Deloitte Study Reveals Supply Chain Industry Still Winning Despite a Decade of Disorder

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.

Kamonrat Global Network
kamonrat- Global Network

The manufacturing industry looks for ways to make itself disruption-proof, according to Deloitte’s 2021 Manufacturing Outlook.

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 -3.7% for 2020 and -5.4% for 2021.

Reeling from the effects of a global pandemic-driven shutdown, U.S. industrial production (-16.5% year over year) and U.S. total factory orders (-22.7% year over year) saw a steep decline in April, followed by suppressed improvement. The current U.S. Industrial Production Index stands at 101.5 in September (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 71.5% in September, 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 October are still 621,000 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.

Other notable highlights from the report include:

·        2020 has been a year like no other in recent history. Before the pandemic hit, the industry was working to regain the momentum it had reached after the 2008 recession, Looking ahead to 2021, the recovery may take longer to reach pre-pandemic levels

·         Digital is key to caging black swans. “Black swan” disruptions are increasingly frequent, highlighting the value of forecasting and visibility across operations and supply chains. Whether experiencing demand surges, slowdowns or something in between, 76% of manufacturing executives plan to cope by increasing their investments in digital initiatives, and plan to pilot and implement more Industry 4.0 technologies.

·         Digitization will drive productivity. Nearly a quarter (24%) of manufacturing executives moving forward with digitization think digital twins, which allow manufacturers to virtually recreate a product, production and even simulate performance. Digital twin libraries of products, processes and production environments will be instrumental to successfully managing future disruptions. 

·         Supply chains are shifting homeward. Regionalization has gained interest due to the disruptions experienced from the pandemic. In fact, 44% of manufacturing executives plan to embrace a more regional supply chain model next year. Many are reducing dependency on China in favor of Asian and American markets. In fact, 31% of executives mentioned that they will nearshore some part of their production back to the Americas in the next year. Digital supply networks can help manufacturers increase visibility and flexibility in these new production environments.  

·         The future of work is here. Pre-pandemic work arrangements are unlikely to return. A prevailing skills gap has widened due to pandemic-related furloughs and retirements, prompting accelerated deployment of automation and robotics. About 28% of executives said that matching skillsets to highly automated work environments will be their top workforce challenge next year.

 

Latest