How the manufacturing industry can mitigate economic risk during COVID-19

By Richard Blatcher, Director of Business Intelligence for Manufacturing at PROS.

Disruption in the supply chain is a direct indicator of a wider impact on an entire industry. Of course, Covid-19 is creating unprecedented disruption in many B2B industries, in fact, a new poll of supply chain managers shows over 75% of companies are reporting disruptions in some capacity due to coronavirus related restrictions. It is unknown how long this new kind of disruption will last and there are clearly going to be huge impacts on supply and demand into the near future.

If we look back at previous recessions using manufacturing output as an important indicator, in 2008, output dropped by 22.6% with the recovery taking years to get back to previous output figures. In 2001 the drop was 9.6% with a recovery period of 33 months1. The effect of coronavirus is not expected to be this severe and the recovery will be faster, however, B2B businesses have a unique opportunity to be more competitive than ever on the world stage during the next few months. A combination of economic forces occurring over the past several years has made the U.S. a more attractive place to manufacture, sell and export goods, causing many high-profile U.S. corporations to shift part of their overseas production capacities back home.

Factors include energy costs, a dollar that was weakening until recently, fast-rising labor productivity, volatile international shipping costs, and a narrowing wage gap between the U.S. and China with uncertainty around tariffs. Current events are only accelerating these changing market conditions. The coronavirus is also rapidly accelerating the increase in digital commerce so B2B businesses have the opportunity to harness an important short-term change in the way products & services are purchased both domestically and globally.

When current restrictions are eventually lifted there will be probably be a ‘new normal’ that will emerge and beyond the urgent there are some critical steps B2B business can focus on now to strengthen their position.

Look at your customer experiences and end-to-end sales process e.g. are you able to respond with agility? listen and engage across different sales channels? optimise your processes?

Focus on short-term strategic planning. Do you have the tools in place to enable you to analyse and gain valuable insights from your vast amounts of customer and market data to enable rapid changes to your business particularly when looking to optimise revenue and profitability?

Implement Strategic Pricing. This is one, if not, the most effective way to improve margins. With such dramatic variations in supply and demand, business must have the ability to work in real-time and offer the product or service at the right (profitable) price consistently across all points of customer engagement.

In these difficult and unprecedented times it is critical to focus on the customer and ensure you are leveraging the lifeblood of your business – your data – to optimise your profitability and  be in the best possible position to do business in the ‘new normal.