As COVID-19 continues to impact individuals and businesses, the definition of normal continues to change. However, one thing that seems to be consistent throughout this global pandemic is that adaptability is key. Now, more than ever, companies must focus their concerns on the health and wellbeing of their employees and customers, while ensuring financial stability, and product and customer satisfaction. With lasting economic and market disruptions effecting manufacturers and distributors, how can companies best navigate these uncertain times? Below are five key factors to consider to successfully navigate this new normal:
- Leadership: In a crisis, strong leadership and communication, across all levels, is key. With many people working remotely from home and observing social distancing rules, it is not uncommon for people to feel isolated and disconnected from their coworkers and peers. Strong leadership and communication can ensure employee morale remains as high and consistent as possible, and ensures better performance, customer satisfaction, and a strong base for when the recovery phase begins.
- Digital strategy: With consumer shifts to online shopping intensifying, the need for a strong digital strategy is crucial. Not only is it important to support an e-commerce platform, but companies need to be able to communicate with their customers and employees and respond to today’s ever-changing socio and political environments. Consumer behaviors are showing shifts within the industry, where short-term behaviors may now become long-term preferences; this is inclusive of the growing preference for online shopping which has only increased due to the pandemic.
- Strong (diversified) supply chain: With suppliers overseas in China, the COVID-19 pandemic resulted in a shock to many companies’ supply chains, having a ripple effect throughout the industry. Goods from suppliers were suddenly frozen and could no longer be produced and shipped to the U.S. to meet demand. This caused companies to have inventory shortages or to find other suppliers for their products, resulting in possible product quality changes, product delays, and related changes in terms with new suppliers in other regions. To reduce possible supply chain disruptions of a similar nature in the future, companies should look to evaluate the ability to move supply chains to varying regions and reduce significant vendor concentrations.
- Pricing assessment: With shifts in consumer demand and behaviors during these times, the immediate needs of customers are changing. Companies must be flexible to these customer needs during these times, while still preserving value in the long-term. To do so, companies can reassess their long-term pricing programs for volume discounts, credits for future discounts, etc. to be more short-term based (i.e. 3-month to 6-month terms). Companies can also offer short-term adjustments to payment terms and conditions or increase support to contracted customers for negotiations to such terms. As the recovery phase is entered, this will allow companies to avoid increasing their prices for goods to instead adjusting to these short-term plans to be made more long-term. This can help companies to keep their customer base post COVID-19 by avoiding customer objections to pricing increases, as well as market competition, as other companies that might have offered decreased pricing begin to raise their prices again as the recovery phase begins.
- Liquidity assessment: The economic impacts of this pandemic have been vast amongst all industries, stressing the liquidity of several small to middle market businesses as evidenced by the government’s Payroll Protection Program. In order to continue its recovery, and prepare for any future economic disruptions, companies should assess their liquidity in terms of cash positions and ease of access to additional capital while continually assessing operating cash flows, budgets, and future projections.
If we have learned anything, it is that future recessions and their lasting impacts, while unpredictable, can provide companies an opportunity to adapt and differentiate themselves when considering the factors above.
Citrin Cooperman’s Manufacturing and Distribution Practice recently launched our inaugural industry survey. The survey provides a pulse of the industry nationally in the moment – amid the COVID-19 pandemic – to measure the current health of their business and to take stock of future priorities, concerns, and challenges. For more on the current state of the industry, check out our Manufacturing and Distribution Pulse Survey Report.