How Will COVID-19 Impact Manufacturing?

3 Ways COVID-19 may impact manufacturing as we know it today

In early 2020, the U.S. economy was humming. According to the January Bureau of Labor Statistics’ Employment Situation report, the U.S. saw employment rise by 225,000, while unemployment remained about the same at 3.6%. By March as we started to feel the effects of the coronavirus, nonfarm payroll employment fell by 701,000 and the unemployment rate rose 4.4%. April 2020 numbers are expected to be much worse with more than 22 million Americans filing for unemployment in the past four weeks alone.

The recent coronavirus crisis has wreaked havoc on the lives of most individuals with growing concerns for one’s personal health as well as the economic health of our employers and nation. Although it is too soon to say what long-term impact the coronavirus will have on the workplace, it is safe to say that COVID-19 will change and have a lasting effect on manufacturing.

Here are 3 ways COVID-19 may impact the manufacturing sector as we know it today.

Diversification and Change of the Supply Chain

Prior to the coronavirus outbreak, U.S. manufacturers were already taking actions to diversify supply chains outside of China in response to the implementation of tariffs. A recent Goldman Sachs survey found that companies were already “rerouting supply chains and relocating production to mitigate exposure to the trade war.”

Now with critical production and supply chains shut down or disrupted over the last month due to the coronavirus, will this trend to diversify and “reroute” supply chains accelerate?

Will U.S. companies adapt to so that they have sufficiently diversified supply chains and production capacity in the U.S. and North America to ensure that they are not adversely impacted during future crises?

Implementation and Expansion of Social Distancing Measures

We have already seen the impact of social distancing measures through the closure of all non-essential businesses and the adoption of work from home strategies. Manufacturers that are considered essential have quickly instituted social distancing measures to ensure a safe work environment while maintaining production. Measures such as workplace temperature checks, safe distancing in production areas, and adoption of wearing face masks have become the norm in plants across the U.S.

Will these workplace safety measures persist after the coronavirus outbreak is behind us? Does this mean the work from home or telecommuting practices will become more widely accepted and utilized for non-production roles?

Are we entering a time where all but essential travel is replaced by video conferencing and virtual meetings to ensure safety and enhance productivity?

It may be too early to tell but it is safe to say that many of the social distancing measures and workplace safety rules that are with us today are here to stay.

Increased Use and Acceleration of Automation

Prior to COVID-19, we were already seeing an increase in the use of automation in manufacturing and logistics. Due to reshoring, manufacturing employment in the U.S has steadily grown over the last ten years to more than 12,8 million in March 2020. The impact of the reshoring manufacturing combined with the decrease in the cost of automation may well mean that we will see an acceleration and expansion in domestic manufacturing due to the increased adoption of automation and reshoring.  Automation and reshoring of manufacturing can increasingly help companies diversify supply chains and mitigate the impact of any supply disruptions in the future.

Will this trend of increased automation combined with reshoring continue? It is likely that companies will implement these strategies to a greater extent going forward to further insulate themselves from supply disruptions while taking advantage of automation.

No one really knows how manufacturing is going to be impacted long-term by COVID-19. Manufacturing will change and adapt as a result of the coronavirus crisis. Hopefully, we will benefit from the changes brought about by COVID-19 that result in a safer workplace and a more competitive U.S. manufacturing sector.