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What do we expect for manufacturers in 2022?

 

It has been 21 months since the World Health Organization declared the Covid-19 outbreak a pandemic, but it has felt like eons longer. That’s in large part because we keep reliving the same story lines again and again. Business operations and air travel are getting disrupted yet again by a spike in Covid cases and the emergence of the omicron variant. Americans just keep buying boatloads of physical stuff, overloading logistics infrastructure. The virus has solidified overly globalised supply chains “as a liability” and should “accelerate the unwinding of far-flung parts networks” and boost the adoption of industrial software to guard against unplanned downtime. The observation would be just as pertinent today.
So as this year finally draws to a close, what should we expect for manufacturers in 2022? Much like Covid itself, the key themes of 2021 aren’t going away, from supply chains to increased automation and a bevy of breakups. The industrial economy is entering a new stage of the recovery, though, and that has implications for everything from capital spending to equity valuations.
There are some encouraging signs that the supply-chain congestion in the US may be easing as freight rates moderate from record highs and ports chip away at container pileups.
Nothing is fixed, though: “The problem is really severe, and it will remain severe for at least another year,” Sanne Manders, chief operating officer of Flexport Inc, said in an interview.
But barring a shutdown of the West Coast ports because of coming labour negotiations, manufacturers have most likely already seen the worst of the supply-chain crunch — and the larger companies have generally managed
just fine.
While disruptions and rising costs have pinched margins and near-term sales at the edges, pricing power is off the charts and orders just keep climbing. There’s no guarantee that the sales manufacturers couldn’t complete in 2021 because of supply-chain challenges will still be there for the taking in the future, but bloated backlogs help support the narrative that the challenging operating environment isn’t eating into demand — at least not yet. Even businesses with shorter production cycles such as Fortive Corp’s Fluke test and measurement unit have backlogs.

—Bloomberg

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