While many front office business functions look to continue operating remotely until the end of 2020, many manufacturers have been open since May, with others having continued the entire time as essential businesses. For the most part, businesses were able to respond to manufacturing challenges and disruptions caused by COVID-19 quickly and responsibly, putting them as leaders in responding to issues and setting examples for other industries to follow. However, that does not mean that manufacturers are above facing challenges as the economy continues to roll out reopening.
Responding to Widespread Disruption
Unlike more localized epidemics of the past, such as SARS, COVID-19 has had a more widespread impact, making it difficult to predict what the new reality will be once the virus finally recedes or is defeated with a vaccine. Even other natural disasters such as earthquakes and tsunamis that have disrupted supply chains were more localized in damage, even as the effects were felt throughout the world’s economy.
Yet COVID-19 presents a significantly new and different challenge due to its widespread impact on the global supply chain.
Impacts to the Global Supply Chain
- Spread and duration of the virus. Despite all best efforts, there’s little surety in predicting when COVID-19 will be completely controlled, or even if/when it might resurface. With most natural disasters, it’s easier to predict that within a few months, operations could be back to normal. Manufacturing is facing a lot of uncertainty in the availability of and impact on the global supply chain.
- Disrupted supply and demand. Many factories have had to shut down completely because of the virus, which in turn affects the supply aspect. But with shutdowns keeping consumers at home, demand has changed drastically as well. Intricate, interconnected, and interdependent global supply chains are facing major changes to supply and demand.
- Longer lead times. Asian countries provide the US with nearly a trillion dollars of product annually. With an already stretched lead time of four to six weeks for sea transport, the pandemic has increased that lead time and, in some cases, stopped it altogether. Manufacturers need to account for the additional time it will take to fill the pipeline back up, and plan for increased lead times.
- Minimal slack or spare inventory. Suppliers come in all sizes and tiers, with many smaller companies not running on much financial slack. With some having as little as only three months of cash on hand, a shutdown of two months can quickly eat through reserves, possibly resulting in an inventory shortage.
Manufacturing Challenges Turn Into Opportunities
It’s not all bad news. While future market predictions may feel impossible to make, there are opportunities to help speed recovery and bring supply chains back to more normal activity.
- Bring capacity online. While it could take small and mid-sized companies time to restart, plan now for staffing and inventory needs. Look at other opportunities for sourcing materials and make a plan for how much inventory you need to build up to restart production. Understand that there could be more demand for limited supplies, and plan accordingly.
- Distribution. With lead times already long, a jump in demand for logistics and distribution could make them longer. Some businesses may choose to shift or increase their distribution capacities to meet the rising demand.
- Build in slack. Now is the time to look for ways to preserve cash, get new lines of credit, or even cut dividends to add some cushion to cash reserves. With materials in short supply, consider building inventories now of the critical components you need to keep your business running in the future.
Navigate What’s Next With PositiveVision
Thriving in the midst of uncertainty is partly dependent on manufacturers having a good understanding of what is happening to both customers and suppliers up and down the line, starting with real-time insights into what is going on in their own businesses. The right ERP and manufacturing software can provide meaningful reports for improved data analyzation, tools for more precise inventory management, integrated warehouse capabilities, process improvements, and streamlined operations. With the ability to coordinate production planning, material purchasing, and shop floor scheduling in real time, manufacturers can build a more solid approach to the reopening economy.
For nearly 20 years, PositiveVision has been the software provider of choice for organizations in the Greater Chicago area. Let us help your business close the gap between where you are and where you need to be in order to navigate the next phase.
Find out how a connected, real-time ERP solution could support your manufacturing business now and for the future. Talk with one our software consultants now.