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COVID-19, Manufacturing, and What to Expect in 2021

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In 2020, manufacturing took a huge hit as a result of the constraints around COVID-19. In April 2020, year-on-year output dropped by nearly 20%. Since then, there’s been a dramatic recovery, although November 2020 figures are still 3.7% lower than those from November 2019. On the other hand, the October and November 2020 Purchasing Managers Index (PMI) is higher than any time since 2018, indicating a pent-up demand for manufacturing.

Here are six trends we expect to see in 2021 as manufacturing responds to demand and adjusts to the new realities in an uncertain time.

1: A Swing to Local Manufacturing

Following the shortages experienced in 2020, manufacturing will take a closer look at local manufacture to minimize risk of disruption caused by lockdowns and closures due to the ongoing pandemic. Long-term factors encouraging local manufacture include the ongoing threat of a trade war, especially with China, as well as punitive tariffs. Benefits of local manufacturing include lower and better working capital management, greater flexibility and a shorter time from order placement to market.

2: Accelerated Adoption of Digital Technologies

With the proliferation of information and data, manufacturers are likely to invest more aggressively in digital technologies. These include IoT sensors, digital manufacturing strategies, robotics and machine learning capabilities, allowing greater insight into manufacturing operations as well as enhancing decision support capabilities. Benefits of shop floor digital transformation include better operational visibility, silo elimination, better control and increased efficiency.

3: Flexible Employment

Employment conditions are expected to improve as manufacturers adopt advanced manufacturing systems that require different skill sets. While manufacturing employment levels are still 5% lower than November 2019, employment is steadily increasing as manufacturers respond to increased demand. Looking forward, there’s likely to be a shortage of talent, and this should lead to higher wages and upskilling. Also, the trend to remote work initiated during COVID-19 is likely to become a permanent feature of the employment landscape.

4: Focus on Sustainability and Efficiency

The incoming administration has indicated it will reintroduce measures to reduce waste and increase sustainability. While this may lead to increased costs, there will also be significant savings as a result of less waste and greater efficiency. Consequently, there’s likely to be greater focus on business optimization techniques to help manufacturers reduce costs and increase efficiency.

5: Development of Operational Resilience

Just as 2020 had many ups and downs and unexpected turns, we should expect much of the same in 2021. While COVID-19 vaccinations have started, it will take many months to achieve mass immunity. Meanwhile, manufacturers need resilience strategies to cope with further unexpected change and disruption. Consider multiple sourcing strategies, supply chain visibility and prescriptive analytics modeling to determine vulnerabilities and appropriate resilience strategies.

6: Flexible and Agile Manufacturing

In line with future uncertainties, manufacturers will focus on flexible and agile processes. These will allow them to adapt quickly to new realities, such as shifts in customer demand or loss of market share as consumer priorities change. They will need to plan for different scenarios and develop contingencies that allow them to make informed decisions when faced with force majeure or unexpected changes.

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