The COVID crisis has burdened manufacturers with challenges they have never before had to deal with. In addition to managing their businesses, leaders must now consider supply chain disruptions, employee health, how to use relief funds to support their companies, and how to accommodate constantly changing circumstances.
Here are seven tips to help your business weather the COVID-19 crisis and look toward recovery:
- Follow relief program guidelines. A variety of programs are available for businesses affected by COVID-19, including loans, tax credits, and payment deferrals.
- SBA Economic Injury Disaster Loan (EIDL)
- Expanded Sick and Family Medical Leave
- Paycheck Protection Program (PPP)
- Employee Retention Credit
- Payroll Tax Deferral
- Main Street Lending Program (MSNLF & MSELF)
- SBA Small Business Debt Relief
- State, local, or vendor specific relief options
- Reevaluate weaknesses in your supply chain. You likely evaluated your vendors’ ability to continue supplying you through the crisis. But the effects of the pandemic on businesses continue to evolve and spread. Globally, many manufacturers have suspended operations, while others have adjusted operations to satisfy new needs, such as for medical personal protective equipment. Manufacturers of food, cleaning products, and other household staples saw an unpredicted increase in demand. In some cases, shuttered businesses have begun reopening, or have plans to reopen in the coming weeks. These changes affect the availability of some goods.
- Communicate with vendors frequently, especially those that supply you with critical goods. Understand whether your supply is jeopardized. Ask how their operations may change as more businesses reopen. Also, ask about their plans should they be unable to obtain goods or have an outbreak of COVID-19 in their facility.
- If you have contracts in place, review those contracts and re-negotiate with vendors as appropriate.
- If you fear your supply is at risk, onboard new vendors. Waiting until there is an outage is waiting too long.
- Focus on inventory management. Once you evaluate your risk in your supply chain, focus on inventory. Businesses can improve cash flow by putting off inventory purchases, safety stock or finished goods in return for committing to order or produce just-in-time. However, risks to your supply chain during a crisis could incline you to build up inventory if your cash reserves allow.
- Determine whether you should and can increase your safety stock to ensure you can meet customer demand.
- Has COVID-19 affected your product mix? If so, consider adjusting your inventory to accommodate current needs. Monitor changes in demand.
- If you have obsolete goods or materials, consider selling them, even at a discount, to raise cash as well as dedicate cash and warehouse space to items you can convert into sales.
- Continue using your cash forecast. Update your forecast at least weekly and plan for a minimum of the next two to three months—ideally six months or longer. Identify trends affecting your cash flow, such as changes in sales revenue, slowing customer payments, or changes in your inventory buying patterns. Incorporate these trends into your forecast.
- What capital expenditures or investments are planned? Do these expenses make sense given the current economic situation, or should they be delayed?
- Can you pay your bills on time? If not, what actions can you take to remain in good standing with your vendors?
- Should you look for ways to reduce costs?
- Will you need to pursue additional working capital support? If you would like assistance with cash forecasting or determining what actions to take to address a cash flow issue, we can help. Contact us.
- Evaluate alternative revenue streams. Many manufactures have pivoted from their traditional business models to offer different goods, such as personal protective equipment for medical providers. However, manufacturers should exercise caution in considering significant change or investment, especially if your risks include possible inefficiencies or quality defects. Some opportunities may be easier to implement than others.
- Talk to your customers and determine their needs. Brainstorming and creativity may identify new opportunities—even if temporary—that can support you and your customers through this challenging time. As well, providing superior customer service can create loyalty that will serve you well in the future.
- Are you taking advantage of your resources? For example, if you have a piece of equipment that is underutilized or previously used only for internal purposes, consider ways you can use it to meet a market demand.
- Can you shift operations toward producing products in greater demand? Temporarily reducing or eliminating some products to focus on others in high demand can maximize efficiency and increase key products’ availability.
- Continue protecting employee health. As COVID-19 continues to threaten the health of everyone, it is important to protect employees. Continue enforcing recommendations from federal, state and local governments, which may include monitoring employee temperatures, cleaning and disinfecting frequently touched objects, preventing group gatherings, limiting visitors, and encouraging sick employees to stay home. Additional recommendations can be found on the CDC’s website at https://www.cdc.gov/coronavirus/2019-ncov/community/guidance-business-response.html. Even the CDC’s recommendations are not all-encompassing; some states and municipalities have issued additional requirements.
- Stagger work start and end times to avoid heavy traffic at entry or exit points, time clocks, or locker rooms. If possible, encourage the use of multiple doors instead of a single point of entry.
- Stagger break times to reduce congregation in break areas or lunchrooms. Consider expanding available areas that can be used for breaks or meals.
- Provide single-use bottled beverages instead of encouraging use of a common water or sports beverage cooler.
- Reduce shared use of items, where possible. Consider purchasing additional supplies of lower-cost items such as pens, office products, small hand tools, or other shared items. Ensure proper cleaning for items that must be shared, such as equipment or larger tools.
- When appropriate, keeps doors open. This will reduce the amount that the employees touch the door, but in addition, opening outdoor doors can improve ventilation.
- Take care of yourself. While we have weathered past business downturns, the COVID-19 crisis is unique. Instead of focusing solely on business and economic factors, business leaders are concerned about the health of their families, their employees, and themselves. The pandemic has affected many aspects of our lives and heightened levels of stress at a time we have been deprived of many traditional stress-relieving activities: social distancing prevents some gatherings; gyms and entertainment venues are closed; vacations have been cancelled.
Companies using a relief program must have a process in place to ensure they follow program guidelines. You will be required to use loan funds in accordance with the program directives and to maintain proper documentation to support how you use loan funds or tax credits. In many cases, guidance continues to evolve. Keep up to date or engage your advisors to help you follow the changing guidelines.
For businesses that did not receive EIDL or PPP loan funding, Congress continues to negotiate legislation to add money to these programs. Remain current on program availability and details. Your advisors can help.
It is important to understand how this evolution will affect your supply chain. As the U.S. strives to open its economy and more businesses return to work, will the goods and materials you need remain available?
Identify your cash challenges for the upcoming weeks or months and determine what actions you need to take to maintain liquidity. Questions to address include:
Other health-related considerations for manufacturers:
Stress and uncertainty can hinder your decision-making ability, so do not make important decisions when you are experiencing high levels of emotion. Save critical business decisions for when you are calm and collected. Incorporate stress relieving activities into your routine. Eat nutritious meals, exercise, and take time away from the news and social media, which are constant reminders of the pandemic. And remember that your trusted advisors are available to support you during this chaotic time.
For questions or to discuss how COVID-19 is affecting your business, contact HBK’s Manufacturing Solutions Group at 330-758-8613 or firstname.lastname@example.org.
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