It hasn't been an easy year for the U.S. manufacturing sector. Most manufacturers have felt the sting of the volatile credit markets, rampant job losses, flagging product demand and the quiver of uncertainties about the future -- made worse by our protracted recession. Creating new jobs and restoring strength to our industry have never been more crucial. As a new member of the National Association of Manufacturers board of directors, I am more committed than ever to making this happen.
But when --and how -- will we see the light at the end of the tunnel? A recent Grant Thornton survey of nearly 500 U.S manufacturing CFOs and senior controllers suggests that it may still be a number of months off. According to our survey, nearly half (48%) do not expect the recession to end until 2011, while nearly another one-quarter (24%) expect it to be later than 2011.
Moreover, only 29% of survey respondents' companies plan to increase hiring in the next six months, while 22% plan to decrease hiring. Hiring is even weaker amongst Fortune 500 firms (firms with revenues of $5 billion and higher); 31% plan to decrease hiring over the next six months, while only 23% plan to increase.
Regardless of when the recovery happens, those companies that are well-positioned for it will be able to capitalize on the opportunities. So, what should you do now to get ready for the eventual improvement?
Examine Your Suppliers and Key Customers
You want to be sure that you have strong and stable relationships with your suppliers, and that you clearly understand the financial condition of your suppliers and customers. Nothing can torpedo an uptick in business faster than the inability to source materials from key vendors or the inability of a key customer to pay their invoices.
You also want to optimize the flow of product throughout the supply chain. This requires sharing production and demand estimates and schedules with your customers and suppliers. This will result in lower costs to you and higher margins on your sales, even if volumes don't grow as quickly as planned.
Implement Lean Manufacturing Techniques
Over the past two years, almost everyone has slashed costs to the bone. But have you really improved operations and become more efficient? Have you achieved a lean manufacturing environment? My experience is that many companies have not adopted basic lean techniques and tools such as benchmarking their operations, waste elimination activity, kaizen events and value-stream mapping. These lean techniques improve quality, eliminate waste and lower costs.You want to have your plant running as efficiently and effectively as possible to profit from the economic recovery in 2011 and beyond.
Now is the time to take action to make sure your company is positioned to thrive in the months and years ahead. One company at a time, we can create jobs and reinvigorate our industry's competitiveness.
Walter D. Gruenes is the National Managing Partner, Grant Thornton LLP's Consumer and Industrial Products Practice. He has more than 30 years in the industry counseling clients in the manufacturing sector, and was recently named to the board of directors of the National Association of Manufacturers (NAM) www.nam.org.