The coronavirus pandemic has disrupted traditional supply chains and forced many manufacturers to alter what they make and where. In this conversation with SupplyChainBrain Editor-in-Chief Bob Bowman, Tony Uphoff, President and Chief Executive Officer of ThomasNet, reveals the findings of the company’s latest North American Manufacturing Trends report, covering the fourth quarter of 2020.
SCB: With regard to this latest Manufacturing Trends report, what struck you as most notable this time around?
Uphoff: Two things. One is that we continued to see radical shifts in sourcing due to the pandemic, particularly around PPE [personal protective equipment] and related products and services. The dramatic increase in vaccine-related supplies and equipment shouldn't have surprised me, but it did. We're seeing a 30% to 35% projected increase. It's been announced that in the United States alone, we would need 850 million more syringes to ensure that we're able to do double dosing of the vaccine. Thinking about the logistics of that, it's an exponential lift from what you would see in a normal year.
The other thing that surprised me was a big increase in printing services. You might think to yourself, Wait a second. We're living in the era of digital transformation. But printing services are up by double digits, and it actually makes sense when you break it down. We’re seeing printing businesses specializing in a range of different services, particularly with the growth in e-commerce, including a tremendous increase in printing on boxes, as well as on COVID-19-related testing units and related supplies. In addition, when people are brought in for vaccination, the related material needs to be printed as a physical manifestation of checking then in.
SCB: Not just in Q4, but throughout 2020, were you also surprised by the ability of manufacturers to pivot so quickly to the production of supplies related to the pandemic?
Uphoff: It was stunning, but I'll say yes and no. The “yes” side was how fast people pivoted. The “no” relates to the dramatic and sustained increases in advanced manufacturing that we’ve seen taking place over several years now. The use of robotics and other types of technology on the factory floor have set the stage for being able to make that pivot. But it's one thing to have the technology in place, and another to actually do it. This isn't about the technology — you either have it or you don't — it's really about cultural and business agility.
We set up a COVID-19 response supplier hub on thomasnet.com about a year ago. It was a call to arms, where we could see that supply chains were collapsing, particularly in the early stages, around PPE. We had over 6,000 companies register, and an enormous chunk of them were able to create capacity to produce PPE. It wasn't just masks; in many cases it was gowns, gloves, shields, partitions, and a lot of other things that fit under that heading.
As the story gets told about the pandemic, I think it will be one of remarkable agility. North American manufacturing in particular has been able to pivot and open up capacity. Companies doing plastic injection molding had never gotten involved with syringes, but were able to work with OSHA and CDC on the guidelines, and the next thing you know they're producing syringes.
SCB: Even more amazing that manufacturers were able to scale up so quickly despite the need for social distancing. This is not an industry where remote work can succeed. How do you feel about industry’s ability to address the people problem?
Uphoff: It’s incredible. There's all this advanced manufacturing and robotics, but that doesn't mean there aren't people in the factories. Increasingly, we need more of them, because there's quite a skill shortage. It’s remarkable to see companies managing through this. They’ve had to balance the production facility: "Can I produce this new product or service to support the marketplace? And how do I do that while also keeping my employees safe and adhering to the guidelines?" We saw factories put up partitions and create protocols and workflows so that people could appropriately social-distance. You have a lot of different jobs in manufacturing today, and those on the factory floor are the most difficult to deal with. But there are also a tremendous number of front-office jobs: in sales, marketing, billing, customer support, and many aspects of technology. A lot of manufacturing today is about technology and software developers and engineers. So some of that work could become remote. Nevertheless, I’m inspired and amazed at how well so many of these companies were able to make the transition safely.
SCB: What do you see as the biggest growth sectors for 2021?
Uphoff: There are a few that we're keeping our eye on. Anything related to the vaccine, supplies and equipment — you're going to see continued growth there. You’ll see it in the PPE area. And there’s a lot of growth in pharmaceutical processing equipment. That's a category that has been growing for a while now. Another is security and surveillance equipment. One reason for that is the need to de-risk supply chains. Today, you're seeing a lot more use of real-time cameras and other things to help people understand where there might be a failure or a system going down. We tend to think of surveillance equipment only with respect to criminal activity, but it's being used in so many different areas. At the same time, because so many people are shifting to remote work, and there are fewer in the workplace, there’s been an increase in companies installing security cameras and systems, even during daylight or normal office hours.
Finally, an area that’s been on a growth curve for a while now, and we think is going to continue, is biodegradable packaging. To meet regulatory requirements and consumer preferences, companies are moving to more recyclable packaging. We’re starting to see sourcing and supply chains head in that direction.
SCB: Do you see a permanent buildup in domestic manufacturing capability for PPE and the like?
Uphoff: The simple answer is yes. If anything, you might see a conscious oversupply. This is a trend that doesn't get talked about a lot, but companies have been caught flat-footed. Whether you're a hospital chain or in an industry that relies on PPE products and services, you hadn't seen much volatility in that area for a long time, so you were caught unaware. If you're on the board of directors, you're probably saying to the CEO of the company, "Let's do a little oversupply here. Let's carry a little more on our books. This isn't perishable, this isn't food products." As you know, 85% of PPE has historically come out of China. People are realizing that having production that’s closer to where you're supporting customers is important. So I think you'll see more production of PPE in North America.
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