It’s no secret that COVID-19 has been a mixed bag for much of manufacturing. While supply chain disruptions and fears of a looming recession have strained production and dampened demand, many technologies such as remote monitoring and robotics have seen their deployment accelerated as manufacturers navigate the complex new landscape.
Still, even with technological innovation booming and recent data from the Federal Reserve charting stronger-than-expected growth in the manufacturing sector, industry may not be out of the woods yet.
According to a recent study from financial advisory firm BDO, even as 51% of manufacturers surveyed report that they expect an increase in customer demand in the next six months, 83% say their businesses will take at least a year to fully recover from the fallout of 2020. A more granular breakdown of the current state of companies found that 27% indicated they were “thriving,” 35% were “surviving,” and the 38%, the largest portion, were “struggling.”
Despite this, there were bright spots in the data as well. Among the same group, 48% expect to be thriving a year from now, while only 31% expect to still be struggling.
BDO’s survey also found that, going forward, 40% of respondents planned to automate some portion of manual labor to alter their workforce strategy to better suit the current environment. Moreover, supply chains are under harsh scrutiny, with 52% companies surveyed seeking to identify back-up suppliers and 22% looking to reshore production to the U.S. altogether.
Many respondents also indicated that the road to recovery is not strictly financial, with more than a quarter of CFOs surveyed prioritizing investments in new technology and infrastructure over cutting costs. Other priorities included merger and acquisition integration, data privacy, and recruiting and retaining talent. Among those respondents self-identifying as “struggling,” more than a third indicated that insufficient cash on hand is their most prominent concern, closely followed by the inability to obtain financing for their business and debt in excess of book value of assets.
Furthermore, even while government assistance helped manufacturers throughout 2020, with 78% of companies surveyed securing government assistance in response to the pandemic, cash flow is forecast to continue to present a hurdle in 2021 due to continued operational disruptions and the potential for delayed payments from cash-strapped customers.