Pushing the Limits of Manufacturing Businesses During a Crisis

No one could ever predict what was going to happen at the beginning of 2020. Business plans and forecasts were all set for an optimistic year, with continuous growth. But the COVID-19 pandemic took the world by complete surprise and turned the situation upside down.

At the moment, the main focus for companies is to protect their employees, and attempt to identify and understand the risks to their business. What impact this epidemic will have is still unknown. But what we certainly do know is that it will have a significant impact on the global economy, affecting global supply chains of raw materials and finished products as well as cash flow among the majority of small-medium sized manufacturing companies.

The keyword for most manufacturing companies since the 70s has been “Just-in-time” (JIT) - you should operate as lean as possible in order to maximize your profitability. To have high (or any) safety stocks for your raw materials and, worse still, for your semi-finished and finished products, is taboo, and contrary to any supply chain experts’ advice.

This has made the supply chain very fragile. Operating a JIT production line requires extremely hard work and high levels of trust, not to mention constant communication with suppliers.

This relationship often takes years to build up, and therefore also means you will end up relying on a few selected suppliers exclusively. In combination with a high focus on pricing, companies are usually left with no choice but to rely on the few suppliers that they have built a relationship with, even if they are in different countries or continents.

Under normal circumstances, this may not seem like an issue. However, when we are hit by unforeseen and sudden events such as natural disasters or the current pandemic, we can see just how flawed our current systems are. In such situations, your supply chain is disrupted, and this will immediately impact your ability to meet customer demands. However, what is most important is that your cash flow will be severely affected.

Predicting the future is never easy. We may use historical data or available market forecasts to estimate future demands. But in times of crisis, it is even more difficult, as your available data is rendered almost useless, with rapid changes to market conditions.

You will have a hard time trying to merely predict your future available capacity, and may even be forced to run production with reduced capacity due to various reasons. There is also the need to consider that supply chains are not functioning as usual.

Many uncertainties come to the surface in this situation. Can I receive the raw material I need on time, and at the same quality we are used to? Do I need to source my material from a different supplier, with different lead times? How will this affect my ability to meet the requested delivery dates from my customers?

All these unknown variables have suddenly made managing a manufacturing company extraordinarily complex. There are so many unknown parameters and circumstances that need to be considered in order to make the best possible decision. This is where the need for a tool that can help you to simulate and give you a clear understanding of what consequences and impacts different scenarios will have on your business becomes necessary.

By now, your mind may be racing and a whole slew of scenarios and questions may be popping up, such as:

  • If my capacity for the coming two months is only 50%, how will that affect my ability to deliver customer orders on time?
  • Which orders should I prioritize?
  • Do I have certain machines or processes where my capacity is significantly reduced due to lack of manpower? How will that affect my throughput?
  • What if demand for my products is reduced by 40%? What capacity do I need to run at? How much manpower will I require?
  • What raw materials do I have in stock and what POs are scheduled to arrive?
  • Due to the impact of the supply chain, if my POs arrive five days late, what manufacturing orders will that affect, and how will that affect my sales orders?
  • If I increase the safety stock for my critical materials by 50%, how will that affect my cash flow?
  • If I predict that most of my customers will delay their payments by 30 days, how will that affect my cash flow?

The scenarios and possibilities are infinite. Without a proper tool that can help you simulate and gain a 360° overview of your business, you may be making decisions based on feelings instead of facts. With a fully integrated system that takes into consideration the situation throughout your organisation, the chances of making the right decisions are certainly in your favor.

Contact us at Monitor ERP System to learn how MONITOR G5 can help you through this crisis, and beyond. We are more than happy to share with you how a modern ERP system built for manufacturing companies can help you through this difficult time, and also prepare your business for the future.

Most important of all right now is to be responsible, and play our part in curbing this pandemic by staying at home and maintaining social distancing. With the latest extension of the Movement Control Order (MCO), it looks like we will all be working from home for at least another two weeks.

All these unknown variables have suddenly made managing a manufacturing company extraordinarily complex. There are so many unknown parameters and circumstances that need to be considered in order to make the best possible decision. This is where the need for a tool that can help you to simulate and give you a clear understanding of what consequences and impacts different scenarios will have on your business becomes necessary.

By now, your mind may be racing and a whole slew of scenarios and questions may be popping up, such as:

  • If my capacity for the coming two months is only 50%, how will that affect my ability to deliver customer orders on time?
  • Which orders should I prioritize?
  • Do I have certain machines or processes where my capacity is significantly reduced due to lack of manpower? How will that affect my throughput?
  • What if demand for my products is reduced by 40%? What capacity do I need to run at? How much manpower will I require?
  • What raw materials do I have in stock and what POs are scheduled to arrive?
  • Due to the impact of the supply chain, if my POs arrive five days late, what manufacturing orders will that affect, and how will that affect my sales orders?
  • If I increase the safety stock for my critical materials by 50%, how will that affect my cash flow?
  • If I predict that most of my customers will delay their payments by 30 days, how will that affect my cash flow?

The scenarios and possibilities are infinite. Without a proper tool that can help you simulate and gain a 360° overview of your business, you may be making decisions based on feelings instead of facts. With a fully integrated system that takes into consideration the situation throughout your organisation, the chances of making the right decisions are certainly in your favor.

Contact us at Monitor ERP System to learn how MONITOR G5 can help you through this crisis, and beyond. We are more than happy to share with you how a modern ERP system built for manufacturing companies can help you through this difficult time, and also prepare your business for the future.

Most important of all right now is to be responsible, and play our part in curbing this pandemic by staying at home and maintaining social distancing. With the latest extension of the Movement Control Order (MCO), it looks like we will all be working from home for at least another two weeks.

Daniel-profile-photo.png

Daniel Häggmark

Managing Director,
Monitor ERP System SEA