The past few months have been eventful for the global markets. With shortages plaguing the economy and industries opening up way past their due, we can expect even more uncertainty to take over in the coming years. And while most economists and analysts generally agree that the market sentiments sway toward an overall bullish trend, there is no guaranteeing that nothing unexpected was to blow things over and put us back at square one.
However, if there’s one industry that’s been balancing on a knife’s edge, then the manufacturing sector is a market worth reviewing because it happens to be both overwhelmed by production orders but also greatly benefitting from economic recovery. So, today we’ll be going over the pressures on the manufacturing industry and whether it teeters toward a more optimistic outlook or paints a less appealing picture.
What’s Pushing The Manufacturing Sector Forward?
From a broad perspective, it’s only natural for the manufacturing sector to push forward as the economy rebounds because most industries largely depend on the capacity of this industry to remain in operations and create end-consumer products. Specifically, three market trends support this positive push: the increasing demand, a promising job market, and the mass adoption of improved technology and E-Commerce.
- Increasing Demand: Industrial air-conditioning units are blasting at full capacity, and work floors are filled to the most acceptable level possible because demand won’t stop rising. And apart from the incoming orders for current demands, there are also backlogged orders that have yet to be fulfilled because of the limitations and restraints imposed by the global pandemic during the initial outbreak. On the one side, there’s no denying that the industry has been stretched too thin, but it does point to a lot of work that needs to be done and demand to keep the industry busy.
- Promising Job Market: Labor shortages caused by health restrictions have severely limited the number of orders that get fulfilled, but now that the world is slowly opening up, it points to a more promising job market. And to complement the increasing demand, manufacturing companies need all hands on deck, which will directly generate more livelihoods. From shipments to resource acquisition and even suppliers, every step of the manufacturing process is short on people and will benefit from a hungry workforce.
- Technology & E-Commerce: Covid-19 forced every business to migrate to the digital platform. While it did take a lot of getting used to, it has sped up the innovation of technology and massively boosted the growth of E-Commerce. As a result, there’s a new realm of investing opportunities available to further improve the overall infrastructure of the industry. And we will only continue to see this trend grow as the surge of online users shows no signs of slowing down.
However, It’s Not All Perfect.
Nevertheless, despite how good the odds may seem given the positive push factors, it’s not all sunshine and rainbows for the manufacturing sector because there are still looming threats and risks that pose a danger to the industry. Specifically, we cannot overlook that supply chains are depleted, raw materials are getting more expensive, and we face an endless number of logistics issues and long lead times.
- Supply Chains Are Depleted: We have yet to resolve any of the prevalent shortages in the market, and many supply chains remain depleted and heavily strained beyond recovery. Therefore, unless the economy can do something about the extreme lack of raw materials and resources or recover an acceptable percentage of inventory, the manufacturing industry won’t be capable of operating at optimal capacity.
- Raw Materials More Expensive: Rising demand and extreme shortages inevitably drove the prices for raw materials higher. If basic commodities such as lumber and steel continue to inflate, the profit margin for manufacturing companies will suffer. As a result, it will impede the industry’s growth and slow down any economic progress to be had in the coming years.
- Logistics Issues And Long Lead Times: While the world has opened up by a considerable amount compared to the initial outbreak and lockdowns, we have yet to reach pre-pandemic levels of movement. And currently, logistics issues are preventing shipments worldwide from arriving on schedule and causing long lead times during such a crucial economic period.
Resilience And Perseverance
Overall, two redeeming qualities will define the manufacturing sector’s ability to capitalize on the available opportunities, which are resilience and perseverance. And if they manage to power through all the relevant issues and everything plays out in their favor, then there’s no doubt that the optimistic outlook could turn out to be much better than expected.