Expectations for U.S. and Overseas Manufacturing

How supply chain factors, investment decisions and a new administration will all play key roles in manufacturing's near future.

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Many industries will spend much of 2021 figuring out how to recover from problems related to COVID-19. While manufacturing has undoubtedly been affected by the pandemic, with significant dents in workforces and the manufacturing GDP growth level forecast to fall by -5.4 percent in 2021, there are still reasons to be optimistic. For example, the disruption to supply chains could be extremely beneficial; with disruptions forcing manufacturers to champion efficiency.

Historically, the manufacturing sector in the U.S. has invested heavily in technology, and most of this has been geared towards automation. Since the 1960s, the amount of workers in manufacturing has decreased by roughly one-third. Despite this, there could be a global movement towards workforce investment in 2021, due to an aging population and the emergence of roles that require adaptability to technological challenges.

While transformation is imminent, the positivity of business executives is undeniable. According to a recent Deloitte poll, 63 percent of them had a somewhat or very positive outlook for this year. Let’s take a look at the specific aspects of manufacturing that will see change in 2021.

A New Dawn for the Supply Chain

Manufacturers will have to reassess their global production footprint, as the supply chain continues to be disrupted due to the ongoing pandemic. This may lead to more of an emphasis on local sourcing. For example, China currently produces 48 percent of the world’s steel, but this could change with more countries looking to secure supply closer to home.

In fact, a recent study revealed that 33 percent of supply chain leaders have either moved some of their operations out of China or plan to move them out within the next two to three years.

The U.S. has some natural steel resources, and several manufacturers are looking to move their production closer to these steel mines. This kind of movement may not become an international or even national trend, but with doubts about the consistency of the supply chain, and with metals being more difficult to ship than consumer goods, it is certainly a consideration for some manufacturers. 

Manufacturers are also dealing with rapidly changing market demands, which may require a recalibration of supply networks. COVID-19 has brought the need for communication within the supply chain into sharp focus. Manufacturers may have to look for alternative suppliers or agree on different processes with existing suppliers to ensure smooth delivery. Digital supply networks will be fundamental to this: With real-time updates, they can bring unprecedented transparency even in chaotic circumstances.

Automation vs. Investment in People

As mentioned above, manufacturing has historically been heavily weighted towards technological investment. However, we can expect an increasing percentage of funds poured into workforce education over the next five to10 years. There is a lot of pressure to fill vacant roles as the workforce gets older. This means that there is a premium on highly-skilled workers - factories have to both retain their employees and train them properly to adapt to technological changes.

The recent paradigm for workforce training has revolved around sponsoring employees who return to school to obtain academic degrees. However, these programs primarily benefit senior engineers or those looking to move into management positions, with those closest to the production floor lacking opportunities to improve their knowledge and skill set. 

Increasingly, manufacturers are realizing the existence of this gap. There's now an increased understanding of the need to educate those closest to the production floor. Hopefully, the model of developing internal and certification programs for floor production workers will continue to develop.

A New Administration 

The end of Donald Trump’s tenure as president is certain to impact the status of the U.S. globally, as many domestic and foreign policy changes will be implemented by the new administration. One topic which President Joe Biden often touched upon during his campaign was the need to follow science and become a more sustainable nation, so we can expect sustainability targets to have an effect on the manufacturing industry in 2021.

Governments tend to be direct with their sustainability mandates, which manufacturers find off-putting because they see them as a luxury. Developing an operational incentive, such as increased efficiency, can provide a better rationale for companies to see sustainability as a benefit as opposed to a costly requirement. 

The events following the outbreak of COVID-19 have shown how fast the industry can grind to a halt, as the disruption has caused productivity and utilization rates to go down by a staggering 16 percent year-over-year. This year, manufacturers' success will largely depend on their ability to recover in areas which have seen the greatest downturn; for some, it could be resolving a difficult supply chain challenge, for others, it might be bolstering a severely depleted workforce.

Arjun Chandar is the Founder & CTO of IndustrialML      

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