As we find our way through the volatile present, manufacturers are making more long-shadow decisions than ever—often without the benefit of updated, fact-based assumptions. Shifting factors are reshaping demand and resources on a daily basis, and the pre-COVID playbook no longer applies. If your goal is to survive the recession and emerge stronger and wiser, you need a playbook on how to proceed.
But how do you forge ahead with certainty in a world that’s anything but? To best determine where we go from here, let’s review where we are and what we indisputably know to be true.
Why the Old Plays No Longer Work
Even before COVID-19, long-held industry assumptions—regarding demand, supply chain, and the workforce—were unraveling. Today, the manufacturing industry is in a state of flux. For example:
- More than one-quarter of the manufacturing workforce is expected to retire over the next decade. How will employers replace these highly-skilled workers, when only 50% of Americans think manufacturing is interesting, rewarding, and safe?
- Manufacturing now holds the smallest share of the U.S. economy in 72 years. How do manufacturers avoid becoming victims of a shrinking industry?
- U.S. manufacturers are grappling with disrupted supply chains and a weakened global economy. How can they plan realistically, when they can’t count on receiving new orders or the supplies to fill them?
What We’ve Learned from Past Recessions
At the onset of an economic downturn, it’s almost reflexive for companies to shift into survival mode—cutting spending, halting R&D, engaging in layoffs. While it’s understandable, evidence suggests that it’s not helpful. Rather, companies that continue to move forward during recessions emerge in considerably stronger positions.
Case in point: researchers from Harvard Business School studied the behavior and outcomes of more than 4,500 companies during a trio of prior slowdowns: 1980-1982, 1990-1991, and 2000-2002. They tracked each company for nine years (three years before, after, and during the recession.) These were their key findings:
- Companies that cut costs deeply didn’t emerge victorious. Only 11% of those that relied solely on layoffs achieved notable success post-downturn.
- Companies that made aggressive investments had a hard time maintaining profitability post-recession, too. Investments took longer than expected to pay for themselves, and some changes alienated customers.
- Companies that did best during and post-recession were those that engaged in a balanced, deliberate process of cutting costs and investing selectively. They reduced expenses by increasing operational efficiency over layoffs, while investing strategically in new assets, R & D and marketing.
How can manufacturers apply this information?
How Manufacturers Should Navigate the Rest of 2020
Considering what we know, it’s logical to conclude that your next move should be based on these four tenets:
1. Do More with Less Using Data
Now is the time to squeeze the most from existing resources. With depressed demand and margins, operational efficiency is key to survival. This means quickly identifying specific areas of waste and eliminating their root causes, while ensuring high OEE to maintain margin integrity.
Now is the time to push performance and execution through accountability, automation and a full-out war on waste. To do so, you must be able to track the metrics that allow you hold your team accountable and identify the root causes of your problems.
2. Apply a Scientific Approach to Adding Resources
As demand finds its way to the plant floor and the bullwhip-effect is in full force, investing in resources like inventory, workforce, equipment and operating capital require a meticulous, data-based approach. There is little room here for gut decisions. Use a scientific process to justify new resources and investments.
Lean into the uncertainty. Keep asking questions and watching as your hypotheses play out through data. How do you do that? The A3 problem-solving process is a powerful lean manufacturing tool that offers an easy, consistent approach to problem solving.
3. Be Systems-Driven Through Documentation & Process
Operating within a shifting world order—such as materials availability and a newly-structured workforce—requires swift learning cycles. Not only do you need to quickly ascertain what works and what doesn’t, you need to document your findings for your future workforce. Don’t operate ad-hoc or rely on tribal memory; develop a system for documenting what works and doesn’t.
4. Be Ready to Seize Opportunities
Remember, volatility creates opportunity. Use the disruption to pounce on rare opportunities that present themselves, such as:
- Reshoring demands – Are there in-demand industries that are largely unavailable globally that you can make domestically, such as medical and automotive?
- The availability of skilled labor – If your local competitors or depresses-industries have laid-off some experienced workers, can you take advantage of that talent surplus?
- New product segments – COVID has created new opportunities, too. Consider, for example, the products in demand by people exercising at their home. How can you respond?
- Digital transformation – Many manufacturers were in the process of acquiring technology when COVID struck. If you’re in a position to make those acquisitions now, you may benefit from lower pricing and faster implementation schedules.
While there is no silver bullet in a 2020 manufacturing playbook — for proactive manufacturers, the market is there for the taking by maximizing existing resources. It starts by connecting with the reality of your business through accurate data, and implementing a scientific improvement system. From achieving OEE to doing more with less, Amper can help you get started. Let us show you how.