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calendar    Aug 27, 2022

A B2B Guide to Resilience in an Uncertain Economy

5 strategies to recession-proof your inventory-based business in a downturn

Written by Chris Tsai, CEO and Co-founder of Resolve

Running a successful B2B business isn’t easy in the best of times, but wholesalers, manufacturers, distributors, and business leaders have been hit with an avalanche of unexpected operational changes and economic challenges since 2020.

Soaring commodity prices. Pandemic protocols. Supply chain disruptions. Labor shortages. Rising inflation. Higher interest rates. The overall global economy and instability.

And it’s not over yet.

A National Association of Manufacturers survey found that three-quarters of manufacturers like you reported that inflationary pressures are worse today than they were six months ago; 53.7% noted that higher prices were making it harder to compete and remain profitable. Even worse, a CNBC survey of top CFOs predicts that a recession is unavoidable and is expected to hit hard in the first half of 2023.

Manufacturers and distributors, you don’t deserve this. And you’re too important to our industry, people and our economy to have to fight your way alone through a looming recession.

As McKinsey manufacturing expert Eric Chewning noted in a recent podcast, “US manufacturing accounts for about $2.3 trillion of GDP. It employs about 12 million people and supports hundreds of local economies across the country…

“Although it only accounts for about 11 percent of our GDP and 8 percent of direct employment, it drives 20 percent of our nation’s capital investment, 30 percent of our productivity growth, 60 percent of our exports, and over 70 percent of business R&D. And it also generates important spillover effects that help impact the broader economic activity in related sectors.”

This confirms what we knew all along. Manufacturing and distribution matters. Your business matters.

At Resolve, we believe that it’s incumbent upon businesses like ours to do our part to help shore up manufacturers. As the lifeblood of our economy, we owe it to you.

This playbook offers five innovative mitigation strategies that could help you with economic recovery and help see you through the foreseeable future and into the beyond with strength and resilience.

Address supply chain issues with improved inventory control

1. Address supply chain issues with improved inventory control

Supply chains: Can’t live with them, can’t live without them. Especially in this embattled economy which has seen unprecedented levels of disruption. Many manufacturers and distributors are either in debt and over-stocked—or left high and dry, unable to meet customer demand without raw materials.

Our customers are clear about the impact supply chain challenges have on their business, including:

  • Sluggish shipping turnaround times
  • Sky-high container prices—up to $15,000
  • Unpredictable and unreliable freight/transit schedules
  • Suppliers who can’t meet demands due to pandemic-related lockdowns and ensuing backlogs
  • An inability to meet production deadlines due to missing commodities

Supply chain resilience is crucial for manufacturers and wholesalers. It’s also exceptionally complicated to achieve. Here are some solutions that may help bring relief in the long and short term.

  • Diversify your key suppliers. In the current economic climate, many suppliers are experiencing some of the same issues that manufacturers are and are struggling mightily to stay afloat. Others are not adapting well to the new challenges and are unable to keep up with demand. It may be time to explore doing business with new suppliers and look at your wider ecosystem to expand your options. If you can, consider local sources to reduce the potential for overseas freight disruptions.

  • Use [B2B marketplaces]( Wholesalers, distributors, and resellers have increasingly embraced the efficiency of online B2B marketplaces to procure everything from equipment parts to commodities. As McKinsey reports, B2B marketplaces “offer access to a broad pool of potential vendors operating under a wide range of business models, including… high-quality, pre-screened vendors.” Many online B2B marketplaces even help facilitate the process of identifying the right supplier and simplify transactions for users.

  • Consider strategic allocation. In an ideal world, your business would serve all its customers on a first-come, first-served basis. But we’re not living in that kind of utopia in 2022. It’s natural to prioritize high-volume or prestigious customers when inventory or resources are lower. It may be helpful to create a strategy for selective order fulfillment to ensure your business is servicing priority customers and orders. Take the time to consider a collection of “if/then” scenarios so that sales, procurement, and shipping teams are on the same page.

  • Invest in your procurement team. When money is tight and the supply chain is in chaos, it might seem counterintuitive to invest in human resources. However, a few new salaries may be the best ROI you’re going to find in 2022. Consider a different professional to specialize in every step of your unique supply chain, including an overseas freight coordinator, a domestic logistics coordinator, or a procurement coordinator to ensure that the right expertise and attention is directed to each of the typical supply chain gaps. Their jobs will depend on their ability to build a paddock of reliable vendors, improve costing, and negotiate with vendors regularly, bringing supply chain strength to your business.

  • … Or outsource it all. If your business is smaller and you don’t have the regular capital to invest in a supply chain team, your money may be better spent investing in a supply chain consultant. These kinds of professionals will ideally have the expertise, contacts and strategies and may be more cost-efficient than relying on your in-house procurement person/team who may need training to get to their level of proficiency.

  • Say good-bye to ‘just-in-time’ inventory management. Call this practice a relic from more tranquil economic times and evolve right on past it. The current efficiency measure is making sure your production is not interrupted, which means many manufacturers are pivoting from ‘build to order’ to ‘build to stock’. Many companies are maintaining higher inventory levels and pre-ordering critical equipment parts to have on-site in case of a breakdown that could interrupt production. It will be critical to strike the right balance between having proactive inventory and paying holding costs.

  • Stay on top of your competition’s supply chain best practices and government regulations. No business can afford to live in a bubble at the best of times, least of all right now. Keep a strategic eye out for how your competition is handling supply chain challenges and consider employing the strategies that are working. At the same time, stay current with government regulations that are ever evolving in response to the changing economic reality. Yes, there may be additional compliance obligations, but there also might be grants and other funding resources designed to make running your business more tenable during turbulent economic times.

  • Create an internal supply chain ‘nerve center’. Most manufacturers have employee teams, such as joint health and safety committees, affinity groups and diversity and inclusion teams. How about a supply chain nerve center team? Pull in a team member representing sales, procurement, finance, shipping, and any other relevant areas to meet regularly and work through contingency plans for supply chain disruptions. Solutions may include identifying back-up suppliers and brainstorming risk mitigation measures in every department.

  • Digitize your supply chain/inventory processes. The right technology in the right places can help simplify and improve the efficiency of everything from sales to overall equipment effectiveness (OEE) to inventory logistics. Look into options such as:

    • Raven, technology that combines and analyzes operator output and machine data to give a clear picture of OEE and production losses
    • Waybridge, an operating system designed to improve supply chain management
    • SOLIDWORKS, 3D design software for manufacturers
    • Altium, printed circuit boards (PCB) design software
    • Atlas Planning Platform, supply chain planning software

When it comes to managing inventory and building a resilient supply chain, there’s no uniform answer for all companies to follow. However, companies with mature supply chain and risk management capabilities are more resilient in the face of supply chain disruptions. The time and resources your company spends on creating strategies that can help your company overcome any eventuality is immeasurable, particularly when a recession is on its way.

2. Make communication a priority

An important aspect of managing your business during economic instability is communicating with all of your stakeholders, including employees, vendors, customers (and even investors or shareholders if you have them). Clear, consistent communication builds trust, protects your company’s reputation, and may even help you emerge stronger from the challenges associated with a recession.

As global consulting company PwC advises, to successfully navigate change, “Businesses [must] communicate with impact—clearly, simply and effectively. Getting your communications right is the key to engage employees, customers and shareholders, increase productivity, enhance reputation and increase your return on investment.”

While a communications strategy may seem out of scope for your manufacturing business, it is vital to ensure that the people and companies you work with have the information they need to retain their faith in your business and continue to serve, work for or invest in you.

Communications 101

A communications strategy is a plan for communicating with your target audience. It ensures that the right information is getting to the right people in the right way. It’s important to create a stand-alone strategy for each stakeholder group, e.g. employees, suppliers, because each group will have its own concerns, fears, expectations and desires.

For example, in a recession:

  • Your customers want to know if their products will be delayed or interrupted.
  • Your suppliers want to know if you’re able to pay for their shipments.
  • Your employees want to be reassured that their jobs are secure and understand how their work may be affected.
  • Your shareholders and investors are interested almost exclusively in the profitability of your business.

It’s critical that each of these groups feels considered and up to date about any changes that your company experiences—and how it will affect them. Best practices include:

  • Communicate clearly. Make it a priority to reach out to each stakeholder group with updates—and in advance of any major changes your company makes. Be sure to include what this information means to them specifically. If there are actions they need to take, lead with that. And be as clear as possible,* “We are extending payment terms from 30 days to 60 days effective immediately.” vs. “As a result of the recession, payment terms will be extended in the near future.”*

  • Communicate early and often. Choose a regular cadence of communication for each group. Maybe your suppliers don’t need constant updates, but your employees sure would appreciate them. Consider all of their potential concerns and create a schedule that ensures you’re reaching out often to alleviate any concerns and maintain their trust.

Communicate the right way for your audience. Your employees may benefit from a weekly stand-up meeting before each shift. Your customers might appreciate a personal email from a member of your senior management team to keep them updated. Your suppliers could be apprised of any new policies and procedures through the portal they use to bill you. Any of these may vary depending on the relationships you have with each of these groups. Consider the relationship and the way each group communicates and tailor the medium appropriately.

If you’re a smaller company that doesn’t have the human resources to consider a more formal communications strategy, you can still communicate well by doing things like:

  • Assigning one team member to each customer/supplier to:
    • Ask how the recession is affecting the way they’ll do business with you
    • Share how the recession is affecting the way you’ll do business with them
    • Communicate any new policy changes in real-time
  • Checking in with employees regularly through emails from management or at shift meetings
  • Holding quarterly shareholder meetings

“The bottom line is that you don’t want to leave any of your stakeholder groups in the dark about anything. They need to know that their concerns are being considered every step of the way during uncertain times.”

  • Chris Tsai, CEO and Co-founder, Resolve Pay

Adding value to communications: A mini-case study

Our customer DocShop Pro, a medical supply marketplace that supplies essential goods to healthcare clinics, enjoys advantages over their competitors due to the constant communication with its vendors. This, in turn, strengthens relationships with their customers because they’re able to deliver when other companies can’t.

For example, a customer may try to order a product that appears to be in stock on their website, but when a DocShop employee orders it from the vendor, they discover it’s on back-order with no ETA. Instead of simply delivering the bad news, DocShop goes a step further.

“At that point, we reach out to our customer and say, ‘You have a few options. You can either: 1. Get your money back because we don’t have an ETA for you, 2. Let us help find you a similar product, or 3. You can wait for it and we’ll just keep you posted on when it’s coming,” said Anna Savvinidis, a DocShop customer service advisor.

“A lot of times during a supply chain issue, our customers say they’ll wait for it because none of their other vendors can get it anyway.”

And because DocShop Pro has strong relationships with vendors, they’re often prioritized over other customers when shipments come in.

“If our vendor gets something in, we may be the first ones they’ll call and they’ll tell us, ‘Hey, I just got a box of this. Do you have a high-profile customer or someone needing 10 of these? I can give those to you.’ So we call our customer and they think we are superstars. We go to bat for our customers and have those great relationships with our vendors that benefit the customers,” says Sylvia Ruma, VP Operations of DocShop Pro.

By keeping in constant, friendly contact with their vendors and customers, DocShop Pro is able to provide world-class customer service. You can, too.

3. Manage your bottom line

You didn’t think we’d forget every CFO’s primary concern, did you? (As an embedded B2B payments solution that streamlines accounts receivable and the entire Net 30 transaction–helping you improve your financial velocity is our obsession.)

Challenges like economic uncertainty and supply chain disruptions can turn a finance department upside down overnight. Suddenly, the tried-and-true strategies that kept a business profitable are no longer relevant.

But let’s not focus on doomsday scenarios or metrics. There are plenty of practical and creative strategies that work to improve the bottom line and improve financial decision-making. Here are our favorites:

Accelerate your working capital, accounts receivables (AR), and decrease Days Sales Outstanding by:

  • Offering discounts and incentives to customers who pay upfront
  • Charging late payment fees
  • Promising access to first shipment prompt payments
  • Using Resolve for automating and streamlining everything from credit checks, net terms enrollment, to invoice reminders and AR collections
  • Providing an online payments portal for your customers that gives them full visibility into their credit line and outstanding balances
  • Giving more B2B payment options other than paper checks

Manage margins. When the economic landscape changes, so, too, must your business. Time to take a deep dive into the key performance indicators (KPI) of every last product in your catalogue. If some commodities are always a challenge to procure, the resources expended on attempting to fulfill product orders that require them may no longer offer a reasonable ROI. Consider altering your product offerings based on what’s most profitable and available.

Manage your customer base. If your product line is under review, so should your customers. Evaluate the resources that go into serving each customer and the profit their business represents in your business. The numbers will tell you which customers you should prioritize and which ones you may want to cut loose. But before you do, consider if there are internal changes that could help make some customers more profitable. If not, raise your prices and let them go if they don’t accept.

Find operational efficiencies. Every company has small redundancies or inefficiencies that can add up to big savings when addressed. Meet with department heads and look for opportunities to optimize the layout of your facilities to reduce employee movement. Evaluate the number of times the same file is handled and consider how those touches can be reduced. Small improvements can have a huge impact on the bottom line. For instance, most Resolve customers (like Trenchless Supply) find that offloading their operational inefficiencies in their accounts receivables saves time and money, leading to greater business growth.

Manage cash flow, take cost reduction seriously, and take a good look at your outstanding liabilities. Strategies to keep cash flowing include:

  • Build scenario planning, forecasts and cash flow modeling to help shore up your AR (consider a solution like Jirav)
  • Ensure you have a good line of sight to incoming revenue and cash flow (prioritize your receivables and collections) so you can mitigate an issue before it becomes one
  • Look for new government grants or funding sources, e.g. the American Rescue Plan (ARP) is offering more than $70 billion in additional lending and investment for small businesses, including small manufacturers
  • Renegotiate lending terms with your financial institution—some offer supply chain disruption financing
  • Help your customer leverage more credit by leveraging embedded credit solutions, like Archipelago did

Manage costs. It’s not enough to bring in more money as quickly as possible. Cutting costs has to be on the table when it comes to analyzing ways to boost the bottom line. Consider:

  • Freezing non-essential spending
  • Delaying major capital investments
  • Working with vendors and other service providers to negotiate costs, e.g. if you have the cash flow to pay some suppliers up front, ask for a discount
  • Talk to suppliers and landlords about extending accounts payables (AP) or at least providing some flexibility on terms
  • Offering overtime to existing employees instead of investing in new hires
  • Using independent contractors for busy seasons
  • Outsourcing functions your company doesn’t specialize in. For instance, many companies outsource the management of their accounts receivables, and their risk and credit to Resolve. Outsourcing allows focusing on the more valuable parts of your business, such as growing sales and customer acquisition. For instance, once Elston Materials started outsourcing their accounts receivables, they were able to close more sales.
  • Working with a GPO (group purchasing organization) like Una to yield cost savings on goods and services

Partner Tip: "Acting strategically when it comes to procurement is a smart move for any business, especially in the wake of an economic downturn. Planning ahead to effectively manage and control spending will ensure your business continues to operate as needed. Businesses can work with a group purchasing organization to improve spend visibility and take advantage of pre-negotiated contracts designed to deliver cost savings and minimize supply chain risks.”

“At Una, we also stress the importance of prioritizing the value members get from the strategic supplier relationships we have in place. These mutually beneficial partnerships ensure our members are working with fully vetted suppliers without having to jeopardize compliance or product quality, and allow our supplier partners to remain innovative and competitive, even in the most uncertain economies." - Kris Lance, Senior Director, Una

Manage debt. If you’re forecasting economic turbulence in the future, negotiate with your lenders before you need them to extend additional credit. It’s perfectly acceptable to preventatively ask to extend existing lines of credit or apply for new ones while the sun is still shining. They’ll be there for you when you need it.

Whether you’re battening down your financial hatches or looking for new ways to infuse efficiency in staid processes, it’s worthwhile to take the time to consider all the possibilities associated with managing your bottom line.

4. Enjoy maximum efficiency with innovative technologies

If you think a recession is not the time to make investments in technology, think again. Replacing people-driven processes with technology frees up your valuable employees to do higher-order thinking—making your business even smarter.

Contrary to popular belief, automation doesn’t have to mean costly and labor-intensive investments. There are a myriad of proven cloud-based software solutions that can transform slow, manual processes into automated systems that run on their own steam. These products don’t just liberate your team’s best talent, they also reduce your need for incoming staff.

“Strategic outsourcing is especially crucial for small and medium B2B companies, especially with a recession headed our way. If you want your company to withstand the challenges ahead, you need your people focused on creating revenue, not babysitting simple processes that a machine can easily do for them,” - Chris Tsai, CEO and Co-founder, Resolve

Ideal business functions for optimization and automation upgrades include:

AP and AR. New B2B payment solutions like Resolve take thankless and time-consuming tasks like running customer credit checks, chasing payments, and managing AR collections off the desks of your talented finance folks. Through Resolve’s net terms as a service, companies are able to offer better net terms, reduce errors, save money, and give your customers an improved invoicing and payment experience (and your employees a more fulfilling work experience by taking the contention out of collection).

Customer relationship management (CRM). Manage your sales methodology and all interactions with customers and prospects in one space to reduce miscommunication and missed sales opportunities. And nobody can afford missed sales opportunities right now. These programs usually integrate with ERPs so everything is in one place. There are also options like that helps distributors cross-sell and upsell, prioritize and grow accounts and deliver a consistent customer experience across all channels.

Visitor management. In a post-pandemic world, there’s less call for stationing a living, breathing person at a reception desk to greet visitors. Look into digital front desk check-in systems like The Receptionist to manage incoming people.

Inventory management. What are you using to manage your complex inventory system? (Please don’t say a spreadsheet…) Technology has come a long way in recent years. The capabilities are worth checking out. Solutions like Plex and Katana take all the guesswork and potential for error out of the equation and even identify opportunities for improvement.

Analytics. Reporting, interactive data visualization, advanced analytics, and intelligence—what software can do with data extends well beyond what is possible with a human at the helm. If you’re looking to understand every aspect of your business from the inside out, it’s worthwhile investing in software that’ll take efficiency to the next level. Manufacturing favorites include TrendMiner, aPriori, and Prodsmart.

In this—and any—economic climate, software is one of the easiest ways to lighten the load. It’s worthwhile to think critically of all the ways you can level up your efficiency with technology.

5. Rethink your business

The inspirational proverb “Fortune favors the bold” is usually invoked to describe explorers, disruptors, and other risk-takers. And rethinking your business is not just about launching new products. Why not wholesalers, distributors, and manufacturers, too? In this economy, the industry needs to be just as brave and daring as flashy new tech startups.

A little experimentation and being creative about new opportunities should be part of the solution to adapting to today’s realities. It’s never too late to evolve into the next best version of your business. Here’s some inspiration:

Mini-case study: Tern Bicycles

The folks at Tern Bicycles believe deeply in the bicycle. Their products are built for fun, fitness, multi-modal commuting, carrying cargo, and even transporting passengers, and they can be stored in a small space when not in use. While the company has enjoyed wild success—particularly during the pandemic when their warehouses were emptied in North America—the company was committed to looking toward the future.

“If you’re not thinking forward, you’re going to be left in the dust,” said Dale Aguas, territory manager for Stile Products, the exclusive distributor of Tern Bicycles in North America.

“We recognized that, if bikes make sense for a personal and family lifestyle, why can’t they do that for businesses and fleets?”

That’s how Tern Business (#Bikesfor Business) was born. By expanding customer awareness in a new market and targeting sales efforts in that direction, they have successfully added a new arm of their original business that services businesses that are on the move.

“In an urban market like New York City, doing deliveries with a van means you have to deal with parking and storage. A bike makes a lot of sense because it has the capacity to carry multiple deliveries much more nimbly.”

As a result of their marketing and sales efforts, and on the strength of their products, they’ve earned the business of some notable businesses around the country, including a national grocery chain, the massive LinkedIn campus, and Harvard University’s Arnold Arboretum.

Diversifying and thinking bigger has made a massive difference for Tern Bicycles. Can you draw any inspiration from their strategy?

Mini-case study: GoMaterials

There are inventory shortages across all industries. Even plants. That’s why GoMaterials, a landscaping company turned B2B wholesaler, transformed a pain point into a way to grow their business. CEO Marc Elliott hatched the idea to help themselves—and other landscaping businesses throughout Canada and the US.

Marc, the CEO, had experienced first-hand the headaches related to poor quality materials, last-minute order changes, product availability shortages and late deliveries. GoMaterials was born out of the need to resolve these challenges for the landscaping industry.

As a result, GoMaterials has revolutionized the industry by giving organizations that need B2B landscaping supplies the opportunity to source the right materials from an online marketplace. They handle everything from procurement, material estimation, quality assurance and logistics, eliminating the problems associated with relying on one vendor.

Most importantly, they were able to expand into new markets with the help of new technology solutions. As a company headquartered in Canada, expanding into the US was a challenge due to the lack of credit history and financial infrastructure. With Resolve, they were able expand to take on newer customers in a new market while making their net terms and accounts receivable process more efficient.

With global supply chain shortages, GoMaterials has become increasingly valuable as businesses look for new ways to source and procure wholesale plant materials through a growing marketplace of suppliers.

By rethinking their business objectives, GoMaterials was able to expand into new markets and provide a profitable service to the industry at the same time.

We’re in this together.

You can build resilience, too.

Tech bubbles burst. Housing markets vacillate. Stock markets crash.

Manufacturers, wholesalers, and distributors are built to last.

Supply chain disruptions and economic crises might impact the manufacturing industry, but it takes a lot more than turbulence to take down a company. Creativity, ingenuity, and the ability to solve any problem are built into your business plans.

Sure, each company needs to do the work to identify their vulnerabilities and act fast to mitigate them, but that’s nothing new for manufacturers. You’re the pioneers, the stalwarts, the people for whom the word pivot was invented.

Futureproofing your operation is vital right now. Be open to old and new strategies like the ones we presented in this guide to withstand any economic impact out of your control. Embrace partners like Resolve to help you build the strength and resilience that’s in your company’s DNA, while giving yourself a competitive advantage.

We’re in this together.

Contact Resolve to today to learn how we can help you decrease DSO, leverage net terms for growth, improve your customer’s buying experience, and even boost your revenue during these uncertain times.

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