexibility. Strong vendor relationships can help you identify these options as well as potential market turmoil that could threaten your ability to grow. In addition, as you adopt new materials or products, think about those products’ availability. If the material or product is subject to volatility, exploring other options during the R&D phase may provide a better solution long-term.
To discuss your company's growth strategy, contact a member of HBK Manufacturing Solutions at firstname.lastname@example.org or 330-758-8613.