By JON VAN DER VEEN
To further understand the economic effects of the novel coronavirus and the shutdown, The Jewish Post & News has reached out to several business owners in the community to get their stories. One of those who responded to our invitation to tell us how the pandemic has affected his business is Benjamin Isakov, the CEO and business coach at Congruent Clarity.
Congruent Clarity is a business consultancy firm which provides its clients with professional training and assistance in managing their small to medium sized company and supports the development of strategies to streamline production, reduce waste, emphasize efficiency, and grow. Benjamin Isakov, an Israeli immigrant, has decades of experience working with supply management chains and quality assurance, helping to plan, maintain and source the proper materials for companies engaged in heavy industry, such as Brunswick Steel and Versatile Inc. Now, Benjamin is passing on his knowledge to his many clients at Congruent Clarity through one-on-one, group, and online executive coaching.
I asked Isakov what he perceived to be the most significant issues currently facing businesses as a result of the pandemic-induced shutdown? I noted that many small businesses are now experiencing severe cash flow problems
Isakov responded: “Cash flow is indeed a big problem right now and there is no way around it if you want to keep your old business model working.”
He continued with a real-life situation: “So, I have two clients, and what we did with them to start was to list their skills and capacity that they have in their business in a brainstorm session and see how they could apply the capacity they have into a new reality. For example, some brewers and brewhouses started to produce hand sanitizer solutions. It’s about using the capacity that you already have to produce something that is in high demand in the market.”
Isakov explainined that, in this current economic climate, companies need to adjust their manufacturing base to shift production from luxury goods and non-essential amenities into more utilitarian products which are in higher demand. To further demonstrate this concept, he provided me with an example of one such transition: a local print metal shop started to produce small metal brackets that attach to the bottom of doors, enabling them to be opened by a foot –an inventive measure to help avoid the spread of the novel Coronavirus.
The objective for many local businesses should no longer be maximizing output, but instead, maximizing the efficiency and flexibility of their production. Moreover, as large multi-national corporations have increasingly globalized, they have been able to manufacture their products at cheaper rates and in greater quantities by utilizing long supply chains. These networks begin with mineral resource extraction in Africa where labour costs and standards are low; then, the manufacturing happens in East-Asia where the population has high skill levels but still retains cheap production costs; finally, the goods ship to Western countries, such as the United States and Canada, where generations of great prosperity have created consumption-driven economies.
As a result, in the last couple of decades, it has become futile for small—medium sized businesses to compete in large-scale manufacturing, especially since these huge multi-national conglomerates can afford to operate at a much lower cost and push the ‘little guy’ out. However, these long supply chains also come with several downsides which have been both exposed and exacerbated by the ongoing coronavirus pandemic.
Although bisecting the manufacturing industry with the consumer base has lowered costs for the consumer and increased corporate profits, this process makes global supply chains more vulnerable because there is an increased number of contact points along the chain for interference and failure. For example, when Covid-19 forced many manufactories in China to close, there were cascading effects for suppliers – who were no longer able to source products.
As a result, Isakov favours repatriating some of our manufacturing base. He said, “We need to keep local economies healthy by keeping at least a percentage of production in the country so that in cases like today we have the capacity to ramp up production. So, I would say –if I was in a leadership position– that we need to keep at least fifty percent of quantity for any type of production within the country.”
He gave a very pertinent example: “So, with safety masks – if you don’t have production at home you have nothing to ramp up. If you have such a machine working at thirty percent capacity making 100,000 masks every eight hours you can increase that to meet demand. But if you don’t have the capacity, you are at the mercy of other countries and have to rely upon them.”
Indeed, across Canada, the United States and the European Union, there were widespread shortages of surgical masks at the onset of the pandemic. Moreover, when Canada eventually imported Chinese masks, the Globe and Mail reported that “about one million of the face masks it has purchased from China have failed to meet proper standards for health care professionals and will not be distributed to provinces or cities.”
Although I recognize the downsides of globalized supply chains and shared many of Benjamin’s concerns, I pressed him to explain how Canada could actualize the repatriation of strategic industries?
Benjamin responded: “We can subsidize some of this industry in the country or make tariffs to make outside products more expensive … Businessmen will not do something just because; they need to have an incentive.”
He continued to explain that there are many benefits if you shop locally at small stores, and although this is more expensive, the government can create the conditions to source locally. A healthy local economy will help create more jobs and wealth; Benjamin stated that if you buy from a small retailer, approximately 68 cents recirculate in the community, whereas if you buy from a big domestic retailer, only 43 cents stay.
I suggested to Isakov that consumers must accept short-term increasse in price for the sake of long-term growth.
Benjamin concurred and gave me an uneasy prediction that without more drastic government intervention the fallout of the pandemic will send shockwaves throughout the Canadian economy for the next six-ten months, especially in sectors such as heavy industry, retail, and real estate. Moreover, Canadians are sleepwalking into a more significant crisis if we do not address the fundamental economic issues. There are points of no return, and for many companies that is fast approaching. Small businesses are already operating on slim profit margins, so the government’s response to the crisis by providing relatively low-interest loans is both inadequate, and a short-term fix.
