It seems counterintuitive to the traditional growth approach of dialing in your processes to improve your productivity and efficiency, but small and medium-sized manufacturers (SMMs) should be evaluating their current state and preparing to take paths based on their circumstances. If the COVID-19 pandemic has taught manufacturers anything, it’s that they have to be nimble and there will be additional opportunities.
According to a recent state of manufacturing survey of 215 senior leaders in manufacturing and related companies, 89 percent say their business has been negatively impacted by the pandemic (revenue decreases, price increases, supply chain issues, etc.). But 97 percent said the pandemic has created opportunities. To take advantage of opportunities during times of uncertainty, manufacturers need to have a plan for the unexpected.
Whether a manufacturer is fighting to stay open or is trying to keep up with a surge in new orders, the process for moving forward should be similar. After all, any significant change in business will disrupt processes and people and cause uncertainty. Manufacturers would be wise to level set from reactive to proactive and develop a strategic roadmap of “adoptability.”
This differs from a typical strategic plan, which is more of a long-term plan that defines company goals and the actions needed to achieve those goals. Today’s strategic roadmap should be flexible and revisited often, and it allows manufacturers to adapt to whatever circumstances come their way. They have to prepare for any uncertainty that will jump into their path so they can rapidly take advantage of opportunities.
Turning Responsiveness into a Growth Mindset
Manufacturers have learned to be more agile, whether in response to steel tariffs in 2002, lean principles to combat impacts of the Great Recession or, most recently, employee safety concerns at the onset of the pandemic and disruptions in supply chains and buying cycles.
Developing a strategic roadmap for adoptability requires a methodology, such as the Future State Optimization Program. This program begins with an assessment to clarify the current state and includes a traditional SWOT analysis (strengths, weaknesses, opportunities and threats), and the building of a flexible roadmap, which breaks down how a manufacturer should proceed and why. A major consideration is if the current environment is permanent or temporary. The process can make the future seem less daunting.
The analysis should include key areas of the business model, such as:
The value of this process to the manufacturer is that it helps them prioritize, revise objectives and develop an action plan based on necessary responses to uncertainty. It converts uncertainty into, well, certainty.
Scenarios Provide Options and Cause for Urgency
A strategic roadmap of adoptability should not be a snapshot; it should be more of a movie, evolving over time. Manufacturers can ensure their plans have the most potential by creating scenarios for each of the key components from their analysis and adjusting as conditions change. What is the impact, and corresponding response, if:
- They lose key staff members.
- A customer significantly increases orders or they get a big new customer.
- They lose a supplier or access to a part or material.
- A core product increases or decreases in demand.
This exercise identifies potential challenges and different ways the company can overcome them. By proactively considering different scenarios, SMMs are more likely to be able to quickly capture opportunities or minimize significant risks and negative impacts. It also creates a mindset among company stakeholders regarding the need to adjust and respond to changing demand and market conditions. The uncertainty is replaced with the ability to focus on opportunities and rapidly respond as needed.
Examples of Rapid Response from Manufacturers
The pandemic has shown how a methodology such as the Future State Optimization Program is not an academic exercise. Many manufacturers have found themselves in rapid response mode, whether it was a forced pivot or they were presented with a short window of opportunity. Here is a sampling of pivots Kansas Manufacturing Solutions clients have recently made:
- Re-prioritization to Meet Demand – Fuller Industries manufacturers brushes, brooms and disinfectants and has shifted its emphasis to disinfectants and sanitizers. In order for them to meet the rising demand, they needed to make significant investments in equipment and workforce, which was a big departure from their previous operations and mindset. They increased production by 10x and are now supplying hospitals with high-quality hand sanitizers. After understanding their new current state, they are now modeling scenarios for the future of sanitizer sales and the security of their supply chain.
- Adjacent Projects – Knit-Rite, a company that makes prosthetic socks for amputees, has expanded into cloth face masks and PPE. They were using the same material, and didn’t need new equipment, so it was a low risk initiative.
- Insourcing – Dentec Safety Specialists manufacturers safety solutions, including half-mask N95 respirators. Over half of the world’s masks are made in China, and early in the pandemic the country was using the masks for their citizens. Dentec obtained plans and resources to bring manufacturing of disposable N95 masks into their Kansas factory.
- Expanding Sales Channels – A central Kansas manufacturer is building an e-commerce site to create a new sales channel. With an increase in demand for decontaminant products, this manufacturer is expanding their market reach and making it easier for new clients to access their products.
Creating a strategic roadmap of adoptability with scenarios can help with costly decisions, such as making capital investments, which is always challenging, let alone amid economic uncertainty. Or, for SMMs whose revenue has slowed, which impacts cash flow, they may choose to borrow to invest in new product markets.
Proactive, Nimble Manufacturers Will Have Opportunities
Yes, it is difficult to go all-in on an investment not knowing if the demand will be sustainable. If PPE clothing is not sustainable, a manufacturer has learned how to pivot with alternative scenarios and may have other new opportunities as fabric and sewing capabilities return to the U.S.
Manufacturers continue to show resilience through the pandemic. Many see reasons for optimism as they have found ways to keep their staff employed. Now is the time to look at how they can grow. From their current experiences, manufacturers should learn, plan, adjust and evolve. In this environment, proactive manufacturers will have opportunities.
For more information about how to create a nimble, adoptable plan that will allow you to seize opportunity during these changing times, connect with your local MEP Center.