Manufacturing agility in the new world
In April 2020, UK manufacturing production plunged a record 28.5%. In the same month, manufacturing job vacancies fell 58%.
If this alone wasn’t bad enough, there was more …
On a monthly basis, factory activity sank 24.3%, also a record drop. Production of transport equipment fell 50.2%, topped by motor vehicles, trailers and semi-trailer production falling 90.3%.
The 2020 MAKE report: ‘Responding, resetting, reinventing UK Manufacturing post Covid-19’ paints a stark picture.
The first detailed analysis of the Covid-19 impact on UK manufacturers reveals it will take until 2022 to recover to pre Covid-19 levels, potentially costing £35.7 billion in Gross Added Value in 2020 alone.
During the first wave, manufacturers were operating at between 25 and 50% of full capacity. And a second wave is likely to keep production suppressed all the way into 2021.
Yet there is demand.
Aside from the call for PPE, ventilators and oxygen tubing, demand for other medical equipment, linked to the reopening of non-essential medical appointments and surgery, for example, dentists and opticians, is increasing. There is also evidence of increased demand for toys and games.
The challenge for UK manufacturers and distributors is how to grab hold of opportunities as they arise.
Where there are ideas there is hope
“Through ingenuity and innovation, UK manufacturers have been at the forefront of the national effort to tackle the Covid-19 outbreak.” Stephen Phipson CBE, CEO, Make UK
Managing complex supply chains requires a knack for problem solving and there is no shortage of such expertise in the manufacturing industry.
From manufacturing vital products to meet demand for ventilators to keeping food and drink supply chains moving. UK manufacturers have played an essential role in supporting critical sectors and in helping deal with the crisis – all while going through its own challenges.
And while manufacturing production in the UK did contract 9.4% year-on-year in July of 2020, this was less than the 10.4% forecasted.
In fact, by September 2020, manufacturing production actually grew 6.3%. Higher than the forecasted 5%. Leading the way was transport equipment, which rose by 18.5%. Although all 13 manufacturing sub-sectors displayed upward trends.
The signs are positive. Baker McKenzie and Oxford Economics predict global manufacturing output will rebound in 2021 with a 6% value-add in manufacturing output compared to 2019. A remarkable, and rapid, turnaround in fortunes.
And the office for national statistics also predict a rapid surge to productivity in the very near future.
Manufacturing production forecast
How quickly manufacturing recovers depends on the ability for companies to re-mobilise supply chains. And how quickly manufacturers evolve to combat future disruption, depends on digitalisation.
Building a resilient and digitised supply chain
The long-term digitisation of supply chains increases resilience against disruption. The goal being to create a faster, more flexible, more granular, more accurate, and more efficient supply chain. One more capable of withstanding abrupt change.
This may mean ramping up technology investments; identifying where it could be beneficial to understand inventory levels; identifying alternative sources of supply; conducting scenario planning.
“As companies seek to exploit the benefits of greater levels of digitalisation, new and innovative technologies, such as blockchain, artificial intelligence (AI) and machine learning, can potentially and significantly disrupt existing supply chain operating models,” – Christian Titze, VP Analyst, Gartner.
We, at HSO, believe today’s technology increases flexibility and supply chain velocity, improving decision making through better reporting, demand balancing and the application of AI. A single technology platform, such as Microsoft Dynamics 365, allows you to make best use of those assets you already own, and reduce the manual labour of looking after them.
A platform such as Microsoft Dynamics 365 can also help you solve other challenges …
– Reduce the number of manual processes built around disparate systems.
– Simplify – and reduce the cost of – inventory management.
– Free up underutilised working capital for deployment on new projects.
– Break down silos of information making it easier to extract insight from across your value chain.
And with connected insight comes better forecasting and a more accurate idea of demand, which in turn allows you to enjoy predictable returns without increasing the cost of production.
The value of technology extends its footprint to the heart of shop-floor operations. Here you can capture shop-floor data to reduce errors in manual entry time and work. Changing product lines becomes dynamic, with new shift patterns adopted to suit.
These are a small handful of examples, but they highlight technology at the heart of recovery.
Green shoots of recovery
A recovery, of sorts, is underway. Looking at the projections, a full revival could be some way off. The second wave lockdown is evidence enough there remains tough times ahead before COVID is through.
Those who have invested in technology will likely suffer less because they can adapt faster managing a flexible and predictable supply chain.
And those investing in technology now will be in prime position to capitalise on post-COVID opportunities, aiding society in regaining a semblance of normality and reassurance of a brighter future.
This ‘normality’ may see the manufacturing world look slightly different though. One where manufacturers are adaptable, supported by a more flexible foundation and able to evolve and innovate more quickly.
Manufacturing for success in a post COVID world
COVID has forced manufacturers to ask themselves: How resilient are our supply chains?
But unlike past recessions, driven by political policies, over production and shifts caused by industrial decline such as mining and steel, this COVID driven recession is different. Yes, COVID is global, its impact, albeit vast, is rapid, but it is not leaving behind the same industrial wastelands of the past; the future is not as dire as normal economic indices might suggest.
The rapid pace of COVID means people’s perceptions have not changed radically, nor their desire to consume. Industries have not built up the excess stock you see in an industrial slow down, and the inherent slow-down in production is not here. There remains a need for a skilled workforce to operate machines and fulfil this demand.
Historians may look back and view this as a short sharp ‘hiccup’, but one clear and lasting impression remains. Those with businesses built on modern technology, such as Microsoft Dynamic 365, have fared better because with greater insight, comes better-informed decisions and the ability to react and respond faster.