We’ve all heard, dozens of time as this point, about all the ways 2020 has been unprecedented and terrible. But for manufacturers, unprecedented and terrible, while accurate, aren’t really the best words to describe the past nine months. Weird is more like it. Spectacularly odd is even better.
A rapid up-and-down production cycle, massive supply chain disruptions, some products selling out, others that had been wildly profitable not selling at all, and no end in sight. Just like everything else this year, the pandemic’s impact on manufacturing was strange, unpredictable and difficult.
The next few months won’t be any easier, but the end could be near. According to a recent McKinsey study, it’s likely that we’ll be back to normal by Q3 of next year. In the meantime, as flux in the labor market continues to provide access to new talent, and as the pandemic lays bare the need to invest in technology and training, manufacturers have an opportunity. While business remains relatively slow, and knowing it should come back soon, now is the time to think about what it will take to remain competitive in the next 10 years.
It may not seem like an ideal time to begin making vast, future-looking transformations. But when is? Business had been so good the two years before COVID that most manufacturing leaders didn’t have time to step back and form technology strategies. Then, in the heat of the pandemic, most were simply doing their best to get by. Turns out the next few months – with manufacturers having adapted to new conditions and an economic upswing around the corner – offer the clear lines of sight necessary to initiate real change.
A Look Back at Manufacturing in 2020
The year started wonderfully – a little down from the previous two record-breaking years, but on path for another run of stellar growth. Recovery from the Great Recession was complete and companies were anxious only about finding enough qualified talent to fill orders on time.
When COVID-19 struck, most of the manufacturers we work with in Ohio were exempt from the shutdowns, and they kept on producing their core products as long as there were people buying them. The virtual shutdown of the automotive supply chain furloughed many for a few months in the summer, but many others got to work producing PPE at massive quantities through the Ohio Manufacturing Alliance to Fight COVID-19. By July, millions of pieces of PPE were in the hands of everyone across the state, consumer demand was rising again and our auto companies were back online.
Manufacturing's recovery from the shutdowns was swift, and most sectors had rebounded except for those tied to industries like oil-and-gas or aerospace, where demand remained low. Some companies, like those that make food and cleaning supplies, were shooting sky high. On average, manufacturers are seeing an off year in profits – many say around 25% lower than anticipated – but Payroll Protection Plan loans proved critical in keeping many from closing permanently this year.
What we were reminded of this year was the resilience, innovation, and importance of manufacturing. Manufacturers showed us what having grit really means as they stepped up to shield workers at the front lines from COVID, and to protect their workers from infection inside their plants through cultures of safety. Through it all, our manufacturers have continued to produce the things we all need in our lives every single day.
Opportunities for the Taking in 2021
As we look to 2021, manufacturers have opportunities.
For one thing, we’ve learned that even mass unemployment hasn’t solved the talent issue. The issue of getting people into good manufacturing careers issue is systemic – simply having more people out of work didn't fix it. Manufacturers have already started looking into more automation as a potential solution. They haven't invested this year like they would have, yet most are optimistic about next year.
To that end, manufacturers still see Industry 4.0 (sometimes called Smart Manufacturing) as critical, but many struggle to know how and when to invest in it. Keeping people safe from COVID through more automation and remote technologies has raised interest in Industry 4.0 even further.
Forward-looking manufacturers can emerge from this period stronger if they use it as an opportunity to invest in the technology and upskilling that can move them closer to the promise of Industry 4.0.
This is not to ignore the risks still lurking out there. The recent rise in COVID-19 cases is frightening for everyone. More companies are seeing more people getting sick, preventing orders from getting out of the door (most of these cases are not spread at work, but are spreading through activities at home or around town).
The bigger issue is our true concern: will consumers stop buying? If disappointing Black Friday sales, recent ISM numbers showing slight slowdowns in the pace of production growth, and economic shutdowns recurring across the world are any indication, then we could be in for a rough winter.
But on December 8, a 94-year-old woman in England received the first COVID-19 vaccine. The end of this unprecedented, spectacularly odd period is in sight. The manufacturers who emerge from it stronger will be those who invest in their post-COVID future now.
Ethan Karp is president and CEO of MAGNET, Northeast Ohio’s Manufacturing Extension Partnership.