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The manufacturing industry has historically reflected the whims of both the global economy and the ever-changing tide of world events—and 2020 has been no different. The global COVID-19 pandemic has caused upheaval in manufacturing practices worldwide, not least, the small manufacturers we value so much here in our region. Of course, the U.S. presidential election creates another element of uncertainty, as the economy responds to the election results in the months ahead.

With the current situation & uncertainty in mind, we are looking ahead to 2021 and identifying some potential challenges and trends that could shape the manufacturing industry in the upcoming year. How will these trends affect your manufacturing business?

Challenge #1—Lingering Effects of COVID-19

Currently, as COVID-19 hotspots crop up, wane, and shift from place to place, every area is affected differently. At times, the U.S. has been the primary hub for the manufacturing, shipping, warehousing, and more, as the pandemic impacted other parts of the world. At other times, local small manufacturers have experienced serious impact due to staffing issues, shutdowns, supply shortages, and more. A recent survey from the National Association of Manufacturers shows, while serious challenges remain, manufacturers are feeling more optimistic about the months ahead.

Gilmore Jasion Mahler (GJM) partner Wes Beham, CPA leads the firm’s Manufacturing Specialist Team. Wes and other GJM professionals have guided many manufacturing businesses through the initial COVID-19 shutdown, the Paycheck Protection Program loan process and many other pandemic-related uncertainties.

“While there’s still a good deal of uncertainty in the market, I do believe that many of our manufacturing clients feel more optimistic now, compared to early on in the pandemic,” says Beham. “Changes have come so quickly during COVID, whether weekly, or sometimes even daily. Its so critical to have a go-to advisor you truly trust to guide you through. It’s very rewarding to be there for our clients in this critical role when they need us the most.”

As 2021 begins, some industry watchers anticipate the beginning of a return to normal, but only time will tell how those events take shape.

Challenge #2—Widening Skilled Labor Gap

Manufacturers stand to lose as much as 4.6 million of the workforce as the skilled population ages. Unfortunately, experts predict that 2.6 million of those jobs will remain unfilled by 2025 as the younger portion of the workforce focuses on building technological prowess and other skills. Adding insult to injury, what was already a difficult situation has now been made worse by the pandemic.

Kip Winzeler, Chief Operating Officer at Altenloh, Brinck & Co US Inc., knows all too well about the workforce challenge in manufacturing. His company, located in Bryan, Ohio is a founding member of the newly formed Northwest Ohio Manufacturing Alliance (NOMA). NOMA’s goal is to bring manufacturers together to lead efforts to solve the skilled labor shortage in the region.

“The pandemic has certainly put further strain on an already difficult situation,” says Winzeler. “Across manufacturing, due to COVID-19, we’ve seen some earlier than expected retirements. That has added more open positions to those that were already unfilled. In my mind, COVID has further proven why it’s so important to have an organization like NOMA for manufacturers to work together to solve this.”

Another consideration: small manufacturers that wish to remain productive well into the 2020s will need to approach 2021 with a focus on training existing workers, becoming more attractive to potential hires, and adapting technology to focus on valuable skill sets. You can read more on the skilled labor shortage, and Ohio impact here.

Challenge #3—Lack of Data Regarding Machine Intelligence

As the Internet of Things (IoT) continues to grow, even the smallest manufacturers see the value in the enhanced internet connectivity available for smart machinery and other smart devices. While the communications and data provided by these devices streamline the production process and provide much valuable data, industry watchers say relatively few manufacturers can analyze the data produced. In 2021 and beyond, it is expected that small competitive manufacturers will need to begin managing these analytics to truly reap the predictive benefits of IoT devices and machinery.

Challenge #4—Shifting Consumer & Industry Demands

In this day and age, some consumers want a more connected, personalized experience with the manufacturers charged with producing their products. Small manufacturers stand to benefit from this industry-wide shift from mass production to smaller, more niche-focused systems. In 2021, it appears the trend toward solutions like additive manufacturing will continue, allowing smaller manufacturers to adapt to consumer needs.  

Manufacturers who don’t sell direct to the consumer are part of a bigger picture, of course, as they often rely on materials from another manufacturer to produce their product and then perhaps ship it on to yet another manufacturer for final assembly. Many automotive suppliers, and other manufacturing businesses in Northwest Ohio and Southeastern Michigan are part of this supply chain, their success effectively linked to their fellow suppliers.  

Your organization is unique and will undoubtedly adapt to these challenges in the way that best suits your business. If you have any questions or concerns regarding how these challenges could affect you, reach out to your GJM advisor for assistance.

Mark your calendar:

GJM Manufacturing Financial Executive Roundtable

Kip Winzeler presents on NOMA apprenticeship grants available to area manufacturers at an upcoming GJM Manufacturing Financial Executive Roundtable. The virtual roundtable is Thursday, November 19 from 10-11 am EST. RSM Deputy Chief Economist Kevin Depew also presents. He will examine presidential election results and the potential impact on manufacturing and the U.S. economy in general. Manufacturing financial executives can register for the virtual roundtable here.  

Established in 1996, Gilmore Jasion Mahler, LTD (GJM) is the largest public accounting firm in Northwest Ohio, with offices in Maumee and Findlay. Locally owned, GJM offers cloud-based accounting and provides comprehensive services including assurance, business advisory, tax, risk advisory, healthcare management and outsourced accounting. The Firm’s professionals specialize in industries including construction & real estate, healthcare, manufacturing & distribution and utilities. Learn more at GJMLTD.com, on LinkedIn, Twitter, Facebook and Instagram.

Ever since she can remember, Dr. Sheila Phelan says her dream has been to own her own dental practice. This year that dream became a reality in spite of the COVID-19 pandemic and some other unforeseen and tragic events that would unfold and change the timeline of her professional plans.

Dr. Phelan, an orthodontist at J. Bunkers and S. Phelan Orthodontics, says she’d discussed with her mentor, colleague and friend Dr. Jeffrey Bunkers, the plan that someday she would take over ownership of his orthodontic practice. In fact, she says, they had a timeline in place for that transition. Then, this spring, Dr. Bunkers became ill and suddenly passed away. It was a shock for family, friends, patients and staff.

Dr. Phelan found herself in the middle of the COVID-19 pandemic, mourning the loss of her dear friend and business partner, while knowing she had to somehow move forward with their original plans that she would one day own the orthodontic practice.

GJM Managing Partner Kevin Gilmore, who has advised Dr. Bunkers, his family and his orthodontic practice for many years, was able to be there as a liaison between the Bunkers and Dr. Phelan at such a difficult and emotional time.

“I’ve handled Jeff’s work for many years and saw him build his practice into the success it is today,” says Gilmore. “I considered Jeff not only a client, but a good friend. I’m glad I was able to be there for him when he needed my help with the sale of the business to Sheila. And I have no doubt she will have great success as she moves forward. She had a great teacher.”

“Kevin is a great person,” Sheila says. “I truly don’t think that I would be owning this practice right now if he hadn’t been that mediator and friend between me and Jeff.”

Dr. Phelan says she studied hard for 12 years, working toward her goal of one day owning a practice. A Michigan native, she completed her undergraduate degree at the University of Michigan. From there she attended dental school at Virginia Commonwealth University in Richmond, Virginia and did her residency at the University of Iowa.

“But there was a bigger dream than becoming a practice owner,” she says. “It was more about a place to call your own and a place to call the shots, especially as a female. I’m the first kid in my family to be a doctor. There were a lot of hurdles to jump through.”

For example, she recalls the times that patients would see a young woman enter the room and ask when “the real doctor” would be there. She says transition of ownership of a dental practice typically takes years. This transition happened in 2 months-time. At 31-years-old she found herself sole owner and was ready to put her own stamp on the practice.

“One thing I knew I wanted to do was automate the office. There seemed to be many opportunities to run things a bit more efficiently from a managerial standpoint. I want to be involved. Judy has been really good at teaching me some of the basics, like how to automate and streamline systems.“

Judy is Judy Anderson, a GJM partner and member of the GJM Healthcare Specialist Team. She also leads GJM’s Outsourced Accounting service line, working with clients who prefer to have a team of experts handle accounts payable, bookkeeping and many of the other financial management tasks involved with running a busy business or healthcare practice. She’s worked closely with Sheila to implement some changes at J. Bunkers & S. Phelan Orthodontics. They’ve transitioned accounts payable and automated some other accounting services. The COVID-19 pandemic has further reinforced the importance of automation in managing a healthcare practice, as the virtual practice has become a reality. Software applications allow Sheila access 24/7 to all the numbers, so there’s continuity, flexibility and transparency. The GJM team also helped to secure a loan through the Paycheck Protection Program, assisted with tax planning and has taken over administering the retirement plan.

“Outsourced Accounting isn’t the right fit for every business, but we have found that it works extremely well in certain industries, including professional services, the nonprofit world and healthcare practices, to name a few,” says Anderson. It also removes the need to hire someone internally to handle practice finances. “With our team in place, the owners can turn their focus to other priorities. In Sheila’s case, caring for her patients and developing her staff.”   

“My staff are phenomenal,” says Phelan. “When I hired each one, I saw something in them that matched the mission of the practice. That means a lot to me. The practice and owning it is a material thing. It works because of the people. I just want to keep making people happy. My goal in life has always been as a manager to create a setting where everyone likes entering. I try to make that happen every day.”

Dr. Phelan says she’s grateful for the opportunities Dr. Bunkers provided to her and has written a tribute to him housed on the practice website. The final line of the online tribute seems to capture her outlook:

“When I walk the halls of our office, I hope he is walking with me and I hope I can make him proud.”

Established in 1996, Gilmore Jasion Mahler, LTD (GJM) is the largest public accounting firm in Northwest Ohio, with offices in Maumee and Findlay. Locally owned, GJM offers cloud-based accounting and provides comprehensive services including assurance, business advisory, tax, risk advisory, healthcare management and outsourced accounting. The Firm’s professionals specialize in industries including construction & real estate, healthcare, manufacturing & distribution and utilities.

While change is sometimes hard to accept, now more than ever before, it is the time to embrace it, which means getting comfortable with uncertainty and working on the skill of adaptability within your organization. While doing this on an infrastructural level is essential (as we discussed in Part 1 of this series) adaptability on a personal level is equally important. The good news is that it is a skill that can be learned and improved upon, as needed.

Arguably, in the current business environment that we’re witnessing globally, adaptability is the most critical soft skill a person can develop, both personally and professionally. Soft skills refer to those underlying skills that people use to do their jobs, like time-management, creative problem solving, and interpersonal style. While those remain important, adaptability will drive most business success and growth in 2020 and beyond.

What Does This Look Like on the Ground?

• Acknowledging the uncertainty, along with the need to adapt. While this may seem obvious, many companies are accustomed to utilizing long-term strategies for their daily operations. As many experts agree, this method of approach doesn’t work so well for the current climate.
• Accepting that things won’t be perfect (at least not at first). Another significant component to encouraging and modeling adaptability is that sometimes it will be messy, and that’s OK. A workforce that feels comfortable making course-corrections when necessary is one of the major components of building adaptability into your business. If something isn’t working, it becomes clear quickly what needs to be changed.

RELATED: GJM COVID-19 Resources

• Taking one step at a time. Again, long-term strategies are taking a real backseat in these uncertain times. Long-term goals or outcomes are fine, but planning one step at a time how to achieve them is going to be a more prudent and less frustrating means of getting there. Things are likely to change along the way, so you can get ahead of that by building a solution around the changes, rather than having to undo an existing strategy and lose precious time and resources.
• Encouraging and fostering emotional intelligence in your workforce. This refers to the ability of a person to empathize and control their emotions and usually involves some level of self-awareness. A workforce that has a higher level of emotional intelligence will be better at adapting to continued change, be better at collaborating, and more generally have increased efficiency, overall.

Every organization is different, so how this looks may be different for some. The most valuable aspect of adaptability is that it allows your business to respond to exactly what it needs, no more, no less.

Established in 1996, Gilmore Jasion Mahler, LTD (GJM) is the largest public accounting firm in Northwest Ohio, with offices in Maumee and Findlay. Locally owned, GJM offers cloud-based accounting and provides comprehensive services including assurance, business advisory, tax, risk advisory, healthcare management and outsourced accounting. The Firm’s professionals specialize in industries including construction & real estate, healthcare, manufacturing & distribution and utilities.

As small and mid-size businesses around the country and the world work to stabilize in the wake of the deadly COVID-19 pandemic, the economic upheaval caused by the coronavirus crisis brings a wake-up call. Just how prepared was your business for such a devastating event and how would your company or organization fare should disaster strike your technology infrastructure?

Such a “disaster” can cause significant disruption in operational and/or technological process capabilities for a period of time for businesses, which in turn affects the ongoing operations of the company and can, in fact, threaten its very existence. That’s why all organizations should be considering disaster recovery, which involves a set of policies, tools/applications and procedures to help enable the recovery and continuation of critical technology and systems following a disaster.

Some examples of potential disasters:

• Natural disasters like floods, tornadoes and hurricanes
• Infrastructure break-down (i.e. utility disruption, pipeline bursts)
• Human error or threats (i.e. cyber-attacks)

According to global IT services provider phoenixNAP, statistics show about 93% of businesses without a Disaster Recovery (DR) plan in place that suffer from a major data disaster are out of business within one year.

As consumers and business operators, we’ve seen an increase in attacks in which companies are locked out of their systems or data was held for ransom. Such attacks can be costly. On average, businesses lose over $100,000 per ransomware incident due to downtime and recovery costs. As these attacks increase, so should your focus on the importance of data back-up and recovery processes and controls. Without sufficient back-ups and defined processes for recovery, companies run an increased risk of delay or error in financial reporting. phoenixNAP says about 96% of companies with proper backups and Disaster Recovery plans in place were able to survive ransomware attacks.

Disaster recovery can be considered a subset of what is considered “business continuity”. Business continuity involves keeping essential aspects of your business functioning when significant disruptive events occur. Disaster recovery focuses on the IT or technology systems supporting your critical business functions.

What Is a Disaster Recovery Plan?

A Disaster Recovery plan is simply defining the strategy for recovering critical technology resources to ensure the continuation of critical/vital business processes in the event of a disaster. 

As most organizations are very reliant on information technology to conduct business, it’s critical to have a plan in place that can be easily implemented to minimize down-time. This plan defines the key processes for recovering critical technology platforms and telecommunications infrastructure within a specified timeframe. 

Tips for Creating a Disaster Recovery Plan

Identify Your Team

Establishing a Disaster Recovery Team (DRT) is a critical initial step in establishing a DR plan. The DRT should be a cross-functional team consisting of IT leadership and other individuals as needed who are responsible for carrying out the tasks outlined in this plan and providing expertise needed to recover from a disaster. It’s also important to involve key business stakeholders who would be involved in helping manage the downtime and recovery and ensure alignment with overall business continuity.

Create an IT Inventory

Ensuring that the organization has a real-time and up-to-date IT asset inventory listing is important in order to focus on the Recovery Time Objective (RTO) and Recovery Point Objective (RPO) for critical systems/applications. An IT asset inventory lists all key hardware and software (i.e. applications, servers, databases, etc.) and their relationships with one another. RTO is the goal for how quickly to restore technology services after a disruption, based on the acceptable amount of down-time for the specified technology. For example, a recovery time objective of 48 hours with local accessibility for payroll services means that the payroll application must be up and running within 48 hours as well as locally accessible. RPO is the goal for the point at which to restore data or information after a disruption, based on the acceptable amount of data or information loss. For example, an RPO of four hours for your financial reporting application means that the application data must be backed-up every four hours so that no more than four hours of data entered into the application is lost after a disruption.

Get Your Plan in Writing

Creating and documenting a plan involving these objectives is key to building out a realistic DR plan. Your organization will likely find during this process that there will be gaps between the current IT infrastructure and the determined recovery objectives. That said, it’s critical for your organization to work through these to ensure that the plan can be carried out as needed for the fluid continuity of the business.

What Else to Consider

Other important items to keep in mind when creating a DR Plan include:

• Determining channels for communicating disasters and next steps to your employees
• Obtaining stakeholder buy-in on the plan and its execution in order to ensure that the plan can be followed through on if necessary
• Testing and practicing your plan to help you find and correct issues, as well as enable more accurate and efficient execution 

With these simple actions, you’re on your way to having a plan. COVID-19 reminded us all that catastrophic events do happen. The businesses with a Disaster Recovery plan in place are likely to be the ones to weather IT outages. Now’s the time to pull together your team and establish your plan so should disaster strike, you’ll be ready.

If you have questions creating or cleaning up your DR plan, Gilmore Jasion Mahler’s (GJM) Risk Consulting Team can help guide your business in building out that plan, determining the gaps and testing your DR plan. To start the conversation, reach out to Director Matt Hoverman at mhoverman@gjmltd.com, Manager Tim Schloz at tschloz@gjmltd.com, or Senior Associate Reid Mankowski at rmankowski@gjmltd.com.

GJM Senior Associate Reid Mankowski contributed this blog. Reid joined the GJM Risk Consulting Team in 2019. Reid has significant experience in testing and leading IT general control and business process SOX testing for large and medium size companies, primarily in the manufacturing industry.

Established in 1996, Gilmore Jasion Mahler, LTD (GJM) is the largest public accounting firm in Northwest Ohio, with offices in Maumee and Findlay. Locally owned, GJM offers cloud-based accounting and provides comprehensive services including assurance, business advisory, tax, risk advisory, healthcare management and outsourced accounting. The Firm’s professionals specialize in industries including construction & real estate, healthcare, manufacturing & distribution and utilities.

This year has introduced businesses small and large to unprecedented levels of uncertainty. Even being intimately familiar with the adage in business, “the only constant is change,” very few companies were prepared for the changes that 2020 has brought us so far. These changes are still taking place and will likely continue for some time to come.

So, how does a business stay afloat, even grow when so much uncertainty abounds? In this two-part series, we hope to be able to answer that question and give you some tangible recommendations as to how you can make your business more “uncertainty-proof.”

Strategic adaptability is a term that is bandied about a lot but is much more critical now than ever before. Simply put, strategic adaptability refers to having the infrastructure in place for your business that allows it to evolve when necessary. You’re probably already doing this on some level, in looking at customer preference changes or for sudden changes in the cost of goods and services.

RELATED ARTICLE: Protecting Your Business from Disaster

The original idea behind strategic adaptability is to make your business as adaptable as possible. While it may seem impossible to plan strategically for an infinite number of outcomes, there are some basic things that almost any business can do to increase its adaptability and afford itself some protection from so much uncertainty.

1. Digitize, Digitize, Digitize

If you have been putting off your business’s entry into the digital era, now is absolutely the time to stop procrastinating. The more of your infrastructure that is digitized, the more easily tasks can be handed off, done remotely, altered, and more efficiently coordinated. Recent research indicates that this sort of adaptability for businesses is precisely the ingredient needed to avoid disruption in providing goods and services.

Gilmore Jasion Mahler itself is actually a good example of a business that has successfully transitioned to a mainly digital infrastructure. Maybe the changes our firm made will help your business too.

When the firm moved its Maumee headquarters to a new building last fall, leadership took the opportunity to embrace some additional digital platforms, including Microsoft Teams, which allows virtual meetings and all phone calls to happen through the computer desktop, no handset necessary. The firm had also transitioned earlier to some cloud-based solutions in a number of other areas of client service prior to the pandemic. For example, secure document storage.

“I feel we’re very lucky,” says GJM managing partner Kevin Gilmore. “When the COVID-19 crisis hit, we had made some smart decisions and had the digital infrastructure we needed in place. Our team was able to seamlessly transition to remote work without missing a beat. Had we not made those infrastructure changes, I imagine we would have had much more difficulty transitioning to a remote workforce.”

The manufacturing sector is certainly proof of the power of adaptability during the pandemic. Many car companies and other manufacturers quickly retooled to start producing ventilator components, face masks, face shields and other PPE to meet the needs of overwhelmed hospitals and other healthcare providers.

2. Build Adaptability into Day-to-Day Management and Labor Practices

What does it look like, on the ground, for a business to build adaptability in to the day-to-day?  

For one, it requires management to take an active role in recognizing the uncertainty and establishing a resilient team to work with; it may also be the time to evaluate which of the old ways aren’t working for a business in the current climate. Focusing on practical solutions and priorities is also key to building this adaptability into daily operations. It’s useful to start with what outcomes you desire and work back from there, adapting the infrastructure as needed to achieve those outcomes. Encouraging collaboration and adaptability in your workforce is another quality shared by companies that are faring well in the current climate. While this may involve some training, these skills are more important now than ever.

Part two of this series will address some of the ways that organizations can help their workforces build the vital skill of adaptability.

Your business can access the latest information on the COVID-19 pandemic and its impact on industry in the GJM COVID-19 Resource Center.

Established in 1996, Gilmore Jasion Mahler, LTD (GJM) is the largest public accounting firm in Northwest Ohio, with offices in Maumee and Findlay. Locally owned, GJM offers cloud-based accounting and provides comprehensive services including assurance, business advisory, tax, risk advisory, healthcare management and outsourced accounting. The Firm’s professionals specialize in industries including construction & real estate, healthcare, manufacturing & distribution and utilities.