Although three-quarters of manufacturers do not expect a return to normal within six months, there are clear steps that can help get the sector moving again, says Nicky Tozer, VP EMEA, Oracle NetSuite.
While 90 per cent of UK manufacturers continued to conduct essential operations during lockdown, more than four fifths suffered a fall in demand. As the economy begins to reopen, there are many factors to consider as manufacturers aim to ramp up operations while balancing employee safety and financial security.
Scrutinise Your Supply Chain
Organisations of all shapes and sizes are evaluating their operations and determining what is and isn’t working. For manufacturers, the pandemic highlighted existing supply chain management issues that were deepened by the disruption. Manufacturers must use this as an opportunity to audit their supply chain for risk. That audit must include every vendor and supplier, inventory management and ecommerce capabilities – not only to eliminate inefficiencies but to prepare for the new normal.
Financial Health: Consider Suppliers
Forced shutdowns on non-essential business had a dramatic knock-on effect for manufacturers, causing furloughs, a fall in demand, and supply chain disruption. Finance leaders should have an eagle eye on cash flow, and suppliers are a focal point in their efforts to maintain liquidity.
With cash so essential, manufacturers must evaluate all vendors and look into strategic sourcing, particularly in single or sole sourcing scenarios. That means looking into secondary and tertiary options to mitigate against future supply chain disruption – with the added challenge of sourcing cost-efficient and reliable suppliers. Supply chain redundancy is effective in maintaining efficiency and keeping your most vital items moving, but as they come at a cost, only use them at the most critical points of the supply chain.
Scenario Planning for Continued Disruption
Forecasting in the current environment is harder than normal, forcing finance teams to assess liquidity and forecast more frequently to prevent nasty surprises. Manufacturers must plan for a variety of scenarios in which they balance holding enough inventory – to avoid a depleted supply chain – while not tying up too much cash.
Global supply chains could take years to normalise, and the best option is to get as much visibility into current and future demands as possible. That will require financial modelling for different scenarios based on best and worst case outcomes for sales, operational expenses and overall cash flow.
Retention and Acquisition is Critical
Generating new customers is expensive, so maintaining strong relationships with existing customers should be more of a priority than ever. That includes prioritising what could be limited inventory for the most profitable and loyal customers. More than ever, manufacturers need a firm grasp of customer lifetime value.
But to offset the financial impact of the pandemic, manufacturers must also cost-effectively generate new pipeline. They must re-evaluate how they’re interacting with leads and prospects, ensuring that sales and marketing messaging align with customer sentiment. Our data shows that 52 percent of manufacturing leaders see new marketing efforts as a top priority in this regard, just behind containing costs and improving efficiency.
Implement a Control Plan for Health and Safety
The government’s Guidance on Working Safely sets out recommendations for steps that manufacturing companies should consider in their duty of care.
These guidelines may mean manufacturers need to alter employee schedules, the layout of the factory floor and continuously monitor social distancing. First, manufacturers need to determine how many employees can safely work at once. Do you need to reduce the number of people working each shift, or separate rotas?
After determining workers numbers, manufacturers may need to get creative with space in their facilities and potentially reconfigure the layout to distance work centres. Many are also considering putting physical barriers between workstations to further protect their staff and to maintain production.
Manufacturers must also incorporate disinfecting into their processes and consider how materials move between areas.
Focus on Continuous Improvement
Manufacturers should use this time to eliminate waste in manufacturing processes. Since many are already going through the process of evaluating the factory floor for distancing and safety, they can also focus on lean efforts and building better efficiencies in systems and workflow processes. This could mean relocating equipment, moving lines, or reorganising for more logical flows. Set KPIs that are specific to boosting efficiency and work towards eliminating barriers to meeting these numbers.
Although it is a long road ahead, manufacturers have the capability to plan now for future growth. By choosing the right priorities now, manufacturing leaders are taking action to survive and prepare for the new normal – whatever it may look like.
Nicky Tozer is VP EMEA at Oracle NetSuite