The Coronavirus Impact on Manufacturers

The ongoing coronavirus pandemic has impacted virtually all industries but in differing ways. Those deemed “non-essential” are hurting from closures and shutdowns, while other “essential” businesses have been thriving, even struggling at times to keep up with increases in demand for products and services. But what about manufacturers? What important aspects of the business should entities in those industries address as the country reopens?

Three main issues come to mind: namely, what impact will restrictions related to the pandemic have on direct suppliers; how do consumers want to purchase goods going forward; and how can manufacturers adjust operations to abide by CDC guidelines and keep their workforces safe and healthy? While it’s important to make immediate short-term adjustments, thinking about the effects of the pandemic from a big picture perspective will likely allow more opportunity for success in the long run. For that, we need to review a bit of recent history.

In 2017, the United States imported $505.6 billion worth of goods from China, including a substantial amount of raw materials that manufacturers rely on, like plastics, steel and electronic parts. The initial outbreak of the coronavirus in China drastically affected operations in that nation, with many factories closing down, making it difficult for some U.S. manufacturers to procure needed source materials.

Given that unexpected circumstance, companies would be wise to consider diversifying their supplier pools. Having greater flexibility in that area would allow them to react more quickly to sudden changes and make adjustments to operations that permit continued workflow with less interruption. One option would be to bring additional technical operations to U.S. soil, which would also create new jobs for a new type of employee, not just the typical machine operators manufacturers already hire.

Meanwhile, with stay-at-home orders in place throughout the U.S., consumers began panic buying, stocking up on cleaning products and essential food items. Stores found the need to place quantity purchase limitations on items like hand soaps, antibacterial sanitizers, meats and paper products, in part to alleviate output strain on suppliers of those goods.

In addition, after the initial shock of the country’s shutdown, many U.S. consumers began shifting their buying habits from shopping at brick-and-mortar stores to ordering goods online. A Nielsen study reported that online sales of consumer goods was up over 60% during mid-April compared to the same week a year ago, owing largely to consumers simultaneously wanting to abide by stay-at-home orders and trying to avoid human contact. Many shoppers are even electing to purchase directly from manufacturers when possible, cutting out the middleman, meaning there are likely changes coming on the product delivery landscape as well.

What does that mean for manufacturers? In addition to expanding their list of suppliers, should they also consider new opportunities on the other side of the supply chain? In other words, can companies start to cut out that middleman and offer manufactured goods directly to the consumer? It’s becoming more of a realistic scenario as consumer shopping habits shift, so manufacturers should probably seriously consider looking into direct shipment opportunities, as compared to continuing exclusively with mass shipments to retail stores.

Another factor impacting the industry are the guidelines set forth by the CDC that recommend a six-foot distance between individuals and a reduction in the percentage of capacity filled within businesses. This is an issue for manufacturing employees, who don’t have the ability to perform their tasks and duties from home. Those CDC restrictions could mean up to 50% of a manufacturer’s workforce will be unable to complete their job onsite, which poses the complication of trying to efficiently keep up with normal production.

Even before the pandemic, a shift toward the use of advanced technology and artificial intelligence was on the radar of a number of companies. Now that manufacturers are likely unable to house employment to full capacity, there may be no better time to consider the impact AI could have on operations in both the short- and long-term. Usage of AI could allow companies to continue to operate at full (or nearly full) capacity without having the labor that was once needed, which solves the problem in the “now.” Since studies have shown that unplanned downtime costs manufacturers up to $50 billion annually,  preventative maintenance through the use of AI could go a long way in solving problems “tomorrow.”

As we start to move out of the shutdown phase, companies are encouraged to consider what the “new normal” is going to be and adjust to the changes. Whatever choices are made, it’s important to look at the long-term impact and stay ahead of the curve.