BEST PRACTICES
BEST PRACTICES/MANUFACTURING
MANUFACTURERS NEED TO BE VIGILANT
ABOUT SAFETY, FINANCIAL STABILITY AND
MEETING NEW PRODUCT DEMANDS
Manufacturers of every size and across every industry are
weathering unforeseen economic forces rising from the COVID-19
pandemic. Demand for products has been upended, relationships
with suppliers and customers are being tested and liquidity issues
have multiplied. Some manufacturers have had to rapidly increase
the production of goods, such as grocery items, household
products and essential medical and protective equipment. Other
industries, like aerospace, automotive and energy, have seen a
sharp decline in demand.
In addition to the economic toll, manufacturers must consider
the health and safety of their employees. They need to find a
balance between keeping factories running and not subjecting
employees to unnecessary health risks. The pandemic has highlighted
the need for manufacturers to prioritize public health,
including employee health, in addition to taking forward-looking
measures such as retooling technology systems to handle supply
chain issues, inventory management and shifts in production
processes.
There are three essential areas manufacturers should address
while navigating the current crisis:
HEALTH AND WELL-BEING
To protect employees from health risks, manufacturers should
consider leaving extended periods between shifts and conducting
remote handoffs, which helps reduce unnecessary face-toface
interactions. Some are monitoring employees’ health by
checking temperatures, setting up temporary health centers and
even hiring onsite medical professionals to test employees.
Because these decisions are both critical and unprecedented,
sharing experiences is key. Industry leaders should engage in
continuing, open dialogue to address shared issues, like frequency
of employee health screenings, steps to take if an outbreak
occurs and best practices for addressing other employee-centric
issues. These considerations are vital and working with industry
colleagues can help companies identify and implement the best
solutions.
Manufacturers should also consider the economic health of
employees. While short-term challenges can be acute, manufacturers
should think about how they want to be positioned as a
business in the long-term and consider the importance of their
employees. Given how challenging it can be to acquire good talent,
many are looking at how to maintain their workforce, by temporarily
freezing or cutting pay rather than laying off employees.
This can help to build loyalty and retain talent, putting companies
in a stronger position when conditions improve.
BUSINESS TRANSFORMATIONS
In response to declining demand for certain products, some
manufacturers have quickly pivoted to meet new demands.
Hockey mask companies are making face shields, fashion designers
are selling masks and distilleries are producing hand sanitizer.
This is a smart short-term strategy for those who can retool exist-
Kevin Staten is a senior vice president and
relationship manager for the Treasure
Coast market in Commercial Banking
at Bank of America Merrill Lynch. In this
capacity, his responsibilities include
leading a team of specialists focused on
understanding each client’s unique needs
to deliver strategic financial guidance
and solutions. Staten’s mission is to help
local companies thrive by achieving their
business goals, no matter how simple or
how complex. He has 25 years of finance
and banking, joining Bank of America
Merrill Lynch in 1996.
KEVIN STATEN
ing facilities and it allows manufacturers to reallocate resources
toward most pressing needs. It also enables them to consider
longer-term objectives in an environment where future demand
is uncertain.
To guide business strategy and gain a window into future demand,
it’s also essential that manufacturers carefully track orders,
inventory and other internal data. For some companies, this will
require upgrading or acquiring analytics systems that can deliver
more robust predictive models. Manufacturers should also closely
watch indicators including national retail sales numbers, housing
stocks, building permit numbers and consumer confidence levels.
FINANCIAL STABILITY
With fluctuations in demand, inventory challenges and sharply
reduced production, many businesses are facing liquidity issues
and other financial concerns. As they navigate the path forward,
manufacturers can consider implementing more systematic credit
checks to ensure customers can pay for orders or requesting
advance payment terms. Banking partners can offer insights into
best practices for credit management, working capital and cash
management. Some of these practices include running sensitivity
models and stress tests to project how long cash will last. While
companies may not need relief immediately, setting thresholds
can be helpful for knowing when it’s time to seek assistance.
While manufacturers face a host of challenges, there are opportunities
to make changes now that can benefit companies in
the long-term. Policies that retain top talent and build loyalty;
technology and process changes that make companies nimbler
and more adaptive; and financial practices that lend greater
insight into risk can help manufacturers develop a stronger business
foundation for the long-term.
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