This year has presented manufacturing businesses with a major challenge of pivoting and adapting to the Covid-19 pandemic. During the summer of 2020, Citrin Cooperman surveyed over 200 manufacturing and distribution companies throughout the U.S. to take a pulse of the industry amid the pandemic.
The U.S. manufacturing industry has made significant adjustments to stay operational and prosper in spite of the impacts of Covid-19. Businesses in this industry are changing course and capitalizing on new shifts in market demand and consumer preferences in order to sustain. The following are highlights of areas where manufacturing companies successfully pivoted during the pandemic and areas of focus for the future.
47% reporting significant or modest revenue growth during Covid-19
Companies capitalized on a major shift in product demand throughout the country and continue to focus their manufacturing efforts in those areas. However, with stabilization throughout the world economies and re-opening by countries like China, the global supply chain has caught up and created more pricing pressure for U.S. manufacturing companies.
Personal protective equipment (PPE) production will be here to stay, however, the short-term gains and significant gross profit margins achieved as a result will not be. Most of the respondents who showed increased revenues during this time, also noted they had focused on e-commerce platforms, and their key to future and maintained success is going to be investments into the strength of their e-commerce platform.
68% say online sales have grown between 11%-50% over the last 12 months
Most of the respondents linked their success to their e-commerce platform and/or working with Amazon. The key to maintaining this success will be investments in enterprise resource planning (ERP) systems and cybersecurity tools to support the demand for these channels. As banks have tightened some of their credit policies during these unsecure times, it will be crucial for businesses to prepare cash flow projections and work with their banks to identify access to capital to make these investments.
Companies should ensure they are carving out lines in their 2020 and 2021 budgets to set aside funds for technology investments. There is upside in capitalizing on larger profit dollars from e-commerce sales, therefore, the investments to support these technology options going forward should be considered.
Increased need for inventory management technologies
One of the areas of concern is how many of these pandemic pivots are short-term changes in consumer behavior or long-term changes. One major item to weigh during this transition is inventory management. As companies have shifted business models to focus their efforts in new ventures, how they are keeping systems in place to monitor the sell through of their older inventory and how they are managing new inventory levels should be key areas of focus in order to survive and ensure they have the inventory to meet the demands without exceeding them.
Reshoring manufacturing to America
Companies have been forced to reconsider existing supply chain agreements out of a necessity to obtain products or to ensure further disruptions to their businesses would not occur. In the survey foreward, Anirban Basu, chairman and CEO of Sage Policy Group, Inc., noted that a greater amount of U.S. manufacturers have reconsidered their supply chains and are reshoring facilities back to the U.S. Coupling this movement with investments in new technologies and smart warehouses, the U.S. could see an increase of manufacturing production in the country, however, the demand for jobs with this move may focus on technology improvements and maintenance rather than manual labor.
These key findings should be areas of focus for what’s to come for manufacturing in the U.S., including those companies that succeeded during the pandemic and those that hit more difficult times. Nevertheless, it is clear that planning is more crucial than ever before, especially with the following areas: cash flow, corporate taxes, organizational structure, and technology investment. Assessing your company’s new goals consistently and creating flexible plans to adapt will help companies thrive.