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How Manufacturing Companies Are Overcoming the Global Supply Chain Crisis

Whether it’s through material scarcity, increasing freight/logistics prices, port congestion, difficulty forecasting, or a whole other myriad of other resulting issues, the recent supply chain challenges have affected business in almost every industry. The manufacturing and distribution industry was especially impacted due to their strong reliance on material inputs to feed their production. In fact, Citrin Cooperman’s 2021 Manufacturing and Distribution Pulse Survey noted that 33% of participants listed supply chain as one of their top two challenges for the year.

While many businesses were eagerly anticipating the end to their supply chain issues, the rise of the COVID-19 Omicron variant and the resulting outbreak quickly served as a sharp reminder that the pandemic was far from over, and its effects on the economy and society as a whole would be long-lasting. Some professionals are saying they expect supply chain issues to persist throughout 2022 and potentially continue for the foreseeable future.

Despite the fact many businesses have been negatively impacted by these issues, we have seen some of our clients thrive in these challenging times. Some had the foresight to prepare in advance for such challenges, while other businesses adapted as obstacles arose. Here are a few ways in which our clients are successfully overcoming the global supply chain crisis.

  • Increased focus on customer service – Having a customer-centric culture and providing excellent customer service is essential for a successful business. However, not all businesses realize that customer service is also at the center of managing supply chain issues. Being upfront and establishing open channels of communication with customers, including providing them with timely and unprompted updates and options that fit their needs, is the best way to ensure that customer needs and expectations are met. Waiting for customers to reach out with complaints or issues is not going to cut it. Instead, businesses need to have a customer-minded team that is proactively looking for new ways to meet customer needs, and even anticipate the needs that the customer is not yet aware of. Maintaining strong relationships with customers is also a key component in businesses being able to successfully pass on cost increases to customers, something every business is facing right now with rising labor and material costs along with rising inflation. 

  • Using technology – Access to data, visibility of the supply chain in motion, and accurate up-to-date information is key to navigating supply chain issues. In addition to reducing costs and maximizing efficiency, utilizing technology that allows businesses to address and respond to shifts and changes in real-time also leads to greater customer satisfaction. Companies investing in systems that increase visibility and simplify data are preparing themselves to meet challenges head-on and prevent many potential issues before they even arise. These tools not only improve the customer’s experience, but also allow businesses to better manage inventory, forecast demand more accurately, monitor cost control more attentively, and decrease employee stress to avoid burnout. The right technology can provide end-to-end visibility and a complete understanding of every element of your supply chain, including the contingency plans should an issue arise. Through technology, such as automation and artificial intelligence, businesses can efficiently manage their day-to-day operations with reduced headcounts caused by the pandemic, which may be a necessity for the foreseeable future. However, it should be noted that these benefits are time-sensitive; Citrin Cooperman’s 2021 Manufacturing and Distribution Pulse Survey noted that 49% of the respondents included updating technology as one of the two biggest hurdles to future growth. It is best to invest in technology as soon as possible, as waiting too long could give your competition an overwhelming lead and leave you unprepared for potential obstacles further down the line.

  • Having the right talent on hand – As markets adapt to rapid changes in technology and customer preferences, businesses are scrambling to find the right talent at the right time. Combined with the struggle to keep them in one of the most competitive labor markets in history, having the right talent has never been more critical for businesses. In a 2018 Harvard Business Review Analytic Services survey, almost a third of organizations queried reported that they were experiencing difficulty in finding the talent they needed. Nearly 60% of the participants at the time anticipated talent shortages in the next three years, a prediction that is now exponentially higher due to the pandemic. Here are a few strategies on how businesses can improve recruiting efforts as well as maintain their current employees:
    • Create a strong employee-focused culture
    • Develop competent leadership and maintain high standards
    • Involve employees in recruiting and pay a recruiting bonus for referrals
    • Engage third-party businesses to review salary data to ensure you are paying market rates and offering competitive benefits
    • Monitor department retention and turnover rates
    • Improve you and your businesses online presence
    • Simplify and streamline the recruiting process

  • Focusing on higher margins – By focusing on higher margin customers and products, businesses are able to reduce their overall production costs and increase their profits. Given the state of the global supply chain and economy, there is no better time to consider streamlining your operations and increasing profitability by getting rid of low-performing products. However, there are many factors to consider before eliminating low margin products and the potential negative effects this could have on your business. For example, some products with lower margins may provide significant value and enhance the overall relationship with a customer that provides substantial profit to your business. Overall profitability for all of your customers should always be evaluated to ensure your company’s efforts align with its financial goals. An additional way to increase profitability is to evaluate the customer experience you are providing. This can come in a variety of forms from quality of customer service, pricing, quality control, and reliability. Making sure the customer experience you are providing aligns with the expectations of your customers can help align your profitability goals with the expectations of management and your employees.

  • Sourcing products locally – Looking at locally sourced products can be a great way to reduce or remove the effect of supply chain issues on your business. For instance, working with local suppliers can help you avoid reliance on additional parties such as freight forwarders and logistics companies. Shifting manufacturing and purchasing away from overseas vendors to those in the same hemisphere can reduce shipping costs. 44%oftherespondentsinCitrinCooperman’s 2021 Manufacturing andDistributionPulseSurveynotedthattheyareexploringreshoring their product sourcing back to the U.S., and 57% said they are now manufacturing more of their own products. That being said, reducing dependency on external countries will be easier for some products than others. Things like furniture, clothing, and household goods can be easily obtained elsewhere because their inputs – lumber, fabrics, plastics,andsoforth—are basic materials. However, it can be significantly harder to find alternative sources for certain types of sophisticated machinery, electronics, and other goods that incorporate highly specialized components such as circuit boards, electronic displays, and precision castings. As such, the supply chain issues are also enticing businesses to consider reducing their reliance on suppliers by investing in machinery, equipment, and skilled workers to bring certain production activities in-house. Here are five advantages to in-house production:
    • Better flexibility to change products and respond to customer needs
    • Better control over the quality of your products
    • Lower management costs by eliminating offsite foreign production managers
    • More production control to better meet customer demand
    • Better public relations by avoiding the negative image associated with foreign outsourcing

Whether it’s by seeking alternatives or restructuring their organizations, manufacturing businesses are experienced at adapting to challenges and changes in their circumstances. The businesses that readjust successfully in response to these supply chain issues will continue to thrive.

How Citrin Cooperman Can Help
Citrin Cooperman is proud to be home to one of the leading manufacturing and distribution practices in the country. Our dedicated team leverages deep expertise to provide a full range of attest, tax and specialty tax, business advisory, economic advisory, and transaction support services. Our consultative approach to all services, coupled with our depth of experience, allows us to help our clients achieve their goals in 2022 and beyond. If you need assistance with any of the topics discussed in this article, please contact your Citrin Cooperman advisor.

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