At the time of this writing, it’s been nine months since COVID-19, also known as the coronavirus, entered into the world.
Since that time, many businesses and industries have been affected by the global pandemic.
This has caused job losses in the millions and business closures.
One of the biggest industries affected by the coronavirus is manufacturing.
In this article, we’ll look at how COVID-19 is affecting manufacturing and what possible outcomes might be after the pandemic is over.
How COVID-19 is Affecting Manufacturing
Manufacturing accounted for 11.39% of the US economy in 2019.
The year prior, in 2018, manufacturing employed 8.51% of the workforce, accounting for 12.8 million employees.
The arrival of the coronavirus saw a shift for manufacturing, especially in terms of businesses locking down to prevent its spread.
Manufacturing was brought to a standstill due to the virus’ origins in China.
China is the home a large majority of factories that supply raw materials to many manufacturing businesses around the world.
More than 75% of businesses have one or more direct Tier 1 suppliers that are based in China, while 938 companies on the Fortune 1000 have Tier 2 suppliers there.
This created challenges and saw both downturns and demand for products.
Vehicle production, for example, took a 99% downturn and continues to remain down by 38% by the first half of 2020.
However, on the opposite end, pandemic shopping saw the vast increase in paper products and specialty chemical products, like hand sanitizer.
At the beginning of the year in March, the National Association of Manufacturers released a survey based on responses from leaders in the industry.
During that time, 78% of manufacturers anticipated a financial impact due to the coronavirus and potential shut downs of business.
Other findings in the survey included:
- 53% anticipated a change in their operations
- 35% were facing supply chain disruptions.
In April, PwC surveyed several chief financial officers (CFOs) in different industries, showing where their concerns were.
As with manufacturing, financial impact and the possibility of a global recession were the top two concerns.
The survey was updated a few months later, showing that the growing concern was another wave of infections, displacing financial impacts.
Top US Manufacturing Sectors
As of 2017, the top three sectors in the US based on the amount of money they generate are:
- Chemical products
- Computer and electronic products
- Food, beverage, and tobacco products
With the increased demand for sanitizers and cleaning products, as well as computers for remote work have seemingly kept the top two positions.
We’ll look at how the supply chain is being affected in the next section.
Supply Chain Disruptions
As mentioned earlier, China is a leading supplier for many global businesses.
The country was one of the first to shut down many of its businesses and ushered citizens to stay home as best as they could in order to container the spread.
This of course caused a major disruption among the supply chain, cause decreases in manufacturing output.
One of the main disruptions was that of personal protective equipment or PPEs. PPEs, which include masks, are still in short supply, especially for those working in healthcare.
One out of every two manufacturing companies were not prepared for the sudden supply chain disruption.
The disruptions have caused some businesses to rethink their supply chains and readjust their projects if possible.
ARC conducted a survey in the first part of the year, showing that 75% of manufacturers had to place all of their current or future projects on hold.
42% stated they would continue to remain on hold until they’re able to get business back to normal.
With the supply chain disrupted, this has also affected manufacturing employees.
The Effect on Manufacturing Workers
When different states of the US began to shut down, many employees were either furloughed or ended up losing their positions as their businesses closed.
Experts have estimated that over a million jobs have been lost so far, with employee uncertainty adding to slower spending on non-essential items.
Other challenges also hinder the manufacturing workforce.
A main challenge is an aging workforce. Older employees are more likely to know more about certain equipment than their younger counterparts.
This creates a gap on transferring that knowledge to younger workers. This shortage has been growing on a global scale.
Another challenge is remote workers.
Unlike other industries where many employees can and are able to work from home, a lot of manufacturing needs to be done at a facility.
As with other industries, manufacturing companies placed an emphasis on health and safety for their employees.
For those manufacturers that entertain customers at their buildings, they’ve moved to offering remote and on-site services where possible.
A survey from ARC found that over 30% of participants cannot shut down their businesses, with another 30% having to close plants in high risk locations.
Possible Outlook for Manufacturing
We’ve looked at how COVID-19 is affecting the manufacturing industry, the disruption it caused in the supply chain, and how it has affected the workforce.
In section, we’ll discuss how manufacturing will enter a new normal post pandemic.
We noted above that many businesses were unprepared for the supply chain disruption, but that may change how businesses look in the long term.
For instance, due to the reliance on one location for their supply chains, many manufacturers may increase their suppliers to various geographies.
Technology may also play a part for many industries, but especially manufacturing.
Robotics, automation, digitization, and others will help to reduce health risks for employees, not just against the coronavirus.
This also will help for those workers who have the ability to work remotely.
Remote work can actually reduce real estate costs, while giving employees better work/life balances. Both of these can also be very attractive to potential workers.
In this article, we looked at how COVID-19 is affecting manufacturing.
2020 continues to be ever changing as the year winds down and how the virus may impact 2021 is still unknown.
However, like many businesses, manufacturing is changing to adapt to a new normal that could bring positive changes to how the industry works.