The COVID-19 pandemic is altering social, personal and business norms around the globe. The effects are different depending on the industry, so the business response will necessarily be tailored in industry-specific ways. Let’s take a look at the distinct challenges that three B2B industry verticals – shipping and transportation, industrial parts and equipment manufacturing, and building products manufacturing – are facing today.
Shipping & Transportation
Considered an essential service, shipping operations continue even in areas under emergency lockdown order, such as the San Francisco Bay Area. However, those ports are still affected because of people missing work due to illness or quarantine. In a March 23 CNBC report that states it may take six months to get back to business as usual, Carl Larry, performance director at Refinitive, said: “Until we are above full clearance of workers at borders for shipping, it’s hard to see how shipping can operate normally.”
Thus, even as Chinese manufacturers restart production, the shipping supply chain will hit snags at destination ports of entry. Until receiving ports can staff up to handle the influx of goods, there will be delays getting items out to distribution networks and exports back out to sea.
The effects are also being felt by truckers in the global shipping supply chain. With an estimated 15-30 percent drop in freight flowing in and out of the U.S. from February to April, those operating on land are getting pounded as well. Drivers are being laid off or taking a significant reduction in hours.
This all spells a lack of short-term growth and long-term revenue uncertainty. Holding on to the margin where you can is crucial in any downturn, especially one that’s been caused by unprecedented and unforeseen world events. The leaders will be the shipping, transportation and logistics companies who think outside the box and master doing more with less.
Industrial Parts & Equipment Manufacturing
Another essential sector, industrial manufacturing, has seen its own shockwaves in March. Needed component parts produced in China are drastically under-supplied following that country’s early February manufacturing shutdown.
With struggles to meet demand, many of these manufacturers have had to make margin sacrifices by sourcing domestically. The added cost is not the only headache. Morton Industries, for example, found that “limited supply and a rush to secure the supplies that formerly flowed from China have sent prices up as much as 30 percent.” As the economy sputters, it’s become increasingly difficult to pass all that added cost through to customers, leading to pinched profits on the manufacturing side.
For configured parts manufacturers, a sudden change in suppliers could mean more than a cost problem. Will the new supplier provide the tools and parts that perfectly fit the specifications your customers require? If not, how much lead time will you need to make the proper adjustments? Is that lead time you can afford?
No one can tell you the answers to these supply and demand upheavals with a straight face today. The silver lining may be the acceleration of a much-needed rethinking of the way industrial manufacturers set price, negotiate cost and meet each customer segment with strategic pricing.
Building Products Manufacturing
Similar to industrial manufacturers, building materials suppliers that primarily get their products from China had a punishing March. ConstructionDive.com points out that “U.S. builders look to China for everything from steel and stone to millwork and plumbing fixtures,” leading Marcum’s national construction industry leader to forecast: “My gut tells me we’re going to see higher prices and projects canceled although I can’t point to the extent of it.”
This kind of uncertainty is rippling through the construction supply space, as factories shut down in Europe and the virus’ rapid outbreak in the U.S. threatens to choke demand. Project outlook is bleak for hotels and other hospitality industry projects, as travelers opt for the safety of their couch over weekend getaways and business travel.
It remains to be seen how heavily social distancing weighs on job sites across America, but as the pandemic grows in scope, more workers are calling for job sites to temporarily shut down. North American governments quickly went from banning social gatherings of 50 people or more to 10 people or more and now some are instituting “shelter-in-place” orders. It only stands to reason that folks are wary of large gatherings at work.
It’s not just the workers who are anxious. Consider the harrowing question BuilderOnline poses in a recent article about protecting your employees: “A commercial buck hoist…can bear loads of up to 8,000 pounds at a clip…Now, imagine 30 workers--a mash-up of stacked crews of painters, flooring specialists, and interior finish technicians--herding into a buck hoist in a mad dash to wrap up work on the 21st floor of a residential tower. Are you willing to bet the health of a person, their family, their community, their circle of acquaintances, etc. on the odds that that 46-second buck hoist trip to the 21st floor will be safe for 30 workers on your job sites?”
The safe bet is that more projects will be stalled, and soon. Just as in shipping and industrial manufacturing, the supply side and the demand side have been thrown completely out of whack.
To top it all off, an already shrinking pool of experienced sales reps in the building products manufacturing sector now find themselves unable to get on a plane to shake hands and close deals. Now more than ever, intelligent decision-making driven by data science is required to weather the storm.
What changes are you seeing in this new business landscape? Talk to us here.