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Is Automation the Key to Supply Chain Stability in a Post-COVID-19 Environment?

DuckerFrontier, April 27, 2020

Manufacturers across industries have shut down amid the COVID-19 pandemic, with many refocusing their efforts on producing medical supplies and personal protection equipment such as ventilators and masks to help fill the need for these products across the healthcare sector.

Reduced product demand and workforce shortages are driving manufacturers to consider appropriate actions to protect working capital and maximize cash flow across many industrial channels.  They are minimizing raw material levels and reducing on-hand finished goods inventory.  Alternatively, there are several product categories that are experiencing tail winds for goods and materials that are critical to ongoing health care operations, DIY construction products, packaging materials, etc.  This massive disruption to the supply chain will continue to be a concern for manufacturers once demand picks back up and normal global business activities resume.  Manufacturers may struggle to source raw materials and may find greater competition across their supply chain as their suppliers have looked to new channels to support revenue streams.

As we adapt to the “new normal” during these uncertain times, businesses are scrambling to implement automation into the regular workflow and business applications. Industrial manufacturers across sectors have begun using automation to produce lower-cost products than those sourced from Asia. Increasing trade uncertainty between the United States and China has progressively increased the cost of overseas production, making domestic goods more appealing to manufacturers. The resulting software improvements from increased automation leads to more advanced innovation that could have lasting impacts across industries. However, automation could have immediate negative impacts on the workforce as it limits employment to qualified technicians over unskilled labor. DuckerFrontier’s Industrial experts, Managing Principal Joanne Ulnick and Commercial Director Dan Ward outline six actions for executives to consider as they navigate the current environment.

Actions to consider

  • Look past immediate efforts to mitigate risk and focus on re-engineering your supply chain to ensure resilience in uncertain times. We anticipate uncertainty will persist into 2021, so we suggest scenario planning to effectively manage supply chain risk to be able to identify and solve for demand shifts and disruptions quickly.
  • Work closely with government authorities to ensure a safe and efficient reintroduction of employees into the workplace and evaluate advancements in technology to support a safe work environment.
  • Consider opportunities to invest in production and material handling automation and retraining your workforce to support new production methods.
  • Evaluate the fixed costs within your organization and their intended purpose. Consider alternative situations to allow for the ability to “flex” expenses as revenues shift.
  • Consider alternative manufacturing methods for key components. Advancements in 3D printing technology and CNC production have grown exponentially in recent years and may provide the needed inventory coverage to maximize production.
  • Review your product portfolio and consider evaluating opportunities in adjacent markets with existing technologies or acquiring the technology required to penetrate a market. Portfolio diversification will help absorb shifts in demand and give you more time to react to a rising situation.

Stay tuned for Part 2, as our industrial experts do a deep dive on specific sub-sectors of industrial manufacturing and what executives can expect through the rest of the year.

Our teams of industrial experts are closely monitoring COVID-19’s impact on the global economy and business environment. View our up-to-date coverage on DuckerFrontier’s COVID-19 Resource Hub and subscribe to The Lens, our weekly newsletter covering the latest global events impacting your business.

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