Here’s How Manufacturers Can Make A Recession Work To Their Advantage

After more than a decade of boom times, the U.S. could be headed for recession this year. Research firm Ned Davis has the chances at 98 percent. How deep that recession goes is anyone’s guess at this point.

Nobody likes to hear news of a shrinking economy, and manufacturers who’ve been reaping the rewards of incredible demand over the last half-decade or more may be finding their palms beginning to sweat. A slow-down can only mean bad things. Right?

Maybe not. Like a sports team in the offseason, the manufacturing industry is tired, a little beat up, and in desperate need of a regroup. Which is why I view the prospect of recession (a light one, that is!) not only as an opportunity—but as a blessing in disguise.

Why Now Is the Time to Invest in Manufacturing

Even with inflation hitting the industry, manufacturing output has risen considerably before and after the pandemic-fueled dip in 2020. In fact, output in September was 4.7 percent higher than a year earlier, Reuters says.

Even as more recent data shows momentum could be slowing, many manufacturers have had years of unheard-of growth to build up cash reserves. With more immediate concerns on their plates, many manufacturers have held off on making big-picture improvements. But the recession is sure to free up more of your resources, and it’s time to deploy those cash reserves to enhance your shop’s technology, innovation, and talent, putting your company in a position to achieve new heights over the next decade or more.

In other words: you need this slow-down. Your investments won’t make you money during the recessionary period—but they will set you up to be one of the winners on the other side.

Three Ways Manufacturers Can Invest for the Future

The longer you wait to invest in your manufacturing, the wider the gap grows between you and your competitors. The companies that have started updating their technology, pouring more money into talent, and supporting innovation already have a head start.

But a recession provides a perfect scenario to catch up. Here are a few areas you can spend now to prepare your company for greater returns on the other side of the slow-down:

1. Introduce Industry 4.0 technologies to your operation. Perhaps you’ve heard about the benefits of Industry 4.0, but have not yet found the headspace to dive in. Maybe you didn’t know how to dive in if you wanted to. The good news is that you don’t have to do it all at once—you’ll be able to incrementally implement, building up to more advanced tech as you grow your experience.

The best, low-barrier way to start right now? Real-time data monitoring. Spend a few thousand dollars gaining the ability to track and analyze how your machines are performing at any given time, and you may find your efforts and knowledge accumulating, and your operation becoming more tech-fueled and efficient by the week.

2. Steer into talent recruitment and culture. We would all like to believe that manufacturing’s talent problem will resolve itself on the other side of the recession, when the economy picks back up. But the reality is that the shortage runs deep, and it’s been around since well before the pandemic. Population dynamics as they are—labor force participation was already sinking from its turn-of-the-century peak to 2020—it’s a problem that will continue to confound manufacturers well into the future.

But there are ways to find great people, even in a tight labor market. Doing so takes creating a top-notch culture that keeps workers around, boosting pay and benefits, and tapping into labor pools that have been historically underutilized by manufacturers.

3. Put more money into innovation. What better time to create new products and services than when your smartest people have less day-to-day tasks on their plate? Innovation that comes from within your organization— “intrapreneurship”—can result in new lucrative business models and even spin-off companies that drive incredible business growth. This comes back to culture, as well. Encouraging your team to speak up when they have ideas, and giving them the space to pursue, can work wonders for the long-term success of your business.

No More Excuses

When times are good, it’s natural to hunker down and work solely in your business, making sure your lengthy list of customers are well-served. Creating a more future-friendly operation seems far from mission-critical. While I’d argue that it’s important to continue working on your business whether you’re at capacity or not, the recession will decimate all excuses. By investing in your manufacturing during down times, you’ll create an operation that can fully capture the opportunity when our economic forecasts begin to turn around.