The top agenda item for many chief financial officers (CFOs) in 2021 isn’t cost cutting but investing in technology or infrastructure to adapt to the post-pandemic world.
Of the 100 CFOs polled for the 2021 BDO Manufacturing CFO Outlook Survey, 26% report investing in technology or infrastructure. The survey, conducted in September 2020, included manufacturing companies with revenues ranging from $250 million to $3 billion, with 77% of them having revenues of less than $1 billion.
How else do CFOs plan to navigate continuing COVID-19 challenges while making moves to seize emerging opportunities in 2021?
Eskander Yavar, national leader of BDO’s Manufacturing Practice and a National Association of Manufacturers (NAM) board member, reveals the survey’s key takeaways, including:
- 83% say their business will take at least 1 year to recover, 51% expect customer demand to increase in the next 6 months
- 49% say the pandemic enabled faster decision-making, 38% say it led to product or service innovation, and 34% say it accelerated digital transformation/Industry 4.0 adoption
- 20% say supply chain stability is central to recovery, followed by 17% each for low input costs and productivity gains
- 44% will introduce new aftermarket services, 42% will pivot to new products
Nearly three-quarters of the CFOs report their businesses are currently struggling or just surviving. Most project it’ll take more than a year for their business to fully recover from the effects of the pandemic.
The health crisis forced manufacturers to get creative to survive. Many introduced Industry 4.0 solutions such as automation to enable social distancing in their workplaces and let some frontline staff work remotely.
Supply chain stability emerged as the factor most critical to the recovery of the manufacturing industry. Yavar says that for 2021 and beyond, manufacturers will prioritize meeting immediate challenges while simultaneously making investments that increase their business’ resiliency for the long term. More than half (52%) plan to invest in supply chain technologies this year to introduce new efficiencies, increase end-to-end visibility, and improve flexibility and responsiveness.
In the short term, “Manufacturers should reevaluate their just-in-time inventory strategies and consider developing alternative sources of supplies or stockpiles of critical materials or products,” Yavar says. Long-term, “Savvy manufacturers recognize that digitizing the supply chain is no longer optional at this point, but – provided they move quickly enough – is also a source of competitive advantage.”
Three-quarters of the manufacturers polled have introduced or are planning to introduce new aftermarket services. Subscription-based analytics, reporting dashboards, condition monitoring, and preventive maintenance are among the offerings enabled by Industry 4.0.
The remainder of this year will be a balancing act between mitigating risk, navigating continued uncertainty, and seizing new opportunities, Yavar concludes. “To succeed, manufacturers must balance making investments that increase connectivity and resiliency to mitigate disruption with longer-term plans for transformation to meet changing customer expectations and adapt to shifting market trends.” – Eric