Resilient Manufacturing: Bouncing Back Like a Super Ball

Factories across Europe, Asia, and North America expanded production in October as they emerged from the pandemic’s shutdowns. Since the steep decline in April, the overall U.S. economy has expanded for the sixth month in a row.

The Institute of Supply Chain Management’s October Manufacturing PMI® registered 59.3%, 3.9% higher than the September number, and is the highest since September 2018, when it was also at 59.3%.

Further, the National Association of Manufacturers (NAM) third quarter 2020 outlook survey indicates the future for manufacturing looks bright: 66% of the respondents are optimistic about their own outlook, expecting sales, employment, production growth rate, and wages to increase over the next year. And, 50.6% of manufacturers report higher production in the third quarter than in the second.

Manufacturers from various sectors are feeling different degrees of pandemic pain based on what markets they serve. ISM reports five of the six biggest manufacturing industries (fabricated metal, food, beverage and tobacco, chemical, computer & electronic, and transportation equipment) showed strong expansion again for October. While these sectors are experiencing active recovery, textiles and printing are struggling.

With the changes in consumer and business behavior, innovation and new business models are sparking new growth in several key industrial sectors, including:

Automotive

“Automakers have thus far done a decent job responding to the challenges of the pandemic —supporting and incentivizing consumers, implementing new safety protocols to get plants reopened, and working with dealers to launch novel shopping experiences both online and in-person,” says Dennis Bulgarelli, vice president of commercial for Comscore.

As a result, new vehicle sales rose more than 1.3 million, up from about 710,000 in April 2020.

Daimler, the Mercedes-Benz luxury cars and Freightliner trucks maker, saw strong third-quarter profits and has raised its outlook for expected earnings. The company now anticipates operating earnings to equal those from pre-pandemic 2019.

One sector that has boomed since the pandemic is the recreational vehicle (RV) manufacturing industry, centered in Elkhart, Indiana. Production is robust due to consumers purchasing RVs as a way to travel with minimal exposure to COVID-19. The RV Industry Association’s September 2020 survey of manufacturers found that total RV shipments ended the month with more than 41,500 units, an increase of 31.2% from the number of units shipped in September 2019.

Fabricated Metal Products

ISM reports cautious optimism for the fabricated metal sector; it indicates the market is “still not back to pre-COVID-19 levels but continues to improve and see increases in customer demand.”

For example, Indianapolis-based Major Tool & Machine fabricates metal products for customers in several sectors, including aerospace, defense, and energy. The company has experienced growth over several years that has not slowed in the pandemic. “Things are continuing to be very strong for us,” says president Mike Griffith. “We’ve not seen, really, any appreciable impact at all from COVID-19.”

Chemical Production

The American Chemistry Council (ACC) reports at the end of October, the U.S. Chemical Production Regional Index (U.S. CPRI) rose again for the third month, 0.8 % in September.

Starting in August, chemical production has seen continued growth with chlor-alkali, organic chemicals, industrial gases, synthetic dyes and pigments, consumer products, synthetic rubber, manufactured fibers, other specialty chemicals, and fertilizers.

A plastics and rubber company that responded to ISM’s November report states, “Business continues to be robust. Sales are greater than expectations, and cost pressures are modest. There is posturing by suppliers on market price increases for corrugated and polypropylene, yet no firm price increases at this time. We expect a strong finish to 2020 and a solid start in 2021.”

Agriculture

Agriculture was one of the many sectors hit hard by COVID-19, which took a sharp decline during the shutdowns back in April. Supply chain disruptions, labor shortages, and health restrictions caused restaurants to shutter—some permanently – leaving farmers with a massive lack of demand for fruits, vegetables, beef, and other livestock.

However, the agriculture industry is poised for recovery. Commodity prices are stable, and the government is promoting sustainable local agriculture to increase food security to encourage future growth. Trends suggest that, globally, the agriculture industry will see a somewhat V-shaped recovery, depending on region and product.

Agricultural exports in fiscal year (FY) 2021 are projected at $140.5 billion, up $5.5 billion from the FY 2020. Soybean export volume is expected to rise 26% year-over-year as growing export demand. Corn exports are forecasted to increase $700 million to $9 billion in FY2021 and horticultural exports by $500 million to $35 billion due to an expected increase in tree nuts’ sales, among other products. Similarly, livestock, poultry, and dairy exports are forecast up $500 million to $32.3 billion. Exploring alternative ways to market through these adverse times is vital to ranchers and their operations’ well-being.

Pharmaceuticals

During the first few months of the pandemic, the pharmaceutical industry’s supply chain stayed resilient and effectively distributed medicines with limited disruptions, except for shortages related to investigational COVID-19 treatments or drugs used to treat COVID-19 patients in intensive care units.

Throughout the pandemic, pharmaceutical manufacturers reallocated resources to invest in research and development (R&D) to speed the development of COVID-19 vaccine candidates.

On November 9, Pfizer announced a COVID-19 vaccine candidate that is 90% effective; a week later, Moderna announced it had developed a vaccine with an efficacy of 94%. Johnson & Johnson, AstraZeneca, Novavax, GlaxoSmithKline, and Sanofi are closing in on their vaccines and could deliver results this year. Once approved, these new medicines will spur pharmaceutical manufacturing and bring a brighter outlook to economic growth in 2021.

Optimistic Outlook

In March, manufacturing halted, leaving many businesses wondering for their survival. However, with innovation and resilience, manufacturers have adapted to the new present condition, has not only bouncing back during this pandemic but are also better prepared for growth in a new era.