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Mariah Hauck

Management

Automation, Reshoring Likely for North American Manufacturing

Covid-19 spurs reimagination of supply chains

Published: Wednesday, June 17, 2020 - 12:03

The latest Thomas Industrial Survey revealed the ongoing impacts of Covid-19 on North American manufacturing. Unsurprisingly, 89 percent of the 1,000+ North American manufacturers surveyed reported being affected by Covid-19. Business impacts include decreased demand, staffing issues, and fluctuations in the supply of materials and services.

Although the effects have been intense and widespread, the results show the crisis has fostered the reimagination of company supply chains and innovation in many manufacturing companies.

Most notably, the report revealed that one in four North American manufacturers are considering introducing industrial automation to their facilities as a result of Covid-19. Additionally, 64 percent of manufacturers report they are likely to bring manufacturing production and sourcing back to North America—a 10-percent increase of the same sentiment reported in the March 2020 survey.

Covid-19 impacts

The most prominent impact of COVID-19 revealed by this report is the decrease in demand, both domestically and internationally. Large decreases are self-reported across many industries, including the expected: oil and gas, transportation, and automotive. Optimistically, we also see each sector reporting increased growth during this pandemic, revealing agility and hope in a time of need.

Click here for larger image.

Two manufacturers weighed in on their experience and expectations of demand this year: “Our aerospace customers are increasing their demands while our commercial and industrial clients are declining in their demand;” “Changes in demand (increase/decrease) among clients in different industry sectors”; and, “Definitely increased demand from clients in healthcare-related sectors.” Many respondents reported much of the same tug-of-war with demand, and some respondents even predicted a boomerang of demand with surging in Q3 or Q4.

Additionally, more than 90 percent of every major industrial sector surveyed reported it was considered an essential business and legally allowed to continue operations. However, a majority of these respondents also reported being affected by the shutdown of nonessential businesses. These sweeping shutdowns can affect key suppliers, forcing essential businesses into an unstable condition where they can’t find, or can’t afford, immediate replacements.

With demand uncertainties, social distancing mandates decreasing staff, and supply fluctuations, many companies are left reevaluating their positions. They need immediate solutions as well as a crisis plan for the future to avoid the same predicament.

Impending changes

In these uncertain times, more than half of the surveyed companies have not experienced layoffs, and 31 percent are actively hiring. Of the companies hiring, job listings include engineers, machinists, operators, inspectors, and many other positions in technical fields. These jobs echo the shift seen in the wider view of manufacturing: the advancement of Industry 4.0, the call for increased automation, and the need for more skilled workers in manufacturing.

The safety of automated machining, from financial to worker health, proved tempting. In April 2020, 23 percent of manufacturers reported that they are actively considering adding automation to their facilities. In addition, 20 percent reported having already implemented automation, with agriculture (33%) and construction (28%) leading the pack.

By promoting digitization and implementing automation technology, industrial businesses free up their human employees from working on dangerous production tasks, eliminate potential errors, reduce costs, and allow humans to handle more intellectually demanding projects. In times of crisis, automation may also reduce the risk of spreading a disease or pick up the slack due to decreased staff.

Another interesting result of the Covid-19 pandemic is the increased enthusiasm for reshoring to North America. Two-thirds of the companies stated they are likely to reshore. Of those companies, 20 percent stated they are extremely likely to reshore, compared to only 9 percent in March.

Click here for larger image.

The shutdown of international facilities and the tighter travel restrictions established earlier this year have left many manufacturing companies unable to rely on their international supply chain due to time constraints or budgets. A majority of companies would prefer to have the risk closer to home. As a result, supply chains heavily reliant on overseas suppliers are being pushed under a microscope.

“The Covid-19 pandemic will fundamentally redefine how industrial companies approach their supply chains and will further advance the digital transformation of manufacturing,” predicts Tony Uphoff, president and CEO of Thomas.

Ultimately, 91 percent of respondents are confident that the industrial sector as a whole will recover. However, the supply chains, facilities, and employees may not look the same.

If you’re interested in participating in leading industry discussions, like this survey, sign up for the Thomas Industrial Survey Panel.

Additional key survey findings:
Relief efforts: Although a majority (85%) of all companies surveyed report they have not shifted to produce supplies related to Covid-19 relief efforts, medical and healthcare, agricultural, and automotive manufacturers are leading the charge to produce personal protective equipment (PPE).
Financial aid: 63 percent of manufacturing companies report having applied for financial assistance. Of that group, 60 percent report they applied for the Paycheck Protection Program, 17 percent report they applied for Economic Injury Disaster Loans, and 9 percent report they applied for Debt Relief and Express Bridge Loans from the Small Business Administration.
In-demand materials: To stabilize supply and keep production on schedule, manufacturers reported the most vital items to be PPE (42%), metals (37%), fabricated materials (29%), and machining tools and parts (27%).

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About The Author

Mariah Hauck’s picture

Mariah Hauck

Mariah Hauck is a digital marketer at Thomas focused on telling stories and providing useful insight through content creation.