How to Survive the Recession and Become a Stronger Manufacturing Company

By Mike Hart

The "great recession" that started in 2007 has walloped small manufacturing companies all over the world.  To survive, companies have had to cut their work force, reduce overhead costs, and eliminate unnecessary expenditures.  Credit is tight and cash flow is king.  In uncertain times, it is a sensible strategy to postpone capital investment in plant and equipment until the economic outlook is more predictable.

Spending Cutbacks Aren't Enough

In response to such a severe downturn, it is a natural impulse to overreact and arbitrarily cut all discretionary spending to the bone.  Taking aggressive action on spending feels like the right thing to do.  But if you fight the great recession solely with spending cutbacks, you will emerge from the it weak and vulnerable to healthier competitors.

There's a better way.  Instead of hunkering down in survival mode, you can take advantage of the great recession to become a stronger and more efficient manufacturing company that will be poised to increase market share when the economy recovers.  How?  By implementing a manufacturing software package that will improve your operating efficiency.   

It Costs Less than You May Think

Manufacturing software does not require a major capital investment, provided that you implement a small business manufacturing software package rather than a mid-market ERP system (click here for a listing of available products). 

In my post How Much Does a Manufacturing Software Package Cost?, I provide numbers that show that a small business manufacturing system will cost from $475 to $850 per user for software, implementation, and support.  A 5-user system will therefore have a total cost ranging from $2,375 to $4,250 and a 10-user system ranges from $4,750 to $8,500.  Even in bad times, most manufacturing companies can find room in the budget for a modest expenditure of this size . 

The real expenditure with manufacturing software is not the direct cost, but the indirect cost of the time and effort involved in implementation.  A recession is often the best time for implementation because your employees may have plenty of extra time to devote to the project.

How Do You Benefit Financially? 

How does an improvement in operating efficiency benefit you financially?  The most significant impact will be on your cash flow.  With good software used properly, you should be able to substantially reduce your inventory and work in process, with fewer shortages and improved delivery times.  The reduction in working capital required to operate your business will dwarf any savings you can make by cutting expenses and will pay for the software many times over. 

So don't just ride out the recession hoping you can survive until good times return.  Why not use the great recession to become a stronger, more efficient company that is ready to prosper when the recovery kicks into full gear? 
    
Mike Hart is the co-founder and President of DBA Software Inc., a leading provider of manufacturing software for small businesses.

Comments

[John Mayner - EPR consultant]

Yes a manufacturinf software package would help, but also the hidden costs should be taken in account, which could be 10-50% of total project cost.