The electronics manufacturing recovery is underway. Here’s a look at what’s driving the momentum and how it could impact the supply chain.
As the world looks forward to 2021, and the next phase of pandemic management, the electronics industry is finally starting to settle into some sort of normalcy — and is even on a trajectory for growth. The upcoming holiday season will be an important step to pushing those numbers higher and further boost the electronics manufacturing recovery.
The electronics manufacturing recovery: By the numbers
U.S. manufacturing has been characterized by a strong rate of growth this fall. To summarize a few of the key figures from the Institute for Supply Management’s (ISM) manufacturing index, the PMI:
- Strongest expansion rate since 2018: PMI rose 3.9% to 59.9% in October
- Highest order growth since 2004: New orders increased 7.7% to 67.9%
Tim Fiore, chair of the ISM’s manufacturing survey committee, commented in EPSNews. “It’s an excellent report. We are seeing the climb-out from the recession. We never expected to see that level of growth in new orders.” (A rate above 50 indicates manufacturing expansion.)
Meanwhile, a survey by the Electronic Component Industry Association’s (ECIA) shows components sales are robust. All major areas — including electromechanical/connectors, passives, and semiconductors — register on the survey’s index between 116 and 119 for November. Any measurement above 100 indicates expected growth.
Reimagining the holiday shopping experience
For electronics manufacturers, the realities of the pandemic combined with the realities of the competitive landscape are shifting supply chain demands. Apple has launched a variety of new products in recent months, underscoring the expectation of consumer hunger for new tech toys even as the shopping season may look wildly different this year.
The 2020 US Retail Holiday Trends Guide, published last month by CBRE Research, outlines four features that may change:
- Slowing brick-and-mortar sales: With an upswing in COVID-19 rates, shoppers may turn away from going to local malls or stores.
- A longer shopping season: Supply chains may be caught unprepared by shoppers and retailers trying to get a leg up on the holiday season, whether it means shopping early or stocking virtual shelves way in advance. Amazon, as you may recall, sent retailers scrambling when Prime Day took place in mid-October instead of July, essentially kicking off the holiday shopping season before anyone had time to respond.
- Surging e-commerce sales: E-commerce sales will have record year-over-year growth of at least 40% in November and December combined. All in all, the surge in online shopping is expected to reach 32% of total retail sales (which last year amounted to $730 billion) during the last two months of the year.
- Bringing balance: Traditional stores will be hard pressed to reimagine the in-store shopping experience, providing safety for both customers and employees, while maintaining an air of festivity.
The supply chain difference
In the wake of shifting demands, combined with the complexities of the pandemic, OEMs must be ready to manage global supply chain disruptions. Deloitte suggests a number of actions that can help manufacturers build a robust supply chain amid uncertainty:
- Set up a crisis management center that looks beyond current realities to identify clues and scenarios about how to rebound, and to capture opportunities during this recovery period.
- Invest in technology that provides control towers and implement skilled program management to achieve timely data visibility, prescriptive insights, and self-driving execution.
- Implement a risk dashboard, including risk sensing, to enhance resiliency during rebound efforts and to get a future look at potentially disruptive events.
- Keep alternates sources in mind to create a resilient supply chain that can react to materials demands from various regions.
- Develop mitigation plans and consider risk/reward tradeoffs for the recovery period. The plan should offer potential alternative actions if new realities trigger alarms.
To summarize: With the holiday season looming, electronics manufacturers need to plan strategically to take advantage of the potential for growth even as the pandemic lingers. Record-breaking sales would pave the way for continued electronics manufacturing recovery.