The uncertainty and disruption caused by the COVID-19 pandemic created significant challenges for the manufacturing industry. The combination of forced business closures, new employee safety requirements, reduction in new orders and completely unexpected supply chain disruptions left many with more questions than answers. Now that the vaccine is being widely distributed, new systems for employee protection deployed, and an increase in new orders, manufacturers have turned the page. According to the Manufacturers Outlook Survey: First Quarter 2021, published by the National Association of Manufacturers (NAM), industry optimism is at a two-year high. The survey found that manufacturing output is expected to exceed pre-pandemic levels in the next few months while the need for new employees is also projected to move in the same direction. Despite the good news, many report continued issues with the supply chain and workforce. To help clients, prospects and others, McKonly & Asbury has provided a summary of the key findings below.
About the Survey
The survey was conducted in the field between February 19 and March 5, 2021. It includes responses from 450 manufacturers ranging in size from small to large companies. Specifically, responses were gathered from 102 small manufacturers (22.7%), 240 responses from medium-sized manufacturers (53.3%) and 108 responses from large manufacturers (24.0%). The primary industrial classification of respondents included chemicals, computer and electronic products, electrical equipment, fabricated metal products, food manufacturing, furniture, machinery and transportation products.
Key Survey Findings
- Return to Pre-Pandemic Revenue – The question on most business owners minds is when the industry will return to pre-pandemic levels. It was found that 33% indicated revenues had already returned to pre-pandemic levels while 6.3% reported revenues will return by the end of first quarter of 2021. Overall, 67.6% of respondents indicated they expected to see a return by the end of 2021, while 85.7% indicated the same by the end of 2022.
- Overall Business Outlook – As the impact of the pandemic continues to subside, the survey wanted to understand the overall outlook for industry companies. It was reported that 27.3% reported having a very positive outlook, 60.22% somewhat positive, 10.67% somewhat negative, 1.78% very negative. It appears that confidence is returning as over 87% of respondents have a positive outlook.
- Current Business Challenges – There was also discussion about the top business challenges facing industry companies. The survey found that 76.2% of respondents indicated the rising price of raw material costs to be a top challenge, 65.8% indicated attracting/retaining a quality workforce, 50.9% rising healthcare insurance costs, 50.2% rising transportation and logistics issues, 48.7% supply chain issues and inventory management, 29.3% trade uncertainties and 17.3% cited slower export sales.
- Full Time Employment – Given the workforce issues many are experiencing, the study inquired about expected changes in full-time employment. It was found that 8.0% of respondents expected an increase of more than 10%, 17.78% an increase between 5% to 10%, 34.4% increase up to 5% and 33.56% expected employment to remain the same. On a positive note, minimal decreases are expected with only 7% indicating some level of workforce reduction is possible.
- Employee Compensation – Since full-time employment opportunities are expected to increase, the survey wanted to understand if employee compensation will increase over the next year. It was found that 8.72% of respondents expect an increase greater than 5%, 32.44% an increase between 3% to 5%, 48.77% an increase up to 3% and 9.62% no change. Less than 1% expect to decrease compensation.
- Product Price Changes – The survey also wanted to understand how product prices will be impacted by the various challenges faced by industry companies. It was discovered that 11% of respondents will increase prices more than 10%, 25.89% will increase prices between 5% and 10%, 37.72% will increase prices up to 5% and 23.44% expect prices to remain the same. Less than 2% of respondents expect they will reduce prices in the coming year. It is likely the expected price increase is being driven, in part, by the rising costs of raw materials.
It appears the manufacturing industry is recovering quite rapidly from the seismic changes brought about due to the pandemic. However, with growth comes challenges in workforce management, compensation, and other operational areas. If you have questions about the information outlined above, our seasoned and experienced manufacturing professionals are here to help. For additional information, call us at (717) 761-7910 or click here to contact us. You can also visit our webpage to learn more about the manufacturing services our team provides.