2021 manufacturing industry outlook

2021 manufacturing industry outlook

2020 was a year like no other in recent history, and the US manufacturing industry has felt the impact. In its 2021 outlook, Deloitte looks at the future of manufacturing and outline four trends for the year ahead.

 

Before the pandemic hit, the manufacturing industry was working to regain the momentum it had reached after the 2008 recession. However, after the first wave of pandemic-driven shutdowns, segment recoveries for various manufacturers have been uneven. Looking ahead to 2021, the recovery may take longer to reach pre-pandemic levels, as Deloitte projections based on the Oxford Economic Model (OEM) anticipate a decline in annual manufacturing GDP growth levels for 2020-2021, with a forecast of -6.3% for 2020 and 3.5% for 2021.

 

Reeling from the effects of a global pandemic-driven shutdown, US industrial production (-16.5% year over year) and US total factory orders (-22.7% year over year) saw a steep decline in April, followed by suppressed improvement. The current US Industrial Production Index stands at 105.7 in December (the most recent month available), a substantial dip from its pre-pandemic level of 110. Production and order levels are still below 2019 levels, but the trajectory of the decline has slowed. Total industrial capacity utilization improved to 74.5% in December, up from 64.1% in April; however, it’s still below pre-pandemic levels of 77%.

 

2020 also experienced a significant dip in manufacturing employment levels, largely due to forced shutdowns in the early days of the pandemic and suppressed orders, with April recording manufacturing’s lowest employment levels since 2010. Despite recent gains from much of the country’s manufacturing base back in operation, employment levels in December are still 543,000 lower than in February. All of these indicators have created an environment of ongoing uncertainty, although 63% of executives in Deloitte’s post-election poll are showing a somewhat or very positive outlook on business. Explore our four manufacturing industry trends for 2021 and beyond to see how things are shaping up.

 

Solving forecasting challenges could be critical to navigating the disruption

For manufacturers, the events of 2020 may be a warning to develop better systems for navigating disruptions like the one we are currently experiencing. Visibility is likely to become the most critical capability for manufacturers in the coming months. Where to increase visibility depends on how a company is experiencing the pandemic, as exemplified above, and digital technologies could be important enablers.

 

Digital twins could support new levels of resilience and flexibility

In its simplest form, a digital twin is a representation, or blueprint, of a physical thing. That thing could be a single product or a component. It could also be a production process or even the physical production environment. Using a digital twin, a manufacturer can virtually recreate a product, its production, and even simulate its performance in the real world without having to “bend metal” or take any other physical action.

 

Manufacturers may expand their options to reduce exposure to trade and other disruptions

As manufacturers evaluate where and when to recalibrate their global production footprint, they can also turn to digital capabilities for help increasing their supply network visibility. The early days of the pandemic saw many manufacturers create “war rooms” that brought together demand-and supply planners to manually share updates in real time from their respective viewpoints. Now, manufacturers can automate this process with a digital supply network (DSN) to gain real-time understanding of activities across a complex supply network.

 

Disruption in the manufacturing industry increases the need for greater workforce agility

In what could become a permanent change for the industry, the majority of manufacturing leaders seem unlikely to return to all the pre-pandemic work arrangements. Manufacturers are seeking ways to re-architect work, the workforce, and the workplace to manage disruption and uncertainty. In our post-election poll, 61% of surveyed executives are planning to develop a hybrid model for their production and non-production processes over the next three years.

 

Agility could be key to manufacturing industry resilience

The year ahead will vary for manufacturers depending on where they have felt the greatest impact from the pandemic. For some, it will focus on rebuilding lost revenue streams; for others it could require recalibrating supply networks to serve different market demands. But for all manufacturers, it should include a commitment to increasing agility in operations. By continuing to invest in digital initiatives across their production process and supply network, manufacturers can respond to the disruptions caused by the pandemic and build resilience that can enable them to thrive.

 

Manufacturing industry leaders can start by identifying use cases that solve for specific challenges on which the pandemic has cast a spotlight, such as fluctuating end-market demand. Manufacturers should set goals for data capture and analysis across the global manufacturing footprint, as this step alone is a key to identifying breakpoints and opportunities for improvement. And finally, manufacturers should consider how digital twins (of products, processes, and/or production environments) may hold the key to ensuring that manufacturing thrives through the next disruptive event. Even after a year like 2020, it could be right around the corner.

 

Read the full report at https://www2.deloitte.com/us/en/pages/energy-and-resources/articles/manufacturing-industry-outlook.html

 

2021-02-18T14:57:17-06:00

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Paul Imison
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