At Warren Averett, we have seen many of our M&D clients face significant issues over the past two years. To stay on top of the constant changes affecting the manufacturing and distribution industry, your company must be prepared to face its current issues and risks head-on.
Inflation Concerns
While most businesses are affected by inflation, the COVID pandemic has triggered an inflationary cycle we haven’t see in this country since Ronald Reagan took office as president. M&D companies have added pressures due to the nature of their operations. From rising fuel costs and overseas conflicts, to wavering consumer confidence and workforce shortages, M&D companies are facing tough decisions including whether or not to close their doors. Instead of closing, use this opportunity to separate your business from competitors and evaluate your company’s assets. Higher inflation typically increases exposure to risk and causes many companies to focus more on short-term solutions rather than staying focused on their long-term goals.
Supply Chain Disruptions
Over the past several years, our clients have seen substantial disruption to their supply chains. The pandemic has played a significant role in speeding up the industry’s de-globalization of manufacturing. Many of our clients are moving their production to manufacturing regions closer to home — hoping to cut back on significantly longer lead times. Shipping prices are also on the rise and tend to be quite volatile due to their cyclical nature. Just look at current container contracts, and you will see most M&D businesses experiencing record costs with some seeing 500-percent increases in just over a two-year time frame.
Retaining Workforce
The United States has seen a war for talent in 2022 as employers try to stymie turnover and attract new workers. This causes many placement teams to lower requirements when hiring new workers, which is particularly concerning to M&D companies looking to not only hire new workers but skilled workers. The rising pressure to keep labor costs manageable post-pandemic will continue to be a challenge. Don’t be afraid to get creative in your recruitment of new hires. Some of our clients have developed nontraditional incentive programs with positive results.
During unprecedented times, M&D companies are forced to look for alternative solutions to thrive rather than just survive. If your business had specific goals prior to these disruptions, try and stay the course, all while focusing on maintaining your purchasing power, strengthening relationships with new suppliers and keeping your customers informed.
MEET THE EXPERT
Jon Chancey, CPA is a member in Warren Averett’s audit division and is based out of the Montgomery office. He is the firm’s Regional M&D Industry Leader for Central and Southeast Alabama. Jon focuses on providing operational and compliance services, leading clients to higher levels of effectiveness. Contact him at 334-260-2347 or jon.chancey@warrenaverett.com.
