Pandemic-related pressures are lifting for many tool and die makers and production shops, which are mostly open and operating but continuing to struggle with sales shortfalls.
The overview comes from Harbour Results Inc., a Southfield, Mich.-based consulting firm that has been surveying the effects of the COVID-19 outbreak on small- to medium-sized manufacturers.
More than 250 people responded to the May survey with 52 percent being tool and die makers and 48 percent representing production shops, such as molders, die casters and stampers. The results were released June 18.
On average, the shops surveyed predict a 25 percent drop in sales from their original 2020 forecast with die builders and die casters expecting the most significant falloff followed by stamping, molding and mold builders.
The survey also indicates the automotive industry, which has been experiencing the highest level of impact, is at an operating level of 33 percent. On average, automotive shops have laid off 29 percent of their workforce, which is an improvement from the study results in April, when the automotive industry was at an operating level of 28 percent with 41 percent of workers laid off.
"Even though the manufacturing industry is operating, it is not out of the woods," Laurie Harbour, president and CEO of Harbour Results, said in a news release. "In our study, 35 percent of tool shops and 47 percent of production shops indicated they are struggling or concerned about the future. This tells me 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 ramp up operations, operating cash will be critical to maintain viability, Harbour also said. 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 and 56 percent of production shops experiencing payments being stretched or negotiated.
Also, 32 percent of respondents weren't modeling 13-week cash flows, which Harbour said are important to understanding current and future cash situations and making informed business decisions.
"Shops need to pull levers to strategically contain costs," Harbour said. "If you don't understand your current situation, you will not know how far you need to cut."
To contain costs, businesses can consider voluntary and strategic layoffs, and they have been. The second study indicated that all shops have implemented some level of temporary layoffs. Still, 92 percent plan to retain their workforce and 98 percent of shops applied for the federal funding — Paycheck Protection Program or Economic Injury Disaster Loans or Canada Emergency Wage Subsidy — to support retaining staff.
Unfortunately, Harbour said the federal funding isn't a competitive advantage for shops and may have created a false comfort level for those who received funds.
"We feel strongly that leadership needs to closely look at its workforce and determine who the key players are and be strategic when bringing back employees to better manage cash," Harbour said.
On a brighter note, the pandemic has many companies looking to reshore work 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.
"This is positive news for the industry — shops need to focus on sales to take advantage of this opportunity while it exists," Harbour said.
Her firm will conduct a third Harbour Results COVID-19 Impact Study in August.