By Jerry Murphy, partner-in-charge of manufacturing and distribution services, Sikich
It’s no surprise, in the midst of an economic downturn, optimism in the manufacturing industry is low. In a recent survey of manufacturing leaders, Sikich found that less than half (49%) of respondents rated their optimism of business prospects over the next six months a seven or higher on a scale of one to 10.
The National Association of Manufacturers uncovered similar results in its quarterly outlook survey, with respondents reporting their lowest outlook since 2020.
While there is little manufacturers can do about the economy, there are steps they can take to boost confidence and set themselves up for success in the future. Using data from the Sikich Industry Pulse report and insights from our team of experts, here’s our advice.
Focus on culture
Attracting high-quality talent has been an ongoing challenge for manufacturers over the past few years. In fact, going back as far as Sikich’s 2017 manufacturing report, we found “addressing workforce challenges” was a top business priority for manufacturing leaders. And this challenge isn’t going to get easier. Due to the aging population in the US, companies will continue to be impacted by long-term labor shortages.
It is important that companies prioritize long-term talent solutions, even amid a potential recession. While talent acquisition will likely slow over the next year as manufacturers focus on cost-saving measures, companies should invest in culture-building initiatives to retain top employees. Companies should review benefit plans, consider unique benefits (such as flexible scheduling), expand training and development programs, and measure and improve employee engagement to improve culture and morale. Since the COVID-19 pandemic, employees and candidates have come to expect more benefits; companies that don’t focus on a comprehensive offering will struggle to attract and retain talent.
Additionally, companies looking for unique skillsets should avoid a hiring freeze. Sikich’s report found more than a third of manufacturers have planned a hiring freeze to save costs this year. This strategy could hurt them in the long run. While it is advantageous to slow hiring during the economic downturn, leaders should be open to making strategic hires when talent with valuable skillsets become available. The increase in layoffs in other industries and at larger companies provides an opportunity for manufacturers to obtain talent that they would otherwise be unable to attract. Manufacturing companies can also explore untapped populations, such as candidates requiring work sponsorship, to ensure they have a pipeline of talent available. Without a long-term talent strategy in place, manufacturers will struggle to sustain a workforce.
Don’t shy from automation
Automation—both on the factory floor and in back-office roles—can be a game-changer for manufacturers. Yet, many companies have been slow to adopt innovative technology. Robotic process automation (RPA) is the automation of manual tasks—examples include verifying vendors, entering purchase orders, accounts-payable processing, accounts-receivable cash application, monitoring inventory and handling customer-service requests. RPA enables companies to eliminate these tasks from employee workloads and redeploy staff to higher-value activities.
Half of manufacturers have no plans to invest in RPA, according to Sikich’s report. What many manufacturers don’t realize is RPA can be easy and inexpensive to implement. In fact, technology-savvy staff can create their own RPA tool using open-source software.
Prioritize supply-chain management
To protect their companies during the economic downturn, Sikich’s report found that more than half of business leaders (51%) plan to keep less inventory on hand, and 39% are diversifying their material suppliers. These are both strategies that should be more widely adopted.
The reduction of inventory is a valuable strategy as pipelines decline, in order to improve a company’s cash flow and reduce risk. Due to the supply-chain challenges during the pandemic, many companies stocked up on additional inventory. Now, companies need to reduce the amount of inventory on hand and use technology to calculate needs more efficiently.
Diversification of a company’s supply chain is also an important strategy, not only during the economic downturn but also into the future. While the COVID-19 pandemic wreaked havoc on the ability to move materials around the world, it is anticipated that supply chains won’t return to “normal” anytime soon...if at all.
We’ve seen a resurgence in reshoring; business leaders should find suppliers that are closer to their factories to reduce the potential for any challenges down the road. Manufacturers should also bring on multiple vendors to meet their needs as demand increases.
