This article appeared in the April 2019 issue of MiMfg Magazine. Read the full issue and find past issues online.
For manufacturers that survived the global recession of the late 2000s, it can be hard to believe a full decade has passed since many both inside and outside the industry debated whether manufacturing was a dying profession.
While manufacturing has bounced back across the country, especially in Michigan with nearly 208,000 new manufacturing jobs created since June 2009, the memories of those dark days still linger for the men and women who risked everything to keep their companies in business.
“I have the privilege to travel across Michigan and talk to manufacturers about the incredible products they make, but many times we’ll end up talking about how what they are doing today is a direct result of lessons learned a decade ago when people didn’t know if their next paycheck would be their last paycheck,” said Chuck Hadden, MMA president & CEO. “Those experiences stuck with manufacturers and I think, in a lot of ways, that’s a good thing. They can take what they learned — the importance of being agile, using new technology, connecting with their peers — and apply it to how they operate their business today. With any luck, those strategies can help protect them when and if the next downturn happens.”
And the next downturn is coming. Predicting when and to what degree may not be a certainty but any manufacturer with a few decades under their belt will tell you the industry is cyclical and every good day could be followed by a bad one. Evidence of this growing uncertainty for the future was found in MMA’s Annual Membership Survey, which asks the question “How would you characterize your outlook for the coming year?” In 2018, 82 percent of respondents said optimistic. In 2019, that future optimism was down to 51.3 percent.
The 2000s were full of bad days as manufacturers closed their doors and the state’s best talent looked elsewhere for work. Despite that, the combination of those memories and a growing pessimism for the future might be what prepares current industry leaders to halt or, at least, lighten the blow of future downturns.
What are the lessons a small- to mid-sized manufacturer can pull from 2009 to serve their business best in 2019?
Staying Agile from the Facility Floor to the C-Suite
An essential starting point is to remain agile in how you operate your business. A common thread found among survivors of the last downturn was their ability to change strategies quickly. They didn’t live or die by a single product. They weren’t overly reliant on a single customer or market. These were also the manufacturers capable of changing with the times — diversifying their product line when they needed to or focusing on certain customers when others were disappearing or canceling orders.
“Quick adjustment to the recession’s new reality was key to our success — tough decisions were made to ‘right size’ the organization for the lowered volumes of sales during the recession,” said David Joyce, director of business development for Gibbs, a manufacturer of precision die-cast, machined and assembled products for the automotive industry. “[We] had to quickly adjust manufacturing operations, the quantity of manufacturing plants and the proper level of staffing in the manufacturing and support areas.”
According to Joyce, who will share more of his lessons learned during the MFG Forum in Novi on 4/23/19, “as automotive sales slumped 40-plus percent from 2007 to 2009, it created a lot of open capacity. Once the recession ended and the OEMs began reinvesting in their offerings, Gibbs was prepared to make its own investments in the new programs as a result of its adjustments during the downturn.”
The ability to adjust quickly and effectively is perhaps more important now than it was a decade ago. As we move further into the 21st century, manufacturers are faced more and more with customers who don’t require face-to-face contact to purchase products, can review and comment anonymously online, leave you suddenly and, even when they love what you make, demand it be produced faster, upgraded quicker, impact the environment less and last longer than ever before. In such a world, successful manufacturers need to adapt in an instant.
Ask the Right Questions
Just as important as an agile mindset is the ability to access outside help when you need it. As successful manufacturers can tell you, improving your business isn’t something that can be done on your own. You need other voices, other resources; you need help and getting help means asking questions. During the MFG Forum, a panel of industry leaders will share their views on how to prepare for the unknown.
Phil Cunningham, senior vice president for strategy and mergers & acquisitions at Varroc Lighting Systems will be a panel participant and shared with MMA a list of questions manufacturers should be asking as they look to prepare for a possible future downturn:*
- What would be the impact on your business if you saw a significant reduction in volume (i.e. >20 percent)?
- Have you identified areas of weakness?
- How strong is your balance sheet?
- Do you have enough liquidity?
- Are you doing everything possible to conserve cash?
- What controls do you have in place to control expenditure and recruitment?
- Can you start reductions to overhead and employee costs now without impacting the business?
- What exposure do you have regarding your suppliers and supply contracts?
*Not all questions offered are listed...
Capitalize on New Technology
Today’s new technology is already almost out-of-date, that’s how quickly things are changing. With speed and agility as a top priority, and your customer’s patience diminishing just as fast, your business needs to understand and implement the technologies best suited to your unique brand.
Industry 4.0 has been on the forefront of manufacturing’s future plans for a few years already and the technologies within that broad term — cloud computing, big data, the Industrial Internet of Things, automation, etc. — are becoming better known, yet the implementation of these strategies remains quite low. According to a study by BDO, 99 percent of middle market manufacturing executives are moderately familiar with Industry 4.0, only 5 percent are currently implementing those strategies.
“[Industry 4.0] is a hot topic and all the solutions providers and consultants are positioning themselves to be part of that space. The benefit is you can gather different pieces to construct a vision for your own organization without needing to be too far in the tech itself,” said Joe LaRussa, director of industrialization engineering with Brose North America and a keynote speaker at the 2019 MFG Forum. “No one knows your business better than you so it’s extremely helpful to do some self-reflection and really do the work of visualizing the future state and how it’s enabled by Industry 4.0 tech. Then you can engage with clarity and a sense of direction.”
Regardless of what technology is right for you, it’s becoming more and more imperative that every manufacturer utilize some new technology to further their progress. Even if you don’t, your competitors probably are and the last thing a manufacturer can do in this age of technological advancement is fall behind.
Be Confident in the Three Cs
According to Dan Liable, CFO and executive vice president for Tier 1 global auto supplier NYX Inc., “any time you’re navigating uncertainty, stay focused on the three Cs: Cash, Culture and Customers. They put your team in a position to succeed.”
Cash means managing liquidity, tending to the relationship with your lending institution and watching your cash cycle. Culture means repeatedly confirming that you have the right people, they are aligned, they are achieving the right outcomes and, importantly, they are achieving them the right way. Customers means that you are providing value, your customers know you are providing value and you are growing that customer base in a sustainable manner.
“Those are your three guideposts to navigating uncertainty and keeping your team moving forward,” explained Liable.
Develop New Connections and Continue to Learn
Even as you dedicate more time within your facility’s four walls to lock down new talent, create new products and locate the next great technology, it’s important to stay aware of emerging trends and best practices.
“The last ten years of manufacturing have seen the fast development of innovative, new ideas,” explained Hadden. “By combining the technologies and new methods of customer relations with the lessons the industry learned coming out of the last recession, we can have a manufacturing industry capable of doing incredible things without that same level of fear or uncertainty that we once had. That’s what we’re working to accomplish at the MFG Forum.”
Tackling Emerging Issues
The 2019 MFG Forum will feature a who’s who of Michigan’s leading manufacturers. From connecting Industry 4.0 innovation to your existing workforce, developing a pipeline to expand your workforce, discussing ways to leverage new technology, understanding the data behind industry trends and empowering your team to excel in the 21st century, the Forum is an event you and your brand’s leadership can’t afford to miss.