Thriving in a new manufacturing world
A changed landscape is pushing companies to rethink processes and products
4 minute read
- Even when the pandemic subsides, it will leave behind a changed economic landscape for manufacturers and their customers
- A less global, more local economy presents opportunities for those able to adapt quickly
- Focusing on automation and targeting areas of the economy likely to grow could help companies succeed moving forward
The coronavirus pandemic has buffeted manufacturers in every sector. Companies serving industries that are thriving—technology, health care and home repair and remodeling, among others—have experienced a sharp increase in demand, while those that manufacture components for underperformers such as aviation, energy and the automotive industry have languished. Meanwhile, almost all manufacturers have grappled with supply chain disruptions.
As in many industries, manufacturers are increasingly aware that even when the pandemic ends, it will leave fundamental changes in its wake, such as greater automation and a focus on smaller, more local factories. With this transformation comes opportunity. Abhijit Bhide, managing director, Bank of America Global Banking and Markets, discusses how midsize manufacturers can adapt to this new normal and thrive in the long term.
What are the greatest opportunities for the manufacturing industry in a post-pandemic economy?
The pandemic has sped up the shift from global to more local economies—a trend already underway thanks to international trade tensions and other factors. As part of this transformation, industries are looking to bring supply chains closer to home and are creating major “reshoring” opportunities. That means manufacturers and the industries they serve are building new factories or reviving old ones that went dormant during years of expanding globalization. These new factories are likely to be smaller and more automated, with technology that enables them to change product lines more quickly as demand shifts. This, in turn, means opportunities for other manufacturers—those that make automation components, as well as “integrators” who put together automated systems. And with new demand for personal technology products and remote connectivity, manufacturers that serve the sector with components for technology hardware, data-centers and cellular connectivity have benefited from increased investment.
Manufacturers are increasingly aware that even when the pandemic ends, it will leave behind fundamental changes, such as greater automation and a focus on smaller, more local factories.
The healthcare industry presents another opportunity. As healthcare facilities and consumers struggled with procuring protective equipment and other medical supplies during the pandemic, demand soared, and manufacturers in this area stepped up to meet demand. Demand for consumable personal protective equipment is likely to continue for some time, benefiting manufacturers of medical supplies across the board. Purchasers of these products, burned by overseas supply chain disruptions during the pandemic, will likely be looking to expand relationships with manufacturers that are more local.
In addition, Americans spending much more time at home are investing in home improvements—from basics such as replacement windows and plumbing upgrades to higher-end categories including new heating and cooling systems, pool products, decking, remodeling projects for home offices and other improvements. These trends have driven up demand for manufacturers of home improvement products and construction equipment.
What challenges do companies face in preparing for the new economy?
The pandemic continues to pose obstacles, particularly for manufacturers that serve industries hurt by the decrease in travel and the resulting slump in energy production. Specialist companies that may have produced a single part used in just one manufacturing segment for struggling industries are looking to reduce their exposure to these areas while aggressively reconfiguring their products and processes for other, more profitable markets. As a part of that move toward diversification, manufacturers also need to look ahead, identifying categories that are likely to outperform in a new economy.
Liquidity, too, is a persistent challenge, as companies look to remain viable or to make investments to move into new areas. In some cases, projections of when things may return to normal have proven overly optimistic, and it’s important to plan for the possibility that the current disruptions may continue. Adding to these challenges is uncertainty about further government stimulus in the year to come.
What can companies do now to secure a better future?
As they move ahead in a changed landscape, manufacturers must adapt to multiple transformations, often by changing processes and practices that they had grown accustomed to. Amid the explosion in online shopping, consumers are demanding faster deliveries and greater choices than ever before. Satisfying those demands will require manufacturers to adapt quickly, whether by innovating with new products or modifying existing ones—say, by allowing consumers to customize products and arranging manufacturing processes to be flexible enough to handle product variations.
Automation, which can help protect workers’ health by minimizing contact with one another, may also help companies reduce labor costs further down the road. While they may not be able to invest in full-scale automation all at once, midsize manufacturers can explore along the edges of their manufacturing processes, identifying one or two areas that could be automated and proceeding modularly.
And to thrive in the post-pandemic world, in part by implementing these and other changes, manufacturers should maintain ongoing conversations with their bankers. Detailed conversations can help ensure they’re financially prepared for any challenge or opportunity that comes their way in the months and years ahead.
- Business continuity
- Markets & economy
Abhijit Bhide, Managing Director, Bank of America Global Banking and Markets