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Manufacturing Faces Uncertain 2020, Deloitte Says

Bill Koenig
By Bill Koenig Senior Editor, SME Media

Manufacturing faces “continued risk for disruption” and uncertainty in 2020, consulting firm Deloitte said in a report.

“The coming year promises to be an ever-changing environment for manufacturers as they try to regain their footing amidst continued volatility and policy decisions,” according to the firm’s 2020 Manufacturing Industry Outlook report.

In the U.S., manufacturing hiring has slowed this year compared with 2018. Trade tensions, particularly a U.S.-China trade war, have a complicated business for manufacturers.

Deloitte cited “ongoing uncertainty in tariffs and their subsequent impact on trade flows.” Tariffs are taxes on imported goods. They are paid by importing companies and the cost is often passed on to customers. Tariffs are not payments from one country to another.

“Costs throughout the manufacturing value chain are seemingly impacted every day,” Deloitte said. “The uncertainty appears likely to continue into 2020.”

The report outlined steps manufacturers are taking.

--Streamlining operations: Some manufacturers are divesting some operations while streamlining and moving to “double down on the core of their portfolios,” Deloitte said.

“Some are turning to mergers, acquisitions or divestitures to get their ‘houses in order,’” according to the report. Such activity is “primarily focuses on product, customer, and geographic expansions.” Deloitte said it expects fewer, but higher value, M&A deals.

--Building “digital muscle”: Manufacturing companies are looking to artificial intelligence, cloud computing, advanced analytics, robots and 3D printing to improve their operations.

Such technology permits “manufacturers to make faster changes…to respond to market-based threats or opportunities,” Deloitte said.

--Forming partnerships: “As manufacturers think about building agility into their supply chains, there is increasing realizing that these efforts cannot occur in isolation,” according to the report. To improve their digital capability, companies may turn to “partnerships and joint ventures rather than outright acquisitions.”

--Renewable energy: A Deloitte survey of manufacturers said 64 percent of respondents “plan to source a significant percentage of their electricity from renewable resources over the next five years,” according to the report. In 2020, Deloitte said many manufacturers will “experiment with multiple renewable energy resources.”

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