The effects of the COVID-19 pandemic have permeated throughout nearly every sector in the global economy, leaving few industries unscathed. Manufacturing was hit hard since the origin of the virus, China, is a country that supplies many raw materials to manufacturers across the globe. As an added challenge, safety measures to stop the virus included nation-wide lockdowns, which further hindered supply chains. In its worst stage, nearly 44% of all manufacturing facilities were operating at only partial capacity.
Despite the operational challenges, many parts of the manufacturing industry were able to rebound and continued to grow for the rest of the year. In particular, October 2020 witnessed unexpected growth in the domestic manufacturing sector; however, this could be overstating the health of the industry. Manufacturing’s continued recovery in the coming months will be a deciding factor for the health of the American economy. Potential future lockdowns and COVID-19 case surges could prove to be difficult. To combat this uncertainty, manufacturers can better prepare by introducing business growth and continuity plans as methods of protection against negative impacts, such as supply chain disruptions.
The Importance of Business Growth In The Manufacturing Sector During COVID-19
The health of the manufacturing sector is a good measure of the country’s overall economic health. While there was a record 31% pace of contraction in Q2 2020, the damage was subdued with over $3 trillion worth of government pandemic relief. Since there is more fiscal stimulus in sight, manufacturers must implement business growth acceleration plans to grow despite COVID-19 challenges.
Why Business Growth Acceleration Is Important For Small and Medium-Sized Manufacturers
Business growth acceleration is defined as methods in which businesses can develop and expand by identifying and implementing solutions to remove barriers to growth. For small and medium-sized manufacturers, growth and expansion are key to staying relevant in a competitive market with manufacturing giants.
The Basics of Business Growth Strategies
The purpose of a business growth acceleration strategy is to position your manufacturing organization to successfully achieve your goals. This includes identifying the unique ways that your organization creates value - which is your competitive advantage.
There are five essential components of a business growth strategy:
- Mission & Vision
- Goals & Objectives
- Capacity & Resource Management
- Understanding Customers & Market Trends
- Current State & Challenges
Your business strategy will address all these components to develop how your resources will be used to achieve your goals. Developing an actionable roadmap determines the set period of time to accomplish them For some businesses, this could be three years while others may set their goals even further.
Examples of Business Growth Strategies
With the right business growth acceleration strategies, smaller manufacturing businesses can improve productivity and profitability – increasing output and reducing damage to the bottom line. There is no “one-size-fits-all” plan when it comes to developing a business growth strategy for your business since your plan will depend on factors unique to your situation, such as the size and type of your company.
Example: New Technologies & Competitiveness
Utilizing advancements in manufacturing technologies can be the main driver in accelerating your business growth. If your company is considering adopting new technologies to increase long-term profitability, such as smart sensors and advanced automation, then your business growth plan will include how technologies can be implemented in smaller operations first and the resulting economic benefits. Factor in the size of your operations, input prices, and production efficiencies and estimate how these new technologies can impact them.
Example: Consumer Trends & Adaptive Marketing
Some manufacturers may recognize market trends, such as changing customer values or environmental factors, and want to adapt their marketing to match these changes. A business growth strategy may include considering new opportunities to engage with clients and new methods of marketing or communication. Such a plan may include ways to better coordinate and communicate between the manufacturer and distributor since both share risks.
Example: Exporting for Diversification
Other manufacturing businesses may see exporting into global markets as the strategy to increase margins and revenues. The business growth plan will need to address the steps to begin exporting, including seeking opportunities in emerging markets, defining export strategies, understanding export regulations, and managing viable supply chains.
Business Continuity Plans
Another method of fostering growth for small and medium-sized manufacturers is business continuity plans. While business growth acceleration methods look for ways to expand businesses and increase output, business continuity and resilience strategies plan to mitigate negative impacts of lost revenue, supply chain disruption, or shifts in customer demands. When smaller businesses lose revenue, these unplanned expenses result in lost profits that can be difficult to replace. These continuity plans prepare a business for success, or at least try to prevent damage in the event of a disruption.
A manufacturer’s business continuity plan should have a working model for restoring production without compromising the continual flow of products as much as possible. For example, a plan could contain supply chain mapping strategies that define alternative sources of supply in the event of a disruption.
Plans can document implemented methods to recover critical business functions in the event of disruptions, and have a recovery method in place to mitigate any negative operational impacts. With business growth acceleration methods to help build growth after the event, continuity plans can help ensure resiliency for organizations in the years to come.
How Does a Small-to-Mid-Sized Manufacturer Implement a Business Growth Strategy?
Every business strategy must be tailored to your individual organization. The first step to plan for future success and disruptions would be for your management to identify and quantify your business risks. This includes having a thorough understanding of your supply chain processes and vendor criticality, so you may need to conduct a risk assessment on each of your critical suppliers. Developing your growth or business continuity plan must contain these, including the above-mentioned five essential components of a business growth strategy.
Positioning your smaller manufacturing business for competitive growth, whether in general or in the face of adversity, is a serious task. It should align with the goals and tasks of your organization. Contacting expert consulting can help develop the best business growth acceleration strategies or business continuity plan for your organization.
Economic and Operational Impacts of COVID-19
Both business growth acceleration and continuity methods are essential to build growth and help prepare in case of future disruptions related to various natural or man-made disasters.
The sector itself is still in recovery from the height of the pandemic. By March 2020, over 35% of American manufacturers reported facing supply chain disruptions due to the outbreak. The same survey found that 80% of manufacturers expected negative financial and operational impact. Those fears weren’t unfounded, either. Due to supply chain bottlenecks, lack of spending, unreliable credit markets, and state lockdowns, the manufacturing sector witnessed extreme losses. Some reports showed that the 10 most affected states could see a $400 billion decrease from the manufacturing industry alone.
Since the start of the pandemic, the industry has rebounded as the manufacturing activity index from the Institute for Supply Management (ISM) has increased to 60.8 percent in February 2021 , due to new orders and growing production and employment. This growth is an increase of 2.1 percentage points from January's index of 58.7 percent, indicating expansion in the manufacturing sector. Any reading above 50 indicates growth in manufacturing, even though the industry has more recovering to do.
While these statistics are optimistic, new case surges may lead to authorities implementing restrictions once again, further limiting economic activity and business growth. Also, additional waves may cause consumer shifts in demand as panic buying return could return. Manufacturers are well advised to plan now for future disruptions.
How Manufacturers Can Leverage a Business Continuity Plan To Mitigate Disruptions
By implementing a business continuity plan with business growth acceleration strategies, manufacturers can help accelerate growth, improve business performance to recover, and prepare for operational effectiveness in the future.
When developing a business continuity plan, there are some key steps to follow to be as successful as possible:
- Be sure to conduct a business impact analysis to identify any critical business functions. Make sure to take into account the resources and processes that support them as well.
- Document the plans and methods needed to recover critical business functions and processes if a disruption occurs.
- Establish a business continuity team and clearly define and document roles an responsibilities for how this team will execute the recovery plan to mitigate disruptions.
- Thoroughly train your business continuity team. Run drills and test the plan and evaluate the recovery steps, the understanding of roles and responsibilities, and ensure all critical business functions are covered. Remember, this plan is not concrete. It’s a living document that requires review and adjustments as new risks are identified so your business can be as resilient as possible.
Having a resilience plan in place will help manufacturing businesses recover from impacts by internal and external forces. Since disruptions can range from natural causes, such as hurricanes or failure of infrastructure, to man-made damage, like cyber-attacks, having a plan in place in case of disasters can be critical. There is always the possibility that negative impacts can result in decreased revenue and damage to your company’s reputation, so responding quickly and effectively is key to resilience.
Although business continuity plans are not explicitly business acceleration growth strategies, the two go hand-in-hand as methods to ensure your manufacturing business has the best chance at success, growth, resiliency, and sustainability. Having a documented, tested plan in place can allow manufacturers to focus on triage, recovery and resilience -- and possibly even expansion and growth -- when a disruption does occur.
How CMTC Can Help Provide Business Growth Acceleration
Are you interested in preparing your manufacturing business for success? If so, you’re not alone – CMTC can help. To ensure a bright, productive future for manufacturing businesses like yours in the United States, as well as help California’s manufacturing industry recover in the wake of the pandemic, CMTC provides numerous resources and programs.
CMTC offers both a Business Continuity and Resilience Planning development program and a California Manufacturers Accelerator® Program to stimulate growth and help small and medium-sized manufacturers prepare, protect, and recover their operations. Reach out to us today and we'll provide you with the best options for your particular needs so you can make the best decisions for your business.
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