The slow road to recovery for the manufacturing industry

The slow road to recovery for the manufacturing industry | Insurance Business America

The slow road to recovery for the manufacturing industry

Given how quickly the COVID-19 virus spread when it first hit in 2020, it’s unsurprising that its economic impact was immediately felt among manufacturers. According to the multinational accounting firm RSM, 71% of 107 manufacturers reported losing US revenue during the second quarter of 2020. Similarly, 73% said they experienced disruptions to domestic operations or production during the same period.

How has the manufacturing industry fared since? We sat down with Brian Gerritsen (pictured), CPCU, manufacturing practice lead at Travelers, to find out how the sector remained resilient these past couple of years, and what new challenges US manufacturers currently face in this “post-pandemic” phase.

What does it mean to be the manufacturing practice lead at Travelers?

As manufacturing practice lead, I am always thinking about the evolving risks facing customers in this industry and looking for ways that Travelers, as a trusted financial partner, can help these businesses prepare for, and mitigate, those perils. Emerging exposures and loss scenarios might require different insurance coverages, underwriting approaches or claim handling methods.

My role is to connect all the groups that serve our manufacturing customers, such as Underwriting, Risk Control and Claim, and then regularly collaborate on trends and issues we’re seeing to develop holistic solutions designed to help deliver the best possible outcomes.

It’s an exciting role in a critical industry that Travelers has been serving for more than 160 years.

What is the current state of the manufacturing sector?

It’s an interesting time right now in this sector. Manufacturing has had some strong quarters of rebound-and-recovery activity. Generally speaking, production is up, and customer orders are being filled. However, some of this rebound activity is being complicated by issues such as COVID-19, labor shortages, ongoing supply chain issues, inflation and geopolitical conflicts. And even though some of the pressures are easing, concerns about the supply chain are not.

Some manufacturers are doing their best to maintain operations as they deal with the intersection of these different issues affecting confidence in the sector. But others are taking advantage of the disruptions of the last few years to invest in new technologies, consider alternative or expanded product lines and customers, and turn to different distribution models such as e-commerce.

After two years of COVID-19, has the sector fully recovered?

Although the sector has gone through a recovery period, there continue to be challenges (not necessarily directly related to COVID-19) that are delaying a return to pre-pandemic levels of production. For instance, this industry was dealing with labor shortage issues before 2020, which have only been exacerbated by the last two years. Inflation is affecting consumer buying habits. High fuel prices are adding an additional strain. Disruptions to the supply of raw material and component parts persist, influenced by ever-changing pinch points.

What can the insurance industry do to help manufacturers in this post-peak pandemic phase?

More than ever, it’s essential that manufacturers feel confident that their insurance partner will be there to help them think about, and mitigate, risks so that they can focus on continuing production and maintaining the brand and reputation they’ve built. It’s important that manufacturers work with an insurer that has a thorough understanding of the manufacturing industry, because the risks and claims require unique approaches.

While insurers help customers plan for the unexpected, business disruptions are no longer unexpected. Something will happen; it’s just a matter of what and when. So, it’s critical to have an insurance partner that provides manufacturers with tools and resources that they can tap into so they’re as prepared as they can be.

For instance, we know how critical employees are to a manufacturer. A single worker who is out for one or more days because of an injury may have a significant operational and financial impact on a company. With today’s labor shortage, manufacturers can look to their insurance provider for best practices on creating and maintaining a culture of safety to help prevent on-the-job injuries.

In Travelers’ 2022 Injury Impact Report, an analysis of our workers compensation claim data collected over five years, we found that employees in the manufacturing industry missed an average of 64 days of work due to a workplace injury. That’s a significant period of time for a manufacturer to be short-staffed, especially when hiring is a challenge and supply chains are strained.

This goes back to what we were discussing earlier about my role. I’m here to help manufacturing businesses stay ahead of the risks they face and help them achieve better outcomes.

With businesses slowly resuming operations, how are manufacturers keeping their workforces safe?

Manufacturers are using different tactics to help keep their workforces safe. Some are investing in automation to shift the responsibility for repetitive tasks, which can lead to strains and cumulative injury exposures, from employees to machines. We’re seeing increased adoption of IoT, which are physical objects with sensors or software that connect and exchange data with other objects over the internet. One application of IoT is the use of sensors to help employees identify places where they may be unsafe, such as in close proximity to dangerous machinery. This is still an evolving area, and we’re continuing to monitor the data on the effectiveness of these kinds of solutions.

One of the strategies we regularly encourage with our customers is to establish and maintain a culture of safety. If you have management that cares about safety and communicates their concern for their employees’ well-being, then those employees are more likely to also focus on safety and help take care of each other. This approach can be an important differentiator for manufacturers. If they help keep their employees safe and maintain a productive workplace, then the workers feel valued and can continue to meet customer expectations.

What can be done to make manufacturers and vendors more resistant to business disruptions caused by supply shortages?

Plan. Develop a contingency plan if you don’t have one, and regularly revisit it if you already have one in place. I can’t stress this enough. We know that it’s only a matter of time before the next thing goes wrong, so spend time now to make sure you’re ready.

Research your primary and backup suppliers. Review their track records, financial resources and readiness. Familiarize yourself with the logistics of your supply chain, from your suppliers upstream, through your plant and along to your customers downstream. Think through different scenarios to make sure that you’re ready for whatever may occur.