Early in the novel coronavirus pandemic, the National Association of Manufacturers surveyed its members to assess the expected impact of COVID-19 on their businesses. Not surprisingly, about 80% of respondents expected a financial impact and 53% expected an operational impact.1

Their expectations are now their reality. According to the Federal Reserve, in April manufacturing output dropped by 13.7% over March, the steepest fall in the 101-year history of the industrial production index.2

The U.S. manufacturing sector, which employs about 13 million workers, currently accounts for 11% of the economy and includes a wide range of industries, from textiles, apparel and footwear to furniture, automobiles, metal, chemicals, and wood products. Food, meat, and poultry processing are also often included in the manufacturing sector.

U.S. manufacturing was already in a mild recession during 2019, according to the Federal Reserve.3 But the pandemic hit manufacturers even harder because of the nature of their work: Most manufacturing jobs can’t be done remotely — most workers must be onsite, often in crowded plants or warehouses. In addition, slowed economic activity worldwide diminished availability of materials and demand for manufactured products. What can manufacturers do to better cope with the effects of the pandemic?

1. Increase supply chain visibility.
   COVID-19 first affected parts of the world that supply vast numbers of raw materials globally. As these economies locked down, 94% of Fortune 1000 companies reported supply chain disruptions.4 Globalization means that weak supply chain links and bottlenecks will likely continue as the virus ebbs and flows around the world. Suppliers may open and close as local circumstances dictate, creating uncertainty for manufacturing customers.

   Effectively managing supply chains is critical. Large manufacturers are better positioned to predict shortages and manage disruptions thanks to visibility into their suppliers’ challenges as well as parallel supply chains already in place.

   For smaller manufacturers, managing component shortages likely means building new supplier relationships or renewing dormant ones. Adding suppliers in new regions might build in some flexibility as the virus spikes and subsides.

   Sharing knowledge and best practices up and down the supply chain can be helpful in creating new solutions. This type of transparency and communication can feel risky in terms of information sharing, but building trust builds relationships.

2. Address safety and productivity issues head on.
   Workforce safety was the first priority for manufacturers in early 2020, and reopening factories continues to be a high-priority challenge. OSHA, WHO, CDC and other entities have implemented strict new rules about workplace safety, many of which have wreaked havoc as manufacturers balance environmental, operational, financial and human factors.

   Some manufacturers have reopened smoothly, whether because their processes and plants were already set up for remote or distanced working or because they could quickly pivot to new ways of operating. But many have struggled to institute required sanitation, distancing and protection measures.

   At this point, manufacturers have generally implemented the solutions they can, from increasing assembly line length and installing barriers to outfitting workers with PPE. They have limited travel and asked employees to stay home if they’re sick.

   But manufacturers should continue to assess redeploy­ment possibilities or possible staff reductions as customer demand adjusts and investigate outsourcing some corporate functions to reduce costs.

3. Solidify capital and funding resources.
   COVID-19 has changed the financial landscape around the world. Investors and venture capitalists don’t like uncertainty — but uncertainty is a hallmark of the times.

   Some manufacturers are thriving as consumer demand has peaked in such disparate consumer products as electronics, puzzles, yeast and hair color, for example. But given the volatility of the marketplace — even in seemingly pandemic-proof sectors — manufacturers are digging into their numbers, looking closely at all aspects of operations, trying to pare expenses and focus resources where they are most needed.

   No one likes surprises. Frequent and full communication goes a long way with financial stakeholders. Providing lenders and investors with insights regarding liquidity, capital needs and performance forecasts can help to mitigate their concerns. If you are seeking additional funds, be prepared to talk about your recovery in very specific terms.

   This type of transparency can prompt valuable conversations with your trusted financial advisors, who are plugged into other companies and how they’re managing and adjusting. Ask for input regarding best practices and innovations your stakeholders are seeing elsewhere.

4. Consider new opportunities.
   As always, where there’s a challenge, there’s an opportunity — or many opportunities. As a result of the pandemic, a focus on contingencies and disaster planning are now seen as opportunities instead of business as usual.

   While few companies would have predicted the extreme nature of the COVID-19 pandemic, those with updated, precise and well-conceived disaster plans were able to adjust more quickly than those who had given little thought to mitigation efforts.

   What would you have done differently? How would you have prepared?

   Innovation is another opportunity that has arisen during the pandemic. Innovation has always been integral to manufacturers’ success. Forbes predicts that “we’re going to see many years’ worth of innovation in the next 18 months. Many of these solutions will bring greater efficiency, lower costs and less waste, allowing them to outlast the pandemic and pay for themselves quickly.”5

   Minimizing the effect of the pandemic will not be enough — it is not a long-term strategy. What’s required is a focus on changing business processes with a goal of thriving.6

   What does your customer base need now? What will they need next year and the next year? Can you pivot to provide different products or materials? Can you optimize your distribution strategy or network?

5. Adapt to change and increase resilience.
   The pandemic has upended a normally slow, steady and conservative approach to change. As manufacturing companies think about managing forward, accelerated change and resilience figure prominently. For instance, a McKinsey survey of Asian manufacturing and supply chain professionals found that 93% plan to focus on resilience of their supply chain.7

   There was good news in June: New orders for key U.S.-made capital goods increased by the most in almost two years, and shipments accelerated. Let’s hope this is a sign of more good things to come.

   The problems of COVID-19 will not disappear overnight, but nimble manufacturers will survive and learn to thrive.

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