Is all this talk of an impending recession getting you down? Or keeping you up at night? You’re not alone if you are increasingly focused on recession-proofing your manufacturing operation. After all, it’s better to plan and be prepared than to find yourself reacting to changing economic situations.

Recession Proofing Manufacturing Operation

According to a survey by the National Association of Manufacturers in 2022, 59% of manufacturing executives believe that inflationary pressures increase the likelihood that the economy will experience a recession within the following year.

In addition, seventy-five percent of manufacturers claim that inflationary pressures are worse now than six months ago, and 54 percent add that increased costs make competing and maintaining profitability more challenging.

What did the survey respondents say? 

90% of manufacturing CEOs in the study cited increased raw material costs as the primary business concern. Increased raw material prices accounted for 97% of inflation, followed by higher freight and transportation expenses (84%), wages and salaries (80%), energy costs (56%), and a labor shortage (49%).

Read it and weep

The current economic news is depressing to read, and the headwinds have been blowing for a while for manufacturers. It’s challenging to remain upbeat in the current environment because of supply chain problems, a lack of skilled workers, and growing manufacturing prices.

Factory workers are adaptable and inventive, making the best of any situation. Yet, even in business, humans have a herd mentality, and when there is talk of a recession, which is heightened by rising oil prices, the herd moves as a unit.

So how can we seize this chance, given that analysts anticipate a protracted period of muted demand?

Recessions Don’t Cherry-Pick their Victims

No matter their size or industry, all businesses are impacted by recessions. Declining wholesale-retail sales, industrial production rates, incomes, and other factors can negatively influence firms for months.

Of course, this implies that you must know how to prepare for a recession. Take a cue from people who stock up on supplies before a storm to successfully weather a recession by planning for your company.

Using our experience navigating customers through economic storms, we compiled an action list to help you prepare for the worst and come out on top. Plus, a cloud-based enterprise resource planning (ERP) solution can facilitate each phase of our recommendations.

How ERP Helps You in Today’s Future Readiness 

An all-encompassing business management tool known as a cloud ERP solution serves as a central data repository for the organization, storing real-time data from every department.

The solution makes business operations more efficient by granting 24/7 access to data from any location. Such a comprehensive, all-encompassing view of your company is essential for operations analysis, forecasting, and managing recession preparation measures.

  1. Recognize and list your company’s most valuable areas

Your company’s various facets have different values. Some aspects of your organization may be essential, even though each uniquely contributes. With the visibility ERP offers, you can quickly determine which areas of your company are the most and least profitable, classifying them for growth or pruning as necessary.

Investopedia offers several cost-cutting suggestions when pruning is required to get ready for a recession, including “streamlining the supply chain, downsizing to a smaller office, or moving to a less expensive building or area, closing facilities, reducing or eliminating outside professional services, such as agencies and contractors, etc.”

But, deploying new technology, such as a cloud-based ERP solution, is another approach to boost productivity and profitability—without necessarily calling for layoffs, pay reductions, or downsizing.

  1. Repay debts and refrain from taking on additional debt

Because businesses need to finance their activities, debt accumulation is widespread. You probably owe money if you’ve taken out a loan or used a company credit card. It is unimportant in a strong economy, but in a downturn, it may restrict your access to money and scare away investors.

In advance of a recession, try to:

  • Pay off your debt
  • Decrease expenses and costs
  • Avoid taking on additional debt
  • Construct a cash reserve

With a cloud-based ERP solution, you will have more access to your accounting and financial data, which can help you find the debts you can pay off. (Many counselors advocate paying off loans with the highest interest rates first, or the “debt avalanche technique”). Your budget can be re-evaluated and reset using precise data with an ERP system.

  1. Provide sustainable and reliable capital access

Paying off debt and cutting spending is the beginning of effective money management. Also, it entails obtaining additional funding, such as a business line of credit. It guarantees that you will have access to short-term financing in the event of unforeseen needs or a decline in revenue.

Remember that finding a reasonable interest rate is significantly simpler when your business is doing well. Additionally, tracking activities, providing personalized reports and dashboards, and automating workflows when you have an ERP solution with an integrated financial management module are much more straightforward. These features simplify what could otherwise be a complex application process by putting a complete picture of your financials at your fingertips.

  1. Expand Your Income Sources

Both businesses and consumers suffer when a recession occurs. No one is exempt from the effects of the economic crisis. Therefore, it’s likely that some of your clients will need more time to make payments. Preventing this worry at its source is the best course of action. The greatest way is to diversify your income streams.

You must increase your reach if you depend on a single customer or a limited, focused audience. This growth can take the form of increasing your marketing efforts or looking for clients in new markets.

Your ERP system can assist in identifying patterns and trends in your audience data, preventing you from overleveraging your organization and ensuring you don’t waste time and money on useless techniques.

  1. Continue to Keep Inventory Low

Consider lowering your present inventory burden if it fits your business model. Keeping as little money as possible invested in non-liquid assets during a recession is crucial. If selling your assets is difficult, consider lowering your entire inventory.

Businesses that manage complex supply chains or logistics workflows must have ERP systems. You can quickly determine inventory levels and make adjustments to meet present needs and anticipated future demands thanks to the inventory management features of your ERP software. You can decrease inventory while avoiding shortages or disruptions if you have a solid ERP system.

  1. Establish a Resilience Culture

Recessions can be unpleasant for you, your company, and your employees. Yet it’s up to you to reduce this pressure by creating a resilient culture. The capacity to recover from a setback or significant struggle is resilience. Being resilient is simpler when you know what is happening in your company and the industry.

Employee information sharing, collaboration, and visibility will keep them current and reassure them that you have a strategy to weather the economic storm. They’ll be more willing to maintain their composure in the face of unforeseen difficulties because you’ve given them the responsibility for the specifics.

Fortunately, you don’t need to look for a system or systems to assist you in maintaining effective communication. Your unified ERP solution is ideal for involving and educating the entire organization.

How SSG can help 

You have a clear advantage over rivals if you know how to prepare for a recession and understand how crucial it is to do so before the recession starts. You can keep your cool while others scramble to figure out how to deal with the economic crisis since you know that your company, with its cutting-edge cloud-based ERP solution, can weather the storm.

Please contact the Strategic Systems Group (SSG) specialists if you’re ready to locate the best ERP solution for your company and ensure that you’re equipped to weather the coming economic storm. Our adaptable and future-proof cloud ERP software will give you and your staff everything they need to succeed in today’s quickly evolving market and economy.

About the Author

Since 1991, SSG has been a leading enterprise resource planning (ERP) application and information systems consulting firm. It started as a group of partners who helped manufacturing and distribution companies improve the functionality of their ERP software systems through custom software development. Many older ERP software packages lacked features and reporting tools, so SSG developed customized solutions to meet client business needs.

SSG still works with clients who use old ERP software, but it has also become an expert in ERP software packages that are the most advanced on the market. SSG is an expert at moving companies from older ERP programs to newer, more modern ERP systems for greater efficiency and business scaling.