This article appeared in the September 2020 issue of MiMfg Magazine. Read the full issue and find past issues online.
When COVID-19 emerged, global trade was brought to a standstill. In fact, the World Trade Organization expects nearly every region to suffer double-digit declines in growth, global commerce to fall by up to 32 percent, and sectors with more complexity, like the automotive industry, to take even steeper dives.
Michigan manufacturers export over $56 billion in goods every year and have been hit hard by the fallout. Today, the global economy has slowly begun to recover, but as factories reopen and ships once again leave our ports, we still live in an environment weary of the omnipresent virus. The industry must adapt to the “new normal” in order to maintain trade functions and the supply chain.
Moving forward starts at the beginning of the supply chain. Before COVID-19, it was acceptable to have one or two manufacturers from the same region producing a select few components. Today, manufacturers are moving to diversify producers around the globe to ensure redundancy, so that manufacturers will not be scrambling if a region shuts off.
Risk assessment and scenario planning have also become imperative. Six months ago, planning for a global pandemic was at the bottom of most executives’ to do lists. The result was that they — like the rest of the world — were unprepared when one came.
There are many questions to face going forward. Do leaders understand the logistical risks of a crisis? Is our workforce prepared to continue working remotely, and can they ensure quality of mission-critical functions? Has each division assessed why and how a crisis would impact their ability to execute their responsibilities?
Global trade had no answers at the beginning of COVID-19 but manufacturers are catching up fast. Now, answering these questions is priority number one, because the industry simply cannot take another unprepared strike from a new catastrophe or second COVID-19 wave.
Proper cash planning and financial strategy is imperative. Early on, many companies lacked the cash on hand to weather the crisis beyond a few weeks. Others had to scramble for solutions to immediate needs, such as payroll. COVID-19 has illuminated the importance of greater financial and operational planning so that companies can handle short-term crises and plan for long-term health.
Companies should consider several preparedness strategies such as embracing the digitization of the supply chain. This change has been decades in the making and COVID-19 is a new catalyst. Besides the logistical and economic values of digitization, shifting trade to a virtual platform allows management to quickly identify risks and interruptions, getting a step ahead on risk assessment, finding another manufacturer, and managing expectations.
Shifting to online has equal value on the consumer side and making the shift to omnichannel distributions and cooperating with logistics service providers will help protect sales and consumers alike.
Be it a second wave of COVID-19 or something else entirely, one thing is certain: another crisis will come. Companies that proactively adapt to the “new normal” will be ready.