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Manufacturing’s problem with resiliency

Aug 08, 2022

The COVID-19 pandemic has served as a grim reminder that unpredictable events — natural disasters, recessions, the next pandemic — can undermine even the best-laid plans. They can also highlight critical gaps in planning that point altogether to a larger problem with business resilience. From supply chain issues to workforce shortages, manufacturing was unprepared for the challenges brought on by the pandemic, but some manufacturers were more resilient than others.

The Wipfli Resilient Manufacturers Study surveyed 194 U.S. manufacturers on their abilities to manage challenging business conditions. It also identified three keys for companies to build resiliency and limit the impact of unexpected disruptions:

1. Develop and deploy a resiliency strategy

Leading manufacturers expect problems — and establish strategies and standards to address them. Yet  just 31% of manufacturers have dedicated business resilience strategies and goals aligned with other company strategies. Some 46% don’t have dedicated strategies for resiliency, addressing it only via other strategies. And a full 23% have NO resiliency strategies.

Some 39% of executives describe their companies as resiliency leaders. But even in this group, only 34% have dedicated resiliency strategies (versus 28% of other manufacturers).

A dedicated resiliency strategy is critical to assessing risk and establishing a framework for risk mitigation. Leaders at firms without resiliency strategies can no longer afford to forgo a dedicated strategy.

2. Extend risk management to the supply chain

The pandemic exposed supply-chain problems for countless companies. But many of these issues pre-dated COVID-19 — because manufacturers didn’t thoroughly examine their supply chains for problems such as:

  • Single-source suppliers: 22% of manufacturers have more than half of their purchased materials and components sourced from a single supplier, putting operations at risk if a lone supplier fails.
  • Infrequent audits: A quarter or more of manufacturers audit key characteristics of suppliers annually or even less often — e.g., quality (27%), speed/timeliness (29%), cybersecurity (32%), financial stability (35%). And a full 14% of manufacturers NEVER audit suppliers for diversity.
  • Insufficient tracking: Few manufacturers have real-time monitoring of goods moving through supply chains and to customers. For example, 36% of manufacturers have minimal or no real-time tracking of supplies and goods enroute to their own facilities.

Resiliency leaders are far more likely to have practices that safeguard their supply chains:

  • 67% of resiliency leaders monitor supplier financial stability biannually or quarterly versus just 49% of other manufacturers.
  • 74% have moderate/extensive real-time tracking of supplies and products at Tier 1 suppliers versus just 63% of other manufacturers.

3. Anticipate cyber dangers

A single cyberattack can cost a manufacturer millions of dollars. Yet Wipfli’s study found that 45% of manufacturers detected unauthorized access of their networks three or more times in the past year alone.

What are they doing about it?

Not enough:

  • Only 51% developed or revised a cyber risk management policy that communicates cyber prevention, detection, response and recovering actions
  • Only 49% implemented safeguards to better protect networks and data
  • Only 48% conducted a cyber risk assessment
  • Only 27% conducted penetration testing
  • Only 16% adopted an industry-standard, all-encompassing cyber-security framework

Even resiliency leaders are behind in managing cyber risk; like others, they need help. Wipfli teams are busy right now designing security strategies for clients to protect their businesses — without sacrificing flexibility or competitiveness.

Wipfli helps manufacturers become more resilient

Wipfli brings together people, tools and methodologies to navigate risk management — everything from cybersecurity to the business continuity planning process. Let us help you establish an effective business resilience program that:

  • Deploys standard work practices and processes as a foundation for operations, alerting your managers and the workforce of variabilities and potential problems
  • Assesses your company’s risk profile and establishes requirements for continuous operation within those parameters
  • Develops recovery strategies and documented procedures to enable swift responses to disruptions
  • Prescribes accountability mechanisms to keep resiliency plans current

Explore our Resilient Manufacturers Study to learn how manufacturing leaders manage innovation, growth, automation and resilience. The study reports on a range of trends and concerns — from how long it takes manufacturers to get new products and services to customers, to annual turnover rates for managers and frontline employees, to the number of data breaches manufacturers experience each year. Download your copy today.

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Bill Boucher, CPA
Manufacturing, Retail & Distribution Practice Leader, Southeast Regional Leader, Partner
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