COVID-19 and EU Exit have thrown up a perfect storm of challenges for businesses in recent months. Manufacturing Advisor Phil Anders highlights the experiences of two North West manufacturers who have moved quickly to respond to changes and find new opportunities during a time of unprecedented change.
If the start of this decade has taught you anything, it’s that you can never be certain of what’s coming around the corner. The COVID-19 pandemic caught everyone unawares and has re-written the rulebook on how businesses operate. At the same time businesses have had to adapt to the UK’s new trading relationship with the EU, having had little time to prepare for the final arrangements or the ‘teething problems’ that are currently unfolding.
However, what we have learnt in these unprecedented times is that businesses can change very quickly in a crisis. In difficult circumstances, it is feasible for manufacturers – even the most traditional industries like heavy engineering and fabrication – to continue operating in a completely new environment and turn things around rapidly.
So what lessons can we learn from these experiences to become better and smarter in future? How can we go from a traditional ‘reactive’ business model to something more agile and proactive?
In the spotlight: Genlab
Genlab, an SME manufacturer in Widnes that makes industrial ovens and incubators, is a great example of a business that moved quickly during the pandemic to mitigate damages and identify new opportunities.
Like many manufacturers, when COVID-19 hit Genlab faced immediate twin challenges of customer demand falling away and suppliers unable to deliver, as Managing Director Phil Crompton explains:
“We were like a lot of businesses, who suddenly wondered if we were even allowed to remain open during the pandemic. We believed we were allowed to stay open and continued to do so, but we faced shortages of key components as many of our suppliers shut down.
“We also lost a lot of regular trade because schools and universities, who all closed, are a key component to our customer base. As a consequence, we had to put around 12 of our staff on furlough. We prioritised those who had a higher vulnerability to the virus so they could protect themselves.”
Genlab mapped all the external impacts on their business and asked themselves what they could to internally to meet the new requirements they were facing.
One of the things that put them in good stead was their willingness to embrace product development and new technology. They had already brought the manufacture of embedded oven controllers in-house, which had reduced dependency on overseas suppliers. This was crucial in allowing them to continue trading in 2020.
Their next step was to look at how they could change their products to meet the changing needs of their remaining customers:
“We endured approximately 3-4 months of low levels of sales and did what we could to diversify our product portfolio to meet customers’ needs to make their workplaces COVID-secure. For example, we developed hands-free door openers that could be retrofitted to almost any doors and retailed these on our website, along with a range of hand sanitiser bottle holders.
“Over time, the orders in recovered and we were able to bring the employees back from furlough. In the run up to the end of 2020 we were able to offer a staff incentive scheme to encourage dispatch of final goods and we ended up turning a small profit for the year.”
It’s been far from plain-sailing – Genlab was hit by a COVID-19 outbreak in the factory in January 2021 and had to shut for ten days – but their ability to adapt quickly, get advice from the right people and put their skills and resources to good use has put them in a good position despite ongoing challenges. Phil continues:
“We are hopeful that we can have a successful 2021/22. A key issue going forward is likely to be related to raw materials. Prices have risen for key materials (steel, cable and glass) and we are being told this is largely to do with factories closing down last year creating a shortage.
“In many cases we are only just starting to see the impact of this. Because of the shortage of supplies we have had to add an extra 5 per cent to the list prices that our agents already have. We have never done that before.”
In the spotlight: STM UK
Another manufacturer that has responded successfully to current challenges is STM UK, a provider of industrial gearboxes and motors in Winsford.
STM’s products are used widely in critical industries, so they weren’t as badly affected by COVID-19 in terms of customer demand. However, like Genlab, the company is having to deal with large price rises, as Director Andrew Ralston explains:
“Raw material prices have, and continue to, skyrocket – copper and aluminium for us in particular. Many of the products we sell contain large quantities of these metals, and the increases have been very pronounced. In over 20 years, I have never known anything like it. This is a world-wide issue affecting everyone.
“I believe that some impact has already started to be seen by consumers and can’t help but feel this will become more and more apparent in the coming months and years.”
EU Exit posed a distinct challenge for STM. The mindset required is similar – a desire to change quickly and adapt to the new environment; not just sit back and try to maintain business as usual. Do you change the way you trade overseas, for example through distributors or freight forwarders to take care of the paperwork for you? Do you move to selling or importing in batches to reduce costs? Do you diversify into new markets? These are important questions for manufacturers. STM is adapting accordingly:
“Since Brexit we have faced additional costs and complexity when bringing in goods from our suppliers in Italy, particularly on the paperwork side. Our shipments used to arrive on a Tuesday or Wednesday, but now it’s generally Wednesday, Thursday or even Friday due to the increased checks and requirements.
“Our finance manager has done a really fantastic job of managing most of the changes we have had to make, but we don’t have capacity in-house to carry out the additional paperwork involved so we have relied on our shipping partners to do this so far. Of course, you have to pay for this service, and we are monitoring these costs closely to establish the full impact and whether it will be worthwhile taking this in-house in future.”
In many ways, we are only just beginning to experience the full impacts of EU Exit. Many UK businesses are yet to decide how they adapt in the long-term when it comes to selling to or buying from EU businesses, and vice versa.
STM have moved quickly to anticipate these changes and find new opportunities overseas. In the months leading up to EU Exit, they have created a comprehensive diversification strategy and marketing plan to develop a global presence and expand their reach to major OEMs, which will serve to mitigate some of the risks presented by new EU trading arrangements.
Learning the lessons
The fundamental element in all of this is the ability to want to change; to learn, try new things and move with speed rather than sitting back and passively letting change happen to you.
The good news is that, in responding to many of the challenges of COVID-19 and EU Exit, businesses have gathered valuable skills and experience that can be used to maintain momentum into the future. Some examples include:
- Supply chain mapping: Mapping out the full supply chain to create a future-proof strategy that will improve flexibility and mitigate risks
- Shopfloor mapping: Re-designing the shopfloor with planning software to identify opportunities to not only increase health and safety but to boost productivity
- Competitor analysis: Looking more actively at how competitors are responding to market trends and shared challenges
- Collaboration: Working and collaborating with others in the supply chain to develop new solutions for the end customer
- People development: Successfully reintegrating people back into the workplace, ensuring wellbeing and supporting skills development if roles have changed
- Adopting technology: Capitalising on the rapid switch to remote working and communications technology by pushing forward with new digital technologies
- New routes to market: Taking stock of opportunities that have arisen to reach customers through new routes to market such as e-commerce
- Innovation: Using the experience of adding value-added income streams to product portfolios to drive new innovation and product development.
We can help
Our specialist Manufacturing Advisors provide tailored one-to-one support to help you adapt to the current challenges with confidence. Get in touch today for a one-to-one diagnostic.
Phil Anders, Manufacturing Advisor
Phil has over 20 years experience, supporting business growth for small and medium manufacturing enterprises.
Formerly delivering the Manufacturing Advisory Service (MAS), Phil is well versed in working with manufacturers to identify growth opportunities and implementing operational improvement plans. A Six Sigma Green belt, Phil is a lean manufacturing expert with specialisms in continuous improvement, waste minimisation and quality management.
To view Phil's full profile including technical capabilities and industry experience, please click here.