Manufacturers engaged in production and mold making predicted an average 25 percent drop in revenue from their original forecast for this year, according to the latest COVID-19 Impact study conducted by consulting firm Harbour Results Inc. (HRI). Completed at the end of May, the study indicates many shops will face significant challenges this year and next.
This second of three studies attempts to better understand how the pandemic is affecting small and medium-sized manufacturers engaged in either production and tooling. Results show that every industry and manufacturing process has been impacted; however, this is an improvement from the April study, with all shops having resumed some level of operations.
Die builders and die casters are expecting the most significant drop, followed by stamping and molding plants and mold builders, the study says. The automotive industry is experiencing the highest level of impact with an operating level of 33 percent and an average 29 percent of its workforce laid off. However, this is an improvement from the April study, when the automotive industry was at an operating level of 28 percent and a lay-off rate of 41 percent.
“Even though the manufacturing industry is operating, it is not out of the woods. There are a number of challenges shops will face in the remainder of 2020 and 2021, so strategically managing resources required to build capacity and meet customer needs will be increasingly more critical,” said Laurie Harbour, founder, president and CEO of HRI. “In our study, 35 percent of tool shops and 47 percent of production shops indicated they are struggling or concerned about the future. This tells me not all shops will survive this crisis. We know there will be a dip in production across all sectors, so shops need to develop business plans that account for best, worst and likely scenarios.”
Manufacturers face challenges
As shops increase operations, operating cash will continue to be critical to maintain viability. In the May study, more than half of shops indicated that they had less than six weeks of cash on hand with 67 percent of tooling and 56 percent of production shops experiencing payments being stretched or re-negotiated.
“Shops need to pull levers to strategically contain costs,” Harbour said. “If you don’t understand your current situation, you will not know how far you need to cut.”
Voluntary and strategic layoffs are being used to contain costs. The second study indicates that all shops have implemented some level of temporary layoffs.
Opportunities arise from crisis
Due to the COVID-19 pandemic, many companies are looking to reshore work to better manage their supply chains and eliminate risk. Nearly half of North American tooling shops are issung estimates to make products that were formerly manufactured in China. Thirty-four percent of production shops are increasing their North American sourcing.
“This is positive news for the industry -- shops need to focus on sales to take advantage of this opportunity while it exists,” Harbour said.
The May survey received more than 250 responses -- 52 percent from tool and die makers and 48 percent production shops (molders, die casters and stampers).
HRI’s third COVID-19 Impact Study will be conducted in August. Results will be analyzed and shared with participating companies and industry organizations in order to help influence the federal government to continue to support the manufacturing industry.
Contact
Harbour Results Inc., Southfield, Mich., 248-552-8400, https://harbourresults.com
