The global economy is still reeling from the effects of the coronavirus pandemic, and some economists are warning that another recession could be on the horizon.
A number of factors could contribute to a recession in the next 12 months, including the expiration of government stimulus programs, continued unemployment, and rising inflation. While it’s impossible to say for sure whether or not a recession will happen, it’s important to be prepared.
To make sure your business can survive the downturn, it’s important to start preparing now. There are a number of steps that manufacturers can take to ensure they are ready for a downturn in the economy. Below we’ll take a look at seven steps manufacturers can take to weather the storm and emerge from the other side as a stronger company.
Diversify customer base
Having a diverse customer base is important for manufacturers for several reasons. First, it helps to insulate the business from the effects of a recession in one particular market. This can be achieved by expanding into new markets or by developing new products and services that appeal to a broader range of customers.
Second, by relying on a diverse group of customers for sales, manufacturers can insulate themselves from the financial impact of any one customer going out of business or cutting back on orders. This diversification can help to keep the business afloat during tough economic times.
Third, having a diversified customer base also allows manufacturers to take advantage of opportunities that may arise in other markets. For example, suppose there is a recession in one market but not in another. In that case, manufacturers with a diversified customer base can shift their focus to the market that is still doing well.
Thus, diversifying one’s customer base is an important step for manufacturers to take in order to prepare for a potential recession. By doing so, they can protect themselves from a recession’s financial impacts and take advantage of opportunities that may arise in other markets.
Manage inventory levels
In a recession, there is often a decrease in demand for goods and services. As a result, manufacturers need to be extra careful about managing their inventory levels. Carrying too much inventory can tie up valuable resources and increase carrying costs.
To ensure optimal inventory, manufacturers should consider implementing an enterprise resource planning (ERP) solution. An ERP solution can help manufacturers keep track of inventory levels in real time and make adjustments as needed. This can significantly reduce carrying costs and free up capital otherwise tied up in stagnant inventory. Implementing an ERP solution is a smart way for manufacturers to stay on top of their inventory levels and ensure they are not carrying too much stock.
Besides inventory management, ERP systems can offer many other benefits for manufacturers. ERP systems can help improve communication and collaboration between departments, reduce errors and duplication of effort, and provide better visibility into business operations. Overall, an ERP system can be a valuable tool for manufacturers looking to streamline their processes and improve their bottom line.
Maintain strong relationships with your suppliers
Recessions can put a strain on supplier relationships. During a recession, manufacturers may need to adjust their production levels downwards. This could mean reduced orders for raw materials and components from suppliers.
If manufacturers have good relationships with their suppliers, they will be more likely to receive flexibility and understanding during these tough times. Additionally, by paying suppliers on time, manufacturers can build trust and goodwill that can come in handy during difficult times.
Recessions can be tough on everyone, but by maintaining strong supplier relationships, manufacturers can help ensure a steady supply of raw materials and avoid disruptions in the production process.
Cut back on costs
There are several steps that manufacturers can take in order to reduce costs. One is to source raw materials from cheaper suppliers or look for alternative materials. This can include using recycled materials or cheaper alternatives that still meet quality standards. When opting for cheaper raw materials, it’s important to keep up the quality since lowering it can lead to unhappy customers and ultimately lower profits.
Some businesses even launch their own buyback and resell programs to recycle components and products internally. This helps to reduce waste, lower costs, and keep employees busy during slower periods.
Another way to reduce costs is by improving labor efficiency. This can be done by automating certain manufacturing processes or training employees to work more quickly and efficiently.
Many manufacturers also opt for contract manufacturing. This way, they only have to pay for the services they need when they need them and don’t have to worry about the overhead costs associated with maintaining their own manufacturing facility. When using an ERP system like Katana that already supports this workflow, the transition to contract manufacturing can be seamless.
Overhead costs are another area where manufacturers can cut down on expenses. A good place to start is by streamlining operations and reducing waste. This may involve investing in new technology or better organizational methods. In the end, taking steps to reduce costs will help keep manufacturing businesses profitable and competitive.
Keep your customers happy and loyal
No business can survive without its customers. Keeping your customers happy and loyal is important, especially during a recession.
So how can you keep your customers happy and loyal during a recession?
First, it’s important to provide quality products and services. This is always important but becomes even more critical during tough economic times. Customers are looking for value; if they feel they’re not getting it from your company, they’ll take their business elsewhere.
Second, you need to maintain good communication with your customers. They need to know what’s going on with your company and how any changes will affect them. If you’re making cutbacks, be upfront about it and let them know what steps you’re taking to minimize the impact on them.
Finally, you need to offer competitive pricing. During a recession, customers are looking for ways to save money. If they feel they can get a better deal from your competitor, they’ll quickly take their business there.
Keeping your customers happy and loyal increases the chances they will continue doing business with you during a recession. This can help you survive any demand decrease and keep your business afloat during tough times.
Even if demand for your products or services decreases during a recession, maintaining a loyal customer base can help keep your business afloat. If you can weather the storm with your current customer base intact, you’ll be in a much better position when the economy improves.
Invest in your workforce
Your workforce is your most important asset. During a recession, it’s important to invest in your workforce and keep them motivated.
There are a number of ways to invest in your workforce. You can offer training and development opportunities so that they can stay up-to-date on the latest industry trends. You can also offer flexible working arrangements, so they can better balance their work and personal lives. Additionally, you can provide financial incentives, such as bonuses or raises, to retain your best employees.
Investing in your workforce ensures that your employees are productive and motivated to help your business survive the recession and thrive once the economy picks up again.
Be prepared
No one knows for sure when the next recession will hit, but it’s important to be prepared. By taking steps to streamline your operations and improve your bottom line, you can help ensure your business is ready for tough times.
Additionally, by maintaining strong relationships with your suppliers and customers, you can weather any disruptions in the production process or decrease in demand. Finally, by investing in your workforce, you can keep them motivated and productive during a downturn.
