Although protecting the safety of families and employees will remain a top priority for manufacturing organizations, business leaders are now facing unprecedented challenges brought on by COVID-19 that require a large amount of planning. These challenges evolve daily, and while many require immediate response, others present potential longer-term threats or positive outcomes. A crisis the magnitude of COVID-19 will affect every facet of your business, but some areas require critical review:

  • Information and Data Used in Decision Making
  • Labor Force
  • Cash Flow
  • Supply Chain
  • Communication

Consider the following as you respond today and plan for tomorrow in these essential areas.

Information and Data Used in Decision Making

Respond today

The data available to business leaders is critical in terms of not only its accuracy but its timeliness. Develop a list of internal reports that you are using and review their content and availability. Condense the number of reports and information presented down to a level that ensures timely and accurate information. If necessary, outsource the preparation of any critical information that you can’t produce internally. For external information, ensure that you have reliable and timely sources for updates, whether they are public health, public service, or legislative in nature.

Plan for tomorrow

Identify any shortcomings in your internal reporting process and develop a plan to address them. Many manufacturing companies do not have adequate “cost accounting” systems, which make it challenging to separate fixed vs. variable costs and accurately planning and projecting future cash flows using “what-if” scenarios. A thorough review of your information technology (IT) systems should also be a part of your plan.

Labor Force

Respond today

To ensure the safety of your employees, rely on guidance from the Centers for Disease Control and Prevention (CDC), as well as your state and local government. Monitor the status of applications with your local lender under the Paycheck Protection Program (PPP) and any other legislation providing support for keeping employees on the payroll.

Plan for tomorrow

The ability to collect from customers and pay vendors and employees is critical to any business. Outsourcing these functions has some companies relying on labor forces in other parts of the world where the disruption from COVID-19 is just beginning or unknown. Many companies are implementing working remotely. By developing a back-up plan that addresses these risks, you can ensure your accounting and payroll functions can continue with minimal interruption.

Begin the process of ranking your employees in the event reductions in your workforce is necessary. Whom should you protect, and whom will you need as the economy recovers?

Cash Flow

Respond today

Monitor cash and cash flow daily. Identify immediate actions to preserve and protect cash positions. Keep abreast of current and pending legislation to determine which options are most beneficial for providing short-term relief and cash flow assistance.

Develop models that allow you to run various “what-if” scenarios and project your cash flow requirements on a weekly and monthly basis—be sure to keep them continuously updated six months into the future. Monitor existing loan covenants and borrowing base calculations and maintain open communication with your lenders.

Plan for tomorrow

Project worst case cash flow scenarios and identify available responses. Identify strategies for generating cash, such as offering additional discounts for quicker payments by customers or reducing prices for purchases of slower-moving inventory. Evaluate and reduce inventory levels as needed based on revised production and sales forecasts.

Supply Chain

Respond today

Determine the impact of the crisis on your most important suppliers and identify alternatives if any expected disruptions affect their ability to meet your needs.

Plan for tomorrow

Review bills of material and raw material listings for items replaceable with similar products available from other vendors. Identify materials and processes where consideration of opportunities for vertical integration is pertinent.

Communication

Respond today

Establish a team with exclusive responsibility for developing the company’s internal and external communications. Your employees and community will be looking to you for direction. Planning for regular updates with an honest dialogue will instill confidence in your manufacturing company’s management of the crisis and help protect the personal safety of everyone. Notify customers immediately of potential delays in shipments. Reach out to your bank and vendors and discuss the impact of the crisis on your operations. Addressing the concerns of all stakeholders builds trust and keeps them engaged.

Plan for tomorrow

Identify trade organizations that effectively advocate for your industry. Evaluate the benefits of membership and determine your desired level of support and involvement.

The COVID-19 crisis demands immediate action and response on many fronts. The most effective manufacturing leaders are also committing resources to proactively evaluating what could happen in the weeks and months to come and are planning for tomorrow. Check out CRI’s COVID-19 Resources Page for additional information, and contact your local CRI advisor for guidance.