As a result of COVID-19, the economy has taken a tremendous hit and many Arizona manufacturers are feeling an impact. Some manufacturers have pivoted to meet customer demand, and more may be able to do so if they can take advantage of technology and increased access to market trends. Even more opportunities may exist for manufacturers than are apparent at first glance.
Creating Opportunities
Before COVID-19, globalization made imported goods cheaper than U.S.-made goods. Manufacturers happily took advantage of that as they looked to increase their profit by buying cheap component parts. COVID-19 changed that as it caused interruptions to the supply chain, resulting in a lot of pain for many companies.
However, this disruption also created opportunities. Clothing manufacturers, including high-end designers, turned to manufacturing items like masks. Manufacturers using 3D printing also stepped up. For example, NASCAR’s research and technology arm pivoted from using 3D printing of composite parts for stock cars to using it for PPE. Ford also switched gears and manufactured items ranging from respirators to testing kits. Small manufacturers began printing face shields.
These manufacturers shared one thing in common: they were able to find a way to meet new demands of the marketplace.
Using Automated Processes
Manufacturers used new technology to automate processes and make them more efficient. Many were already moving in this direction even before COVID-19. The JDA 2018 Intelligent Manufacturing Survey showed that many companies had been reprioritizing and refocusing their technology investments to meet quickly changing client needs. Survey respondents focused on inventory optimization solutions, integrated planning, and execution technologies. COVID-19 accelerated the need for improved forecasting and greater collaboration across the supply chain.
Innovation
Innovation includes trying new ways of doing things, seeing “holes” in the process that need to be filled, and finding new products that meet client demand. Everything has changed, and companies that do not change, and continue to do things the way they have always been done, are less likely to be able to meet the demands of a disruptive environment.
Smart Investments
Making smart investments in the business is essential. Although manufacturers investing in new technology or markets face the problem of knowing how much to invest in something they have not tried before. Should they try a small-scale test project or go full steam ahead? How long will it be before the technology needs to be updated? It is not always easy to find financing for these innovations in an uncertain world.
Forecasting Cash Flow
Looking at cash flow in a period of unprecedented uncertainty is challenging, but some guidelines help:
- To prevent unpleasant surprises, estimate cash flow on the basis of a worst-case scenario.
- Review projections on a weekly basis over a 13-week timeline.
- Closely manage accounts receivable.
- Consider possible changes, such as PPP loan forgiveness, staffing, and pricing.
Remember, manufacturers who are willing to take a hard look at their operations will find plenty of opportunities. The effects of COVID-19 may be felt for a long time, and the earlier companies adopt new ways of remaining sustainable in an uncertain world the better off they will be.
To improve your company’s ability to innovate, contact us about cash flow forecasting, tax planning, and accounting.