Covid-19 hit U.S. manufacturing in a variety of negative ways – from supply chain disruptions to HR challenges. But on the demand side, many sectors have seen stable to rapid growth in customer orders: Food & Beverage, Pharma, PPE, Telecoms Equipment, some Medical Device segments, and Warehouse and Distribution centers are all experiencing growth. While it may be short-lived, this spike in demand has accentuated operational pain points that could be addressed by industrial automation –
Each of these dynamics on its own could cast automation as a prudent investment for risk management, not just for operational efficiency. Taken as a whole, it seems likely that more companies will be actively considering industrial automation investments.
Working against an uptick in industrial automation is simply its cost. Most companies are carefully watching if not limiting capital investments. Viewed through this lens, the idea that we’d see a slew of costly new infrastructure projects seems far-fetched. But money has never been cheaper, and companies with strong balance sheets may be able to finance capital improvements more efficiently now than in the past.
The biggest variable to watch is, without question, reshoring activity. There has certainly been a lot of talk about supply chain diversification and redundancy in the wake of the pandemic, and even before the pandemic trade uncertainties have been driving more businesses to think twice about their exposure to China. But whether or not that will lead to a significant uptick in reshoring has yet to be seen. Reshoring will exacerbate chronic labor shortages in the manufacturing sector, leaving few practical options that don’t rely on automation. And with higher labor costs in the U.S., the ROI for large scale industrial automation projects begins to look more attractive.
Without a clear trend toward reshoring, we expect an uptick in industrial automation investment in Q4 2020, into 2021. With an increase in reshoring, we expect that growth to accelerate through 2021, 2022, and 2023.