Are You Prepared for a Prolonged Strike?
This is article is part of a series of monthly articles produced by Harbour Results for PMA’s MetalForming Business Edge e-newsletter. Click here to view the full collection of articles.
We covered this topic in the recently, but feel it is important enough to share more insights. The UAW/Unifor – Detroit 3 automaker (Ford, General Motors and Stellantis) negotiations started in mid-July, with very little progress to date. With contracts set to expire on Sept. 14, we are expecting a strike situation.
And a prolonged strike would hurt the supply chain. Let’s look at a few facts from our 2023 Harbour IQ Manufacturing Benchmarking study.
Nearly 30% of the respondents were in poor financial health at the end of 2022 or what we call ‘unbankable’ and another 21% that are ‘somewhat bankable’.
All manufacturing processes have experienced a profitability decline since 2017, even among top performers in manufacturing (10.9% EBIT in 2017 – 9.2% EBIT in 2022).
84% of manufacturers predict a flat or a decline in revenue and profit in 2023 based on information through June 2023.
Overall manufacturing volumes have decreased since the pandemic and the average small to medium-sized manufacturer is just under 60% capacity utilization.
The small to medium-sized supplier is already sitting in a challenging environment and a shutdown of more than two weeks will result in a significant decrease in volume and create an untenable situation for many, which puts the entire supply chain at risk.
So, what should you be doing to prepare?
If you provide products to the automotive industry, it is critically important that you get prepared to manage your business through a strike. Below are a few steps you should consider.
Use Data and Intelligence
Look at your company’s data and market intelligence. What OEMs utilize your products, what vehicles are they on and where are they manufactured? Know where your products are going and what the impact of a strike will be on your business. You need to know how your demand will be impacted – in production hours – to develop an appropriate plan.
Create Scenarios
We do not know who will go on strike or how long it will last. You should work with your leadership to create different scenarios for your business based on the length of the work stoppage. Also, you should look at scenarios that show all Detroit 3 automakers on strike versus one and do it by OEM to understand your company’s impact. In your scenario plans you should look at all aspects of your business – workforce, inventory – raw materials and finished goods, capacity, scheduling, supply chain management, cash flow, etc.
Companies need to have a plan of how they are going to wind down their business and take out costs and, maybe even more importantly, how they will ramp back up after the strike ends to meet the demand. You need cash to buy raw materials and secure talent for a ramp up and having a gap in receivables will make that difficult especially if the business is not in good standing with their bank.
Communication
Communication is key. You should be talking to your customers, bank, employees, and suppliers. You must have a clear understanding of the state of your business and gather any insight and data that can help with scenario planning. Additionally, you need to keep your employees and suppliers informed of your plans. Transparency creates trust, which in the end will help you retain these important partners.
Leverage the Downtime – If Possible
If possible, leverage the downtime for continuous improvement across your facility. Offer additional training across your workforce; conduct needed maintenance of idle machines; look at your most troubled, inefficient, or high-scrap projects and conduct a kaizen event to identify improvements; or take time to improve your product launch process. We know that labor is not easy to find, so if possible, utilizing your team for other activities during the shutdown may eliminate the need for workforce reductions.
The shutdown might also provide some time to investigate new equipment, automation, or machinery upgrades. Reach out to your vendor partners to have them come to your business and provide improvement recommendations.
If you are in the automotive supply chain, this should be on your radar, and you should be closely monitoring the situation. If you need help navigating the shutdown it is important to reach out to someone you trust.
