Thanks to global economic turbulence, a recession is likely to strike the U.S, perhaps sooner than you think. Non-profit think tank The Conference Board believes there's a 96% chance that the country will slide into an economic downturn within the next 12 months.
Although we've written in the past about manufacturers' relatively positive outlook on these conditions, they're still a danger to your business. You may be searching for ways to cut costs and expenses without panicking your workforce. Thankfully, layoffs are avoidable. With several smart adjustments to how you view and manage manufacturing facilities, you won't have to make as many tough choices in the years ahead.
Here's how you might tighten belts without threatening your employees' hours or job security:
Reuse everything you can
Recycling may be high on your agenda already, but it's wise to concentrate on even more effective treatment processes for glass, metal and plastics. Tear-out waste can be repurposed for new products or components. Aluminum is especially good for this: The Verge reports that around 75% of all the aluminum ever produced is still used today.
Reusing scraps means you don't have to purchase as many raw materials, and the money you save on new resources can be funneled into other areas of the business. Try to gauge the tear-out volume you produce every month, set a workflow for separating these waste materials and consider how you'll prepare them for reuse. Plastic, for instance, can be collected, ground, melted and extruded from many small cut-offs along the manufacturing chain.
Build up your emergency funds
Having a stockpile of cash that can keep the business going through three, six, 12 months or more is extremely beneficial. We suggest reviewing every outstanding credit account and chasing your debtors down so you have what you're owed right now. It's also wise to automate your cash flow management, ensuring that invoices and follow-ups are sent promptly on schedule.
It's also a good idea to store a regular percentage of your profits in a separate bank account. Forbes recommends reserving at least 10% of your annual revenue for a backup fund, planning around slow and busy periods in your seasonal forecasts. This means everyone will continue to be paid and you can continue making savvy investments across your business.
Reduce operating expenses
With tweaks to your production techniques and supply agreements, you can save significantly over time. It's worth negotiating with your suppliers for better deals on material acquisition or looking somewhere else entirely. Discuss an extended contract; if you give them more certainty for business in the long run, they might return the favor with lower direct prices.
On the operational side, you can use edge devices to track energy consumption, spotting where you might want to replace or adjust less efficient processes. Edge technology is also excellent for predictive maintenance — the sooner you find a problem and fix it, the fewer issues you'll have on the production line. Therefore, you'll keep hitting quotas and won't have to invest in as many repairs or replacements.