Recession-proofing strategies don’t merely serve as a lifeline during the economic downturn currently impacting the manufacturing market; it lays the foundation for long-term success and security when demand eventually rebounds. PHOTO courtesy Staubli.
By Justin Geach
In December, the Institute for Supply Management’s manufacturing index for the US contracted again, making it the fourteenth month in a row of decline. The trend has continued into 2024, with Barrons reporting an additional decline for January. Despite hopes to completely recover from the pandemic, this trend proves some industries are still not out of the woods.
Now more than ever, companies need to recession-proof their operations and protect them from further decline. Here are six strategies to bolster your company amid so much economic uncertainty.
1. Accelerate Digital Transformation
If the recovery process continues to stall, it will not just put companies out of business; it might also drive the most talented and skilled workers out of the industry in search of more stability. Curb revenue loss and speed up recovery by accelerating the digital transformation that most players in the industry have already initiated. Technology is key to weathering these challenges with improved efficiency and reduced costs, ensuring long-term success.
Taking basic steps to invest in enterprise software solutions can streamline communication and data management. More advanced solutions, like robotics, can speed up production by automating an operation’s most complex and resource-intensive aspects. Embracing digital transformation ensures your survival in today’s market and positions you for sustained growth in the future.
2. Rethink Existing Sales Models
Adaptability is another key ingredient for you to recession-proof your operation. Find ways to diversify your product offerings wherever possible, either by expanding their range or developing more innovative solutions.
Taking this approach reframes the economic downturn as an opportunity for expansion. After all, venturing into new markets can widen your customer base in lieu of creating more products, fostering wider brand awareness and potential for unexpected growth. Reducing dependency on a single niche or market generally ensures a more robust and sustainable future for your company once the recession is over.
3. Take Advantage of Incentives and Programs
In addition to tangible cost-saving measures, you should take advantage of every tax incentive and rebate program available.
4. Lean Into Partnerships
Partnerships play as much of a pivotal role in recession-proofing your operation as they do in succeeding in the market outside of downturns. Taking a human approach with people in the companies you do business with can improve resilience in ways that are hard to quantify. Strengthen your relationships with suppliers, distributors, and other key partners by being transparent about supply chain challenges, delays, and potential issues that could affect them.
This type of open communication empowers all parties to find win-win solutions to problems, helping to minimize costs and control damage and losses from unforeseen circumstances, emergencies, and low revenue periods. When you’re honest with your partners, it creates a basis for long-term sustainability.
5. Strengthen Customer Loyalty
Extend the positive impact and personal touch beyond just your partners. In times of economic downturn, you should take extra care to improve your customer relationships. Bolstering customer retention helps you weather the challenges of a recession and positions you for a stronger rebound once the downturn ends.
Offer incentives to customers who continue to place orders when times are tough to foster goodwill and demonstrate gratitude for their loyalty. Sustained customer loyalty ensures a stable revenue stream and enhances your reputation and competitive advantage in the long term.
6. Lower TCO for True Cost Savings
Total cost of ownership is an easy metric to ignore when you’re bleeding money, but prioritizing long-term cost efficiency is crucial to staying in the black. Reducing costs solely by downgrading quality could create a future crisis that undoes all of the hard-won recovery when the market stabilizes.
The total cost of ownership goes beyond the upfront material purchase cost, incorporating aspects like maintenance and efficiency throughout the entire product lifecycle. For example, higher quality cutting fluid might cost more upfront but yields significant savings throughout the value chain. This improves part quality and labor efficiency and reduces consumption rate.
Becoming Recession Proof in a Time of Industry Uncertainty
Recession-proofing strategies don’t merely serve as a lifeline during the economic downturn currently impacting the manufacturing market; it lays the foundation for long-term success and security when demand eventually rebounds. Diversifying product offerings, strengthening partnerships, enhancing customer loyalty, and optimizing their total cost of ownership empowers manufacturers to thrive in the ever-evolving marketplace.
Justin Geach is the Global Director of Marketing at Master Fluid Solutions
