Like many industries, manufacturing was hit hard by the pandemic. While manufacturers recognize the importance of technology and how transformative it can be, the rate of adoption has remained relatively low. As a result, many found themselves unable to adapt quickly to the challenges imposed by the pandemic such as supply chain disruptions, social distancing measures at the workplace and transitioning to remote work.
Fortunately, while the events of 2020 may have been a surprise, manufacturers are entering the future with a better idea of what to expect — and how to better navigate these challenges. To understand their new priorities, I had the pleasure of moderating a panel of senior finance leaders in diverse businesses to discuss the findings of our SYSPRO 2020 Manufacturing CFO 4.0 Survey Report. This report reveals the pandemic’s impact on the manufacturing sector, through the lens of CFOs.
Joining me in our discussion was Frank Patton, CFO of meat processor and food manufacturer Ruprecht; Gurmeet Rayat, CFO of industrial equipment supplier CAN-AM CHAINS; and Elena Serebryany, President of CFO consultancy firm TYM Consulting. Together, we dove into the survey’s results to see how they resonated with the panel and to gain a better understanding of where priorities lie heading into 2021 and beyond for manufacturing CFOs.
Going digital, understanding evolving needs and pivoting to essential or sought-after services
According to our survey, most businesses fared well during the pandemic, with 47% of manufacturing industry CFOs saying that they experienced business recovery and 31% expecting it by the end of Q2 2021.
While these stats certainly paint an optimistic picture, some sectors adapted better than others. For example, for food manufacturing and processing, Elena explained, “These types of industries have done significantly better. Obviously, they were busier; there were more requirements to produce more food and more purchases.”
Less obvious industries like furniture manufacturing also adapted particularly well, Elena added. “All the furniture stores were closed; no one was buying indoor furniture. However, because people were stuck at home and unable to spend their discretionary income on things like vacations, the demand for outdoor furniture boomed,” she said. “It was really interesting to see how some products were not moving at all, but as long as companies were able to switch to produce products that were required, they were able to grow their sales.”
These examples show that the businesses that adapted well to the pandemic were able to do so primarily because they had the ability to pivot.
This was certainly the case for CAN-AM CHAINS, which found itself better prepared for the pandemic than most, having already survived the 2008 financial crisis. As CFO Gurmeet explained, “That was something we had to think about — how quickly could we arrange our tool and die and manufacturing facilities to pivot? One of the lessons is that we have to be more nimble and able to adapt to situations more quickly.”
Our survey revealed other hard-learned lessons from all kinds of businesses. In general, there were two major factors that affected how well businesses adapted to the pandemic: how easily they were able to augment their existing digital activities and how quickly they were able to adopt e-commerce models. This makes complete sense, as stricter social distancing measures continue to make in-store shopping more difficult, leading customers to interact digitally more often.
2021 is all about maintaining margins, managing cash flow and utilizing ERP
Our survey revealed the top three priorities for businesses in 2021:
- Maintain margins and performance levels / sustained profitable growth (70%)
- Manage cash flow (68%)
- Utilize ERP for automation, data accuracy, and reporting (46%)
These points resonated with Frank, who, in the wake of the pandemic, realized that his company’s data-gathering ability needed a serious upgrade in speed and efficiency. “We’re really looking at ways to link all these sources of information into a central repository and then be able to mine that data and look into it to tell us what’s there — and how we can put linkages between what appears to be disparate data,” he explained. “We also recognize that we really need to better understand line efficiencies and improve shop floor controls. We also need to discover opportunities to make investments in automation or other capital equipment.”
Employee safety is also at the forefront going into the new year. More specifically, however, businesses must go above and beyond to make employees feel safe enough to come to work instead of staying home and relying on government benefits. This means not just providing proper equipment, but, as Elena explained, also financial incentives, emotional support and even transportation. “No one felt comfortable getting on public transportation. So, we really had to come up with creative ways, whether that meant getting small cars that they shared or investing in Uber sharing, and cover the costs required to get them safely to work.”
Many businesses overhauled their processes as well, especially those that transitioned to remote work. This required new training for employees, adoption of mobile-friendly technology, farther-reaching communication processes and efforts to help employees maintain a healthy work-life balance. Elena continued, “It was depressing for some people sitting at home stuck to the computer. So, we really had to say ‘This is the break in your calendar to go outside.’ We literally had to go and ensure that our employees were able to adjust to working from home and take care of them physically and emotionally.”
Business intelligence, ERP and other technology initiatives deemed critical for sustainable growth
For sustainable growth, many CFOs plan to invest in technology in 2021, including those on our panel. Gurmeet, for example, plans to introduce warehouse automation and robotics. “Warehouse automation ties in with our goal to reduce and manage our inventory better,” he explained. “We’ve been looking at pick and place robots, so that would eliminate some of the reliance on labor and people.”
At Ruprecht, Frank’s planned technology initiatives relate more to AI, machine learning and general data analysis to glean more insight from data, particularly regarding customer acquisition, overall margins, and getting the right people in the right role. “It’s not about just building a spreadsheet anymore, it’s about really being able to take the data and make a compelling analysis out of it, and that requires both internal and external information.” This aligns with our survey’s findings that 46% of manufacturing CFOs intend to pursue ERP for automation, data accuracy and reporting as their top priority in the new year.
For many manufacturers, with remote work becoming more commonplace, communication and cybersecurity initiatives are also proving more essential than ever. For Elena, this has meant becoming more reliant on tools like Slack and Microsoft Teams. “We needed a tool that allowed us to all communicate. And cybersecurity — protecting all the information — was critical, especially now that employees are connecting from home networks that may not be as secure as the office network.”
Future CFOs: From books and records to strategic business partner
The panel expects to see their roles as CFOs drastically evolve in the coming years. With over three decades under his belt as a CFO, Frank predicts, “The CFO will become even more of a strategic business partner. I think they’ll be tasked with not only executing business strategy, but also guiding and challenging company owners on strategy.”
From her experience acting as a contract CFO to many different types of companies, Elena predicts that CFOs are going to be working much closer with HR and Operations in the future. “This is where we found a lot of gaps in many of the companies under $20 million in sales,” she said. “HR and Operations are going to be working very closely with the CFO to establish all of the regulations and the processes.”
The clear consensus is that CFOs will continue to wear many hats in the future, and their roles will focus on support and strategy even more than the purely information-gathering and reporting roles that CFOs are typically known for.
If you’re interested in hearing more about how these financial leaders plan to succeed in 2021 — and how to make your own manufacturing company a success in the years to come — be sure to watch the full discussion SYSPRO 2020 Manufacturing CFO 4.0 Survey Report