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Harbour Results COVID-19 Study: Manufacturers Predict 25-Percent Revenue Drop

June 19, 2020


Harbour Results, Inc., (HRI), Southfield, MI, in the second of its three planned surveys gauging the impact of the COVID-19 pandemic on small- to medium-sized manufacturers, reveals that while revenue is down, all shops surveyed are open and operating at some level. On average, shops surveyed predict a 25-percent drop in revenue from the original 2020 forecast, with die builders and die casters expecting the most significant drop, followed by stamping and molding companies, and mold builders. The automotive industry is experiencing the highest level of impact, with a 33-percent operating level. On average, automotive shops have laid off 29 percent of their workforce, an improvement from HRI’s April study which had the industry at an operating level of 28 percent and 41 percent of workers laid off.

“Shops will face a number of challenges during the remainder of 2020 and 2021,” says HRI president and CEO Laurie Harbour, “so strategically managing resources required to build capacity and meet customer needs will be increasingly critical … Not all shops will survive this crisis. We know there will be a dip in production across all sectors, so shops need to develop business plans that account for best, worst and likely scenarios.” 

As shops look to ramp up operations, operating cash will continue to be critical to maintain viability. In the May study, more than half of shops indicated that they had less than six weeks of cash on hand, with 67 percent of tooling companies and 56 percent of production shops experiencing payments being stretched or negotiated. Additionally, 32 percent of respondents were not modeling 13-week cash flows.

According to Harbour, shops that don’t understand their current and future cash situation cannot make informed business decisions. “Shops need to pull levers to strategically contain costs. If you don’t understand your current situation, you will not know how far you need to cut.”

One consideration for cost containment: voluntary and strategic layoffs. The second study indicated that all shops have implemented some level of temporary layoffs, and 92 percent plan to retain their workforce. Additionally, 98 percent of shops applied for federal funding to support efforts to retain staff.

“We feel strongly that company leaders must closely look at their workforce, determine who the key players are and be strategic when bringing back employees to better manage cash. Unfortunately, the federal funding is not a competitive advantage for shops and may have created a false comfort level for those who have received the funds,” says Harbour.

Finally, as a result of the COVID-19 pandemic, many companies are looking to reshore work in an effort to better manage their supply chain and eliminate risk. Nearly 50 percent of North American tooling shops are quoting on programs historically produced in China, and 34 percent of production shops are increasing North American sourcing. 

Industry-Related Terms: Die
View Glossary of Metalforming Terms

 

See also: Harbour Results Inc.

Technologies: Management

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