Global manufacturing and supply chains were severely disrupted by the COVID-19 global pandemic, forcing companies to adapt and plan for a new business reality. The 2021 State of Manufacturing Report from Fictiv reveals an industry that is quickly rebounding with investments in digital transformation aimed at improving speed, resilience, and sustainability. While concern over supply chain disruption and labor shortages persist, most manufacturers report that lessons from the pandemic have paved the way for innovation.
Key takeaways from the report:
- Industry leaders believe now is the time to accelerate the pace of change with 95% saying the pandemic has had long-term effects on their business and that same number (95%) agreeing that digital transformation is essential to their company’s future success.
- The pandemic laid bare deep weaknesses in supply chains as 94% of survey respondents report concerns about their current supply chains and 92% say their supply chains act as barriers to new product innovation.
- As companies move into a post-pandemic era they are looking to future-proof their manufacturing with 62% pursuing a re-shoring strategy, 89% reporting that sustainable manufacturing is a growing priority, and 84% have turned to on-demand manufacturing as a solution.
We caught up with Dave Evans, CEO of Fictiv to have him explain the high points of the report.
Design News: Has the pandemic has accelerated manufacturers’ move to digitalization? Have they been able to move digitalization forward during the pandemic?
Dave Evans: The pandemic proved to be an extraordinary opportunity for digital investments in the supply chain and manufacturing. In last year’s State of Manufacturing Report, we heard that digitization was on industry leaders’ radars but there were challenges in their path - 87% of respondents said digital transformation initiatives were a high priority but only 14% were well funded. Flash forward to 2021 and supply has caught up with demand. Pressured by the realities of the pandemic but also given an opening, a staggering 91% reported that they have increased digital transformation investments in the past year.
The pandemic accelerated digital transformation in ways that we have never seen before. Anecdotally we hear it all the time - changes that were planned for years in the future happened in 2020 within months - but the data backs it up. Other interesting findings shed some light on how or why this happened. For example, 81% of participants said the experience of working remotely made them more comfortable outsourcing production. So, it’s a mix of needing to invest, having the chance to initiate change and the validation of early efforts providing a green light for greater commitment. Overall, it’s clear that the manufacturing industry has seen perhaps its most rapid movement towards digitization in the last year than in all the years prior.
DN: Have manufacturers responded successfully to stresses supply chains?
Dave Evans: Supply chains are always under stress - materials shortages, armed conflict, trade disputes, blockages in the Suez Canal. But last year was an unprecedented level of supply chain disruption that exposed weaknesses and forced change. That’s why 94% of respondents to the 2021 State of Manufacturing reported concerns about their current supply chains. It’s no longer possible to hide from your supply chain fears.
At the same time, companies are confronting the impact of those limitations on their businesses. Ninety-two percent (92%) said supply chain issues are barriers to product innovation. These range from external concerns about quality and cost overruns to internal challenges with lengthy supplier onboarding and vetting processes that can slow time to market. In response, companies are being creative and breaking with longstanding norms to address what they say in the report is their top business priority: improving supply chain resilience and agility - with 84% of respondents identifying on-demand manufacturing as a solution.
Speed, agility, and resilience are the desired business outcomes, and digital manufacturing is the consistent theme that runs through every innovation initiative. By their enhanced transparency, speed, and agility, on-demand manufacturing platforms are poised to be a game-changer for manufacturers, providing a clear path to the digital transformation that 95% of companies agree is essential to future success.
DN: Is reshoring a distant hope, or is it beginning to happen?
Dave Evans: Undoubtedly, the pandemic has forced companies to rethink the viability and resilience of their global supply chains. China has had a stranglehold on high-quality, low-cost manufacturing for the past couple of decades, but there does seem to be a shift in sentiment with 62% reporting that they plan to pursue a re-shoring strategy. This is most pronounced within the medical device industry, with 80% pursuing an on-shore strategy in 2021, followed by robotics, with 67% of respondents stating they have an on-shore strategy for 2021.
But for companies looking to reshore, there are concerns here at home - namely a lack of technical skills, capacity, and technology advantages. We believe that American manufacturers must continue to embrace digital transformation to reclaim their position as a global leader in manufacturing. By making American manufacturing competitive, we can turn out greater numbers of higher quality, faster-made, and more affordable products on the world stage.
DN: How has the workforce has changed during the pandemic? Did the pandemic create new availability of expert workers, or did the shortages increase?
Dave Evans: We saw a few interesting themes around the workforce in this year’s report. First, when asked what the top concerns are when considering their manufacturing footprint in the US, 55% said they worry the workforce lacks the training to run the latest in manufacturing technologies. So clearly, industry executives believe there is a profound skills gap in our domestic workforce.
And while 44% report difficulty hiring manufacturing talent with required digital expertise, 95% of companies agree that expert guidance around manufacturing feasibility for new product innovations would be of great benefit. This tells us that the industry needs skilled workers but there is still a gap in available talent.
Most interestingly, however, is the aforementioned connection between the pandemic’s mandated work-from-home (WFH) rules and industry executive’s willingness to take a different approach to outsourced manufacturing. While many employers were hesitant towards remote work before the pandemic, the past year has been a proving ground for the effectiveness of remote work. And this has led to broader changes: 81% of executive-level respondents say that the success of flexible work has positively impacted their attitude towards flexible manufacturing arrangements. Together, these trends could signal an industry less tethered to the ownership of physical spaces, both in regard to working and manufacturing facilities.
DN: What are the benefits manufacturers are reaping from increased digitalization? Are technology investments bearing fruit?
Dave Evans: One thing is clear from the 2021 State of Manufacturing report: manufacturers don’t want to repeat the disruption of 2020. From automation to sustainability, we saw a tremendous shift of strategic priorities for manufacturing companies, led by the very highest levels of leadership. Speed, agility, and resilience are the key business outcomes and digital manufacturing is the current that runs through every innovation initiative. Unprecedented disruption has led the vast majority of manufacturers to adopt on-demand manufacturing platforms, with a whopping 100% of users of on-demand reporting that they benefit from this flexible solution. Benefits cited include increased quality, speed, and production transparency, which aligns well with top business priorities to increase product innovation speed and supply chain agility.
DN: Where are manufacturers most focused? Improving production operations or improving the supply chain?
Dave Evans: The data tells us that right now manufacturers are mostly focused on improving the supply chain. When asked to select their most important business priorities for 2021, an overwhelming 68% of respondents chose “Improving supply chain resilience and agility,” while “Integration of Industry 4.0 production technologies” was the second to last most popular answer. Our reading of this data point is that industry leaders believe the number one priority this year is to get the supply chain functioning with agility and then perhaps focus on improving the technology on the factory floor for even greater improvements. Ultimately, if you have industry 4.0 technology cranking on all cylinders but don't have the supply chain figured out then the benefits are essentially canceled out.
DN: Is technology adoption becoming a competitive imperative for manufacturers?
Dave Evans: Digital transformation is arguably the most imperative and consequential decision any manufacturing business can make in 2021. This is no longer even a differentiation or advantage; it is table stakes. But, the State of Manufacturing survey shows that the industry is committed and that the shift will only accelerate in the coming years. If 2020 taught us anything, it’s that manufacturers need to adapt their processes to thrive in this new world and take advantage of the digital tools available to them.
Rob Spiegel has covered manufacturing for 19 years, 17 of them for Design News. Other topics he has covered include automation, supply chain technology, alternative energy, and cybersecurity. For 10 years, he was the owner and publisher of the food magazine Chile Pepper.