Sales On the Upswing
Manufacturing has been in a recession for over a year in the U.S. with the situation worsening nine months ago. Logistics has been robust until the tariffs went into effect and government spending declined, and construction maintained longer than manufacturing but has been slowing down in the last several months. This doom and gloom is pivoting to an upswing in sales with recent developments.
Since January, trillions of investments have been announced into manufacturing, data centers, shipbuilding, and more, thereby stimulating optimism. As positive as these announcements have been, there was uncertainty about the tariffs and taxes. Since the competitive tax rate of 21% for businesses was scheduled to expire, executives were concerned about their ability to compete if it went back up to 35%. In addition, interest rates remained higher than they have been in many years. Thus, when Congress passed what has been referred to as the “One Big Beautiful Bill (OBBB)” which made the tax rate permanent in addition to several key benefits for builders, the outlook has turned positive. In fact, several clients immediately started receiving orders. Refer to our recent article on the OBBB and its benefits.
Revenue Growth is Spurring Shortages & Lead Time Issues
As revenue grows, shortages and lead times are increasing. Companies are pivoting and reallocating production among plants with the tariffs, and if business processes and technologies cannot pivot fast enough, shortages are occurring. In addition, because order backlogs have been declining during the manufacturing slump, the proactive companies are reviewing opportunities to optimize profit and performance with predictive processes such as SIOP (Sales Inventory Operations Planning) and advanced planning strategies backed with artificial intelligence.
Thus, as executives transfer production, optimize resources, better utilize ERP and related technologies, and bring production in-house to keep their people productive, demand and supply patterns change. If their end-to-end supply chain isn’t keeping up with the evolving conditions, shortages increase as sales volume increase rapidly. On the other hand, stodgy companies are not thinking ahead. Instead, they were slashing costs and inventory, leaving themselves in a stalled position. According to Newton’s law, an object at rest, stays at rest whereas an object in motion stays in motion. Thus, these companies have issues ramping up from a position “of rest”, thereby increasing shortages and lead times. Customers will not accept poor performance; they will find an alternative.
For example, an industrial equipment manufacturer’s volume has been much lower than it has been in several years. Thus, the engineering, planning and operations teams have been pulling orders forward, insourcing production, and sharing resources with other sites to keep high-skilled talent intact. Since they have maintained their resiliency and predictive capabilities, as quotes and orders started to increase, they quickly placed purchase orders and communicated throughout their supply chain. Certain suppliers have been able to ramp up rapidly. Others struggled. For example, a motors supplier pushed a one-week lead time to ten weeks with no notice! Thus, as the company is forward-thinking, the executives asked the engineering team to redesign and/or source additional suppliers to ensure they could support sales growth.
Is Your Supply Chain Ready for Growth?
It is past time to ensure your supply chain is ready for growth. Since companies are reshoring, nearshoring, friendshoring, expanding production, transitioning to regional supply chains, changing suppliers, and dual sourcing suppliers, demand and supply are getting out of whack. As became apparent during the pandemic, as demand and supply misalign, the entire supply chain gets out of balance. There will be a huge opportunity for companies that are prepared for growth and ready to invest wisely to meet demand.
Start by looking internally. Are you able to scale up rapidly? Have you kept your high-skilled resources? Have you invested in the appropriate automation and advanced technologies such as robots, additive manufacturing, and digital twins? Have you upgraded and transformed your supply chain planning processes? How secure is your end-to-end supply chain? Are you dependent on a supplier that could be shut off due to a likely world event? Perform an operational readiness assessment. The best companies will have more opportunities than any time in history to take market share and thrive for decades to come if they are ready for growth.
If you are interested in reading more on this topic:
Advanced Planning Strategies to Optimize Manufacturing Success