As we begin to see some light at the end of the COVID-19 tunnel, many manufacturers are turning their attention to the future. While the pandemic's effects on manufacturing will be temporary in many aspects, there is a strong possibility of long-lasting changes taking effect in the near future. In this blog, we will dive deeper into the extensive impact the virus has had on global manufacturing and what steps are being taken by the current political administration to address these problems, as well as ways that digitalization can get America over the hump.
Ending Dependency on Foreign Manufacturing
Returning to work has been a slow process for businesses across the U.S., but particularly for the manufacturing industry. With COVID-19 reaching full swing and the consequences setting in, businesses were closing their doors and manufacturing plants were shutting down. There was uncertainty about what the next steps would be. As a result, employers were forced to take on new procedures in order to keep essential functions running. These precautions had the effect of limiting production and bringing into question how business would be conducted in the future. Workers were more vulnerable to the virus and the infrastructure was not in place to support the demand.
There has long been concern about the United States' reliance on foreign manufacturing, particularly in China. The pandemic's impact on production in China and around the world created a disruption of the global supply chain. This put a spotlight on these concerns, particularly when it came to medical equipment and supplies. As we are regaining a foothold, we can expect that consumers and workers will not be satisfied with the current state of affairs. We can also expect enthusiasm for bringing more jobs back to the U.S. to overcome any future crisis.
Legislative Plans for the Future
President Biden supports progressive proposals designed to encourage the relocation of manufacturing facilities and jobs to the U.S. For example, in the run up to last fall's election, Biden called for:
- Leveraging federal buying power and the Defense Production Act to manufacture more critical products domestically;
- Using tax penalties and tax incentives to discourage offshoring and encourage "reshoring" of manufacturing businesses; and
- Offering a 10% tax credit to companies that revitalize, renovate and modernize existing or recently-closed manufacturing facilities.
How much of this moves forward through Congress remains to be seen. There are other robust legislations kicking off a trend such as fuel efficiencies in electric vehicle standards and shifts toward other renewable sources of energy. Manufacturers should understand that current innovative proposals and those continuing to arise will not keep this sector stagnate.
Focus on digitalization
Post-pandemic manufacturing will see an increased emphasis on digitization.
- Manufacturers will need to rely on the efficiencies offered by automation, artificial intelligence and the Internet-of-things technology to maintain a competitive advantage in light of cheaper labor costs overseas.
- Post-pandemic, there will likely be continued interest in remote working arrangements.
- Digitalization provides expanded opportunities for hiring skilled workers from any location which can fill in the missing gaps of production, as well as giving leeway to reduce unemployment around the country.
- Workers are becoming more tech savvy in a constantly-evolving atmosphere that promotes knowledge and education in a demanding, but necessary, field of practice.
- With a new-found focus on digitalization, it remains important for manufacturers to use digital measures that are relevant to their own identity and advancement, deploying the right strategies to fit their overall needs and standards.
As a result, manufacturers will need to rely on Internet-based diagnostic and management tools that allow devices on the shop floor to be monitored and operated remotely. Online communication and collaboration tools will be key, while still managing the levels of variability such as demand, process, manufacturing technology and customer behavior. The COVID-19 experience has highlighted the wild fluctuations that can happen in extreme conditions.
With greater reliance on domestic manufacturing, questions remain: How long is the lead time to get the country up and running for a surge in manufacturing coming back? Do we have enough buildings, facilities and equipment? If not, how long will it take to build, renovate and/or purchase and deliver them?
Some things that must be considered are:
- How can your work at home increase your bottom line and fulfill the anticipated need? Are there cost savings/benefits such as travel and facility space requirements?
- How are you coming to grips with digitalization, not only in terms of technological advancement, but also the efficiency of the model that is being used in regards to a company's core values or what they view as their pillars of success?
- Can resources be allocated in ways that make domestic production a viable path for growth in generations to come?
It is not entirely clear what the future has in store for manufacturers once the COVID-19 pandemic is behind us. One thing is certain though: The new normal will likely be different than the old one, and manufacturers that are prepared for change will have a competitive edge.
Originally Published by Ostrow, February 2021
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