With the current Covid 19 crisis throwing businesses and lives astray everywhere, the volatility that it creates for businesses is no less apparent in manufacturing industries. There is no crystal ball that can predict the next crisis. What we can be sure of, however, is that building resilience into a company’s strategy can help mitigate risk.
Becoming more resilient is key for businesses if they wish to stay afloat during economic downturns and during times of crisis of different origins.
So how can manufacturers build resiliency into their way of operating? While there are many factors, manufacturers that exemplify this characteristic have three main attributes.
Firms with superior products are resilient because the value they create isn’t affected by the economic conditions. Often this can come down to a product or service having few or no substitutes, which means demand is unaffected by downturns. Having a superior product gives manufacturers a strong competitive advantage.
The key to developing superior products is investing in research and development. The report states that 60 percent of resilient firms invested heavily in R & D in the boom times before downturns, so when the tides turned, they were able to innovate and keep ahead of the competition.
Firms with diversity in their product mix and geographic export markets are resilient because they’ve spread their risk.
Diversity doesn’t necessarily require a number of different final products. Manufacturers should, alongside selling their own assembled products, take opportunities to be part of supply chains for other firms if they have the capacity. Should your product’s industry begin to wane, you can continue to remain buoyant by selling intermediary pieces to other firms either locally or in other geographic territories allows your firm to have the capacity that you can call upon in times of need.
Firms with flexibility built into their business structures are resilient because they’re able to adapt to changing economic climates. Like chameleons that change to fit their environment, firms that have flexibility can, for example, manage costs in downturns by minimizing variable expenses (including labor) or shift production priorities to more financially healthy sectors of the economy.
Flexibility starts with your business structure. If you’re immobile in the way you purchase from suppliers or employ workers full time, you’ll be unable to flex costs down in the slow times. Likewise with the industries you choose to focus on. Flexibility in manufacturing operations means you can prioritize those sectors that are booming.
The world today is changing faster than ever before – and in the future, the rate of change will be even greater than it is now. To survive in the long run, companies will have to continuously renew their competitive edge and build sufficiently resilient organizations to enable this capability. With these three principles, designing such a system tailored to your manufacturing business gets just a little closer to reality.