Throughout 2020, manufacturing supply chains took a hit because of constraints around the COVID-19 pandemic. In April 2020, year-over-year output dropped nearly 20%. Since then, there has been a dramatic recovery, although November 2020 figures are still 3.7% lower than those from November 2019. Positive momentum indicates pent-up demand since the October and November 2020 Purchasing Managers Index (PMI) was higher than any time since 2018.
We expect to see four trends in 2021 as manufacturing supply chains respond to demand and adjust to the new realities of this uncertain time.
Local Manufacturing Will Grow
Following the shortages experienced in 2020 and recent global supply chain disruptions, manufacturing will take a closer look at local opportunities to minimize the risk of disruption caused by lockdowns, shortages, and port congestion. Ongoing threats of trade wars, punitive tariffs, competition for raw materials, and increasing shipping costs add further appeal to regional options. Local manufacturing benefits include lower and better working capital management, greater flexibility, and a shorter time from order placement to market.
Greater Investment in Digital Technologies
With the proliferation of information and data, manufacturing supply chains are likely to invest more aggressively in digital technologies. The strongest areas of growth include artificial intelligence, machine learning, and end-to-end supply chain visibility, which gives insight into manufacturing operations and enhances decision-making capabilities. The benefits of adopting digital technologies include better operational visibility, silo elimination, and increased efficiency.
MircoVention, a medical device manufacturer, saw a 28% increase in forecast accuracy by adopting digital technologies and implementing Vanguard Predictive Planning™.
Operational Resilience Becomes More Critical
Just as 2020 had many unexpected spikes and dips in demand, we should expect much of the same in 2021. While COVID-19 vaccination programs are in process, it will take many months to achieve mass immunity, and the spread of new variants threatens this timeline. To account for unexpected demand surges, out-of-stock components, and regional fluctuations, manufacturers should use scenario modeling and AI-based analytics to develop resilient strategies. Adopting predictive analytics, supply chain visibility, and scenario modeling help companies determine vulnerabilities and appropriate resilience strategies to mitigate these shortcomings.
Flexibility and Agility Will Be Primary
In addition to becoming more resilient, building more flexible and agile processes into supply chain planning will be critical in 2021. Agility allows manufacturing supply chains to adapt swiftly to new realities, such as shifts in consumer demand or loss of market share as consumers’ priorities change. Manufacturers will increasingly model and plan for different scenarios to rid themselves of the pre-pandemic world’s rigid supply chain processes. Flexible, AI-based modeling facilitates more informed decisions and risk analysis and has become key to supply chain planning success in 2021.
The events and disruptions of COVID-19 will be felt in supply chains for months and potentially years. While 2020 was about reacting to these disruptions as they arose, in 2021, manufacturers should make an effort to prepare their supply chains for these events before they happen. Like 2020, 2021 is expected to be an eventful year for the manufacturing industry. Those organizations who plan and prepare processes ahead using the latest technology, such as Vanguard Predictive Planning™, will succeed in keeping their supply agile and secure.
Download our industry sheet to learn more about Vanguard Predictive Planning™ for Manufacturing Supply Chains.