“Uncertainty” continues to be the theme for most U.S. manufacturers. Deloitte recently released their 2021 Manufacturing Industry Outlook which is based on their survey of more than 350 U.S. executives and other senior leaders this past November. Let’s break down their findings and explore what the challenges mean.
In the report, Deloitte states that before the pandemic began, U.S. manufacturers were regaining momentum after the last recession in 2008. Deloitte predicts that our current economy may take longer to return to pre-pandemic levels than initially presumed. They anticipate a decline in annual manufacturing GDP growth levels for 2020-2021, with a forecast of -3.7% for 2020 and -5.4% for 2021.
Deloitte also cites a significant dip in manufacturing employment levels during 2020, largely due to forced shutdowns in the early days of the pandemic and suppressed orders. The lowest employment level occurred in April. There have been recent gains, but employment levels are still lower than in February. These factors all contribute to the “uncertainty” theme, although 63% of the executives surveyed were optimistic about the future.
Four Key Considerations
Manufacturers need to not only address today’s pandemic-related challenges; they must focus on becoming more “disruption proof” for the future. The Deloitte survey highlighted four key areas in which manufacturers should focus:
- Solving forecasting challenges and creating more visibility
- Leveraging digital investments
- Seeking more flexibility in supply chain management
- The need for greater workforce agility
Here are key highlights regarding these four key areas:
The pandemic impact varies by manufacturing segment. Some have been hit very hard, such as commercial aerospace and heavy equipment, while others are booming, such as home improvement, paper products, and sanitization/filtration equipment. A common theme, however, is the difficulty of forecasting. 2020 highlighted the need for manufacturers to have better visibility across their supply networks to better manage production flow. They also need better visibility into operations to help them optimize cost-cutting opportunities.
76% of the executives surveyed intend to increase digital investments and implement more manufacturing 4.0 technologies. Investment areas could include sensors, machine learning, digital twin technology, and more. In fact, 24% of executives plan to invest in digital twin initiatives. As Deloitte states, digital twins could be instrumental in preparing for future unknown events, such as the pandemic.
The pandemic has forced manufacturers to evaluate their supply chains with a goal towards increased agility and flexibility. Some are reducing their reliance on China as they explore other markets, including a shift towards nearshoring or focusing on domestic suppliers. Also, manufacturers again look to automate with digital supply networks (DSN) to have more real-time visibility and data-based decision making across their complex supplier networks.
Finally, perhaps the most permanent shift will be the pandemic’s impact on workforce management. Manufacturing executives want to find ways to rethink the workforce and workplace to better manage potential disruption. 28% of the surveyed executives said upskilling and building new skills for automation, digital, and remote is their top challenge today.
The manufacturing industry is struggling to find skilled workers. In the Institute for Supply Management’s December 1 survey of manufacturers, executives from multiple industries cited labor shortages as a challenge in ramping up production. Increased furloughs and retirements are forcing manufacturers to increase the use of automation and robotics. The need for talent then requires more technical expertise and upskilling. Broader use of digital supply networks also requires greater technical skillsets and specialization. Manufacturing executives may need to redefine the skills they need in their workforces and develop new ways to find or build those skills.
2021 will prove to be another interesting year for manufacturers. Although the challenges may vary from segment to segment, the common theme of “uncertainty” means that all manufacturers need to become more agile and flexible to succeed. Data and analytics, digital initiatives (including supply chain management), and progressive workforce strategies will become more prevalent, allowing manufacturers to achieve greater levels of success for the future.