The Pandemic’s Impact on American Manufacturing

Manufacturing leaders and industry analysts share their insights on how COVID-19 is affecting U.S. manufacturers, and what it could mean going forward

By Mark Shortt

August 13, 2020

For many American manufacturing companies, the COVID-19 pandemic laid bare their need to make their supply chains more resilient and less vulnerable to risks. And while many smaller suppliers have continued operating while producing essential parts and services, others have taken big hits to their businesses.

Design-2-Part spoke with numerous manufacturing and supply chain experts to hear their insights on how the pandemic is affecting their businesses and the industry as a whole, what it might mean for the industry going forward, and what companies can do to protect themselves against future disruptions.

Following are transcripts of our conversations, edited for length and clarity.

Brian Marks, Executive Director, Entrepreneurship and Innovation Program, and Senior Lecturer of Economics and Business Analytics, University of New Haven

D2P spoke with Brian Marks, J.D., Ph.D., senior lecturer of economics and business analytics at the University of New Haven’s Pompea College of Business, about the economic impact of the COVID-19 crisis on manufacturing companies, including small and medium sized businesses.

D2P: How would you describe the impact that the pandemic has had on manufacturers and their supply chains?

Brian Marks: This pandemic is a transformative event. I know I’m stating the obvious, but it’s going to be transformative. I think everyone will be reexamining the supply chain, and the implications of what a crisis has on each and every aspect of the supply chain. It’s not so much where we’re manufacturing things, but where do we get our components?

As we saw after 9/11, the nation turned inward.  I think we’re going to see something similar. I think there will be entrepreneurs who are going to say, ‘We can be cost effective here in the United States, and maybe we shouldn’t outsource as much as we did before, because, by keeping it close to home, we can be more agile, more resilient. I think other nations are going to see the same thing, which, arguably, is not good news for economic growth and development on a worldwide basis.

We may very likely see costs of production go up. And then, as time marches on, we’ll look at this pandemic in the rear view mirror and we will have made some changes, but at the same time, we may move in the direction of sort of opening up again, and outsourcing (offshoring) of manufacturing, or components.

But certainly, in today’s environment, businesses—international, national, and regional—are all looking at supply chains. Governments—federal, state, and local, municipalities—are, too. We will see innovation in the supply chains. I worked in warehouse management, transportation management software, and we saw a movement to just in time delivery, and in managing the transportation within that supply chain.

In the area of PPE, let’s be realistic: We’re not manufacturing enough here in the United States; our hospitals are in dire need. Certainly, some people have come up with innovative solutions, but are they scalable?

Everyone talks about ‘Necessity is the mother of invention.’ I like to say, ‘Challenges create opportunities for innovation.’ Right now, we’re just responding to critical needs in the manufacturing process, and we need to be resilient and agile. Small manufacturers can take a look at their domestic operations here in the U.S., and can say, ‘Can we imagine how we can shift our current assets, and repurpose them for other uses?’ We saw distilleries transforming their assets to produce sanitizers. So, the small manufacturer who has that entrepreneurial mindset, who can transform its assets and redeploy them, will, knock on wood, survive the storm. Others may not.

Small manufacturers are always looking for the hedge—how to protect their business and operations. I think what we may see, and which very likely could have a lasting effect for small manufacturing, is that when small manufacturers start looking at replacing equipment, or putting in new equipment, they may look at their equipment with an eye towards, to what extent can this equipment be redeployed in another way to produce related goods and services? And, quite frankly, maybe to produce related goods and services in the healthcare industry, or for public health purposes. When we talk about innovation and equipment in manufacturing facilities, can someone go ahead and say, ‘Yes, we can quickly redeploy for healthcare purposes.’

Small manufacturers who can turn around and redeploy and transform their assets are probably going to be the ones who are going to be sustainable in the long run. So, if I were to advise a small manufacturer, I’d say, ‘Think about your operations, and think about something that could be allied to what you’re doing for healthcare.’ Because healthcare crises are going to be, no doubt, in the forefront of everyone’s minds.

I teach entrepreneurship and innovation at the University of New Haven. I’ve talked to my students about the need to have the entrepreneurial mindset. You need to be flexible, and small businesses generally are the ones who have that flexibility.

Often, innovation starts in the garage or in the basement. That’s all well and good, but the key is going to be scalability. Why do we want scale? Because economies of scale reduce the per unit cost of production, and that’s what can drive economic development and growth, and that’s what can drive accessibility to the various components that are needed, and make them available universally, and not just for someone who can afford the high end.

D2P: Do you see any other potentially long lasting impacts of this pandemic on the economy, or ways of doing business?

BM: First of all, from a facilities standpoint, everyone, from the small manufacturer, even to the large manufacturer, is going to reexamine facility utilization. No ifs, ands, or buts about that. The one thing we always have to keep in mind is that human beings are social animals, so we do like social interaction, and we do like not just video contact, we like social contact, physical contact with each other. But I think we are going to see that part. People are going to reexamine facility usage, reexamine the amount of square feet per person in a space.

Now, on the technology side. As we are transforming, in general, to leveraging more information technology infrastructure, we are going to need security, and people are going to need to be cognizant of it. Let’s put it this way: Everyone quickly moves to Zoom, and Zoom quickly found out they had a security issue, and a privacy issue. So, the rush to respond to this crisis has demonstrated the need that we certainly need to shore up: our information technology environment in the area of cybersecurity, which is what one will move towards.

Will we see robotics? We’ve already seen that move here in the United States. The real questions will be, what more will move to robotics and automation? Can some of the things that have been outsourced before, and that require fine motor skills, come back to the United States? Will we see advances in robotics to facilitate the production of certain goods that require those fine motor skills?

As far as the pandemic as a public health and economic crisis, there are political-economic ramifications. This is a crisis of how to govern—the proper role of government, the proper interplay of our Federalist system as designed by the U.S. Constitution. And we also have to recognize that our founding fathers, the Constitutional design, tended to favor the status quo. Its institutional design, just like all our institutions, is not quick to pivot and change because we are a democratic republic. And I think when we look back in the rear view mirror, some people are going to look at, yet again, what is the proper role of government? I think we may see that as soon as the election of 2020, that there are going to be discussions along those lines.

Ever since the founding of this country, we’ve been debating, ‘What is the proper role of government in a democratic republic?’ And just historically, since the founding of our country, we have generally left public health issues to be local issues. And the real question now is, given the nature of our society, given our ability to travel across the country and be interconnected communities physically, not just through a phone, to what extent will public health issues start reverting to a federal role? And is that necessarily the correct thing? I think only time will tell. But I think what we are going to see in the 2020 election and beyond, people are going to be debating, ‘What is the proper role of government?’

 

Justin Berkenstock and Steven Wright, ATron Group

Justin Berkenstock is director of sales and marketing, and Steven Wright is director of engineering and technical services at ATron Group LLC, a provider of wire harnesses, cable assemblies, and sheet metal fabrication services in Dallas, Texas. ATron was one of eight U.S. companies recently selected by NASA’s Jet Propulsion Laboratory to manufacture its new VITAL ventilator for COVID-19 patients.

D2P: How would you say the COVID pandemic has affected your business overall?

Justin Berkenstock: I look at it from the standpoint of, where certain things have become more closed off or more difficult, it’s allowed us to also uncover things that were slightly different, or new opportunities for doing business in a different way. While some industries have come to screeching halts with what they’re manufacturing, there are other industries that have taken off like a rocket ship.

Searching out those opportunities is part of the flexibility that ATron builds into its systems. It really allows us to say, ‘Okay, if this is down, where else do our skillsets lend themselves to, where we can make a very positive impact into that community? And we can pivot very quickly to do that.

D2P: From this experience, what lessons can we draw about our supply chain’s readiness to provide needed medical parts in the future? Do you see OEMs looking to make different decisions on where they’re going to source parts?

Berkenstock said he’s seen companies in different industries get “absolutely crushed” by the disruptions brought on by the pandemic.

“It’s opened a lot of people’s eyes. I think we’ve learned some very valuable lessons—not necessarily within our company, but as a whole, as an entire country—about single sourcing, where we source things from, and how we are applying our process of managing supply chain,” he said.

Berkenstock added that ATron performs operational risk analyses that inform the company’s sourcing decisions. In the course of these analyses, the company considers the implications that a pandemic or geopolitical factors, for instance, could have on its business. Events that happened before COVID-19 had already started to change people’s thinking about how to manage supply chains, how to source parts, and how to consider “what if” scenarios. When the pandemic became front page news, ATron was able to react quickly.

“It’s our way, and it’s built into our infrastructure of the company, that we’re not going to ever rely on one single source or one single point of failure,” Berkenstock said.

D2P: Do you think U.S. manufacturers—the OEMs—will be more inclined to look to shorten their supply chain by looking more toward American suppliers?

ATron’s Director of Engineering and Technical Services, Steve Wright, said he believes COVID-19 is helping bring U.S. manufacturers together. He’s seen companies steer their operations head-on into the challenges of building complex, critically needed parts, all while putting humanity over individual advantage. Some of them got into manufacturing to produce industrial parts and are now wholeheartedly embracing the opportunity to make a medical grade valve.

Wright said the president of one company called to say he was willing to put in another manufacturing line at no cost to ATron, to do nothing but to serve ATron’s business.

“As a guy at a contract manufacturing/engineering company, it’s been heartwarming to hear guys talk about that, instead of hitting me up with, ‘I put in a line, but we’re going to have to amortize that over so many pieces and raise your price by double,’” Wright said. “I have been amazed to hear people say, ‘You know, we can build an American product that can help Americans and the rest of the world, and all I’ve got to do is put a little bit of something behind it. I can work with these guys, and we can take care of it.’”

For more on the VITAL ventilator, see How Engineers at NASA-JPL Persevered to Develop a Ventilator. For more on ATron Group, see Finding Our Heroes Among Us.

 

Joseph Tenebria, Myers Precision Grinding

Joseph Tenebria is president and owner of Myers Precision Grinding, a provider of grinding and machining services that include ID, OD, centerless, surface, and thread grinding, as well as general machining. The company, located in Warrensville Heights, Ohio, employs 16 people in a 22,000-square-foot facility. It is a supplier to manufacturers of components for gear, transmission, and power systems in the aviation, automotive, medical, and energy industries.

Parts manufactured by Myers Precision Grinding include fasteners for numerous industries, worm shafts for power transmission, lead screws for machine tool manufacturing, motion components, medical device components, and molds for plastic closures and medical implants.

D2P: How has the COVID-19 pandemic affected your business?

Joseph Tenebria:  We had scheduled deliveries of 10,000 pieces per month going throughout 2020 with our number one customer. We shipped in January, and they shut off the pipeline. So, we lost almost 100 percent of our sales with our best customer for February, March, April, May, and June. They released us 7,000 parts to make and send in July. So, that was a hit.

My second best customer shut down when the Governor shut down the state, and they were out for three weeks.

We, on the other hand, received about 30 emails from existing customers that said that they were essential businesses, and the work that we did for them was essential to them. So, we were deemed essential.

Both of the customers I mentioned are up and running now. Aircraft work has picked up, power transmission work has picked up, so we’re seeing some good life in those areas. I add our orders every day, so we’re on the right track. We’ve had 47 years in this business. We know how to go through lean times.

Manufacturing will come back, and we will be stronger, although there will be fewer of us. I have children in the business, and we will go into the next generation because that’s their livelihood. But if I didn’t have kids in the business, and this all came around, I might have walked away.

D2P: What can U.S. manufacturers do to be better prepared the next time a crisis hits? Do you think this will cause OEMs to rethink where they’re sourcing their parts?

JT:  Absolutely. We cannot depend on third world countries, and communist countries, to provide our products. America can build anything here, at a price. And the American public has been essentially brainwashed by the Walmarts of the world to buy cheaper. But what ‘cheaper’ has done is removed good manufacturing jobs from this country and sent them elsewhere.

I think that there’s enough movement for people to buy American. And we, in the manufacturing world, are producing the equipment that everybody else is using. So, if something costs $3 in China and it costs us $8 here, but you’re selling it for $400, just eat that and give the job to an American. There’s enough people that are making enough profit on stuff, it’s almost greed.

We could go down this rabbit hole all different directions. But I think the American manufacturers have to look at it and say, ‘Wait a second. If we build, if we sell helicopters to Italy, Italy’s requirement is that 50 percent of that helicopter be built in Italy. Do we have the same requirement?

 

Rich Hoster, Smith & Richardson

 Rich Hoster is president of Smith & Richardson, Inc., a precision machining contract manufacturer in Geneva, Illinois.

 D2P: The COVID-19 pandemic disrupted U.S. supply chains, and affected our readiness to provide critical medical supplies when needed. What can OEMs do to build a more resilient supply chain so that they’re better equipped to handle the next crisis?

 Rich Hoster: I do think, unfortunately, we’ll always all be driven by the dollar. The low-cost countries are always going to play a part in some way in the manufacturing world. But understanding your supply chain, understanding where the product comes from, and making sure that you do have backups in place and alternative sources for items is important, so that you’re not necessarily single-sourced and beholden to somebody that might be seven, eight thousand (7,000-8,000) miles away, and with no other alternative than to wait for that product.

I think one thing we’ll start to see is the questioning of all the computer control logic. That’s really been the biggest backlog for a lot of these companies because every one of these machines has computer chips in it. I don’t produce those, but without them, these machines don’t work, and most of that is produced in Asia.

For more on Smith & Richardson, see Finding Our Heroes Among Us.

 

Suketu Gandhi, Partner, A.T. Kearney

The disruptions wrought by COVID-19 the crisis  have caused numerous company executives to ask what they can do to make their supply chains more resilient. For many of these executives,  their focus has moved from cost to resilience in less than nine months, said Suketu Gandhi, a partner with the global consulting firm A.T. Kearney and a digital supply chain expert.

“It really started with the trade skirmishes, and COVID put it over the top,” Gandhi said in an interview with D2P. “At the end of it, we want to figure out, what is your value at risk, and what are the options that a CEO, or a head of supply chain has?

D2P: From your perspective, how has the COVID-19 pandemic affected manufacturing companies in the U.S.?

Suketu Gandhi: If you get down into the details of how it is affected, you see that manufacturers are reexamining the base design and manufacturing of products they make, whether it’s the subcomponents that go into the product, how they manufacture it, or the optimal use of labor and technology together, whether it’s robotics or the use of intelligence. That is becoming a wonderful growth area, and it is also part of how we build more resilience.

If you reduce the number of components, and reduce the geographical boundaries that the subcomponents will cross, then you start to bring resilience back into the game. The other area that folks have started to look back on quite actively, is capacity reduction, and it is much more around reducing the base platform. What is your ability, for example, to take a common chassis, or underlying product platform, and come up with different products on top? Where each one (product) is different, that’s higher resilience for you to serve all of your customers.

The last thing that is happening is the combination of physical and digital, carbon and silicon together—so, making things, but having intelligence built into them. The price of software and the hardware that goes with it has dropped significantly. If you tear down some of these really heavy machines, you find there’s a little bit of hardware and a lot of software that is going into these things to allow for a much more flexible platform on which you can build. And that, we think, is going to be the ultimate resilience.

A good example occurred during a hurricane in Florida, when Tesla remotely increased the available capacity for the driver by 50 percent so that they could make it out of Florida and recharge.  That’s the kind of intelligence that can be built into these things, and will bring together a renaissance in manufacturing that we probably have missed for the last 15 or so years.

D2P: What are some of the major vulnerabilities of U.S. manufacturing companies that were exposed by the pandemic?

 SG: If I were to name three, the first one would be visibility to the Tier 2 and Tier 3 suppliers. Typically, you find very limited visibility. The second area is planning, which has moved from annual planning to quarterly, but it does not have the granularity to respond to change rapidly. And the word ‘granularity’ is really important.

And the third thing for manufacturing is understanding ‘what it takes to make,’ which goes to the underlying product platform. I’ll give you a simple example. A manufacturer had a zipper that was flying for four hours to get to the manufacturer, and that became the bottleneck. That’s typically not a high-spend area, but it became the area that stopped them from shipping, or getting the product. But those would be the three areas that I would say have shown the highest vulnerability.

D2P: What can U.S. manufacturers, including OEMs and larger product manufacturers, as well as the smaller manufacturing suppliers, do to ensure they’re better prepared to meet customers’ needs when the next crisis occurs?

 Gandhi said that going forward, it will be important for manufacturers to use a combination of human and machine intelligence. If there’s one thing the pandemic has shown, it’s that people matter. By communicating with some 500 executives across the globe via a series of webinars, Kearney’s team found that companies succeeded when they had people “who could make decisions,” Gandhi said. “Otherwise, it was just chaos.”

The ability to coalesce massive amounts of data through artificial intelligence (AI) can provide fertile ground for insights into supplier risk, transportation, or planning and visibility. But it must be combined with human intelligence that can, for example, distinguish between a trend and a fad, or determine whether two data points can be connected by a line, or are just random. Deciding the ‘signal versus noise’ debate requires an experienced hand, he said.

Another recommendation of Gandhi’s, although somewhat antithetical, is to “expect failure.” Once you see what types of operations succeeded following the onset of the COVID-19 crisis, that’s not as negative as it sounds. “What succeeded were distributed manufacturing, distributed designs,” he said. Why? Because a distributed model of manufacturing provides an alternative means of production in the event that a traditional supply chain fails. “That, at the end of the day, is what will bring more resiliency,” he said.

D2P: Do you see the pandemic spurring the development of any particular types of innovations in products?

SG: Yes, the hardware-software interface is becoming really, really important, and prices of sensors have dropped significantly. I’m not just talking about IoT, but every kind of sensor we can think of that senses the environment in which your product lives and operates. You can use them to understand where your product is being used, and how an end user or machine is using it. That’s why, about four years ago, we had an article in MIT Sloan Management Review, called ‘Now That Your Products Can Talk, What Can They Tell You?’ (Suketu Gandhi and Eric Gervet, March 15, 2016). And that is now true today, right? We know things are connected. We just haven’t been listening.

 

Taylor Downes, EVO Design

Taylor Downes is vice president of Evo Design, a product development firm based in Watertown, Connecticut. Evo was recently selected as one of eight U.S. companies licensed by NASA’s Jet Propulsion Laboratory to bring its newly designed VITAL ventilator to commercial production.

D2P: What impact do you, as a product designer, see COVID-19 having on the medical space and other sectors?

Taylor Downes: This is really interesting and I think it’ll be fascinating, in five and 10 years, to look back on how this event has changed not just product design, specifically, but everything. I think there will be a push to ensure we have supplies in an emergency. I also think the approach to design could be different.

We’ve seen a number of companies and, for example, NASA, develop new medical equipment really quickly. Historically, this type of product takes years to develop, with lots of testing and lots of refinement, and that process is usually slow and costly. So, I think it will be interesting to see if we can shift to developing products in a more nimble fashion in the future, specifically in the medical space.

We’ve been working on developing a product to detect sinusitis. The product development portion of that project started about six years ago, at this point. It’s a nasal swab; it’s not an invasive device. It involves an assay cassette that’s readable, so we can know which strain of sinusitis somebody has, or whether or not they have the bacterial infection. But six years is a long time to develop, basically, a swab and an assay cassette that reads what the swab came from.

So, it’ll be really interesting to see what changes there might be. It’s so important to go through the FDA approval process, and that will be critical to make sure we’re developing safe products. But I think it will be really interesting to see if the development process can become a little bit more nimble and efficient.

D2P: As a product designer, you normally consider a range of factors in the design of a product. Do you think COVID-19 is compelling product designers to pay more attention to certain factors—such as social distancing, patient comfort, or user safety—in the design and development process?

TD: I do. I think one of the things will be touchpoints. I think there will be an increased sensitivity to all of the things that are touched, and there are a lot, especially in medical. If you go and walk into a hospital room, you’ll see things that are touched by a range of people, from nurses and doctors. So, I think it’ll be interesting to see if the touchpoints change in any way.

I also think we might see an increase in the design for empathy—doing things to create the feeling of safety and security. That’s definitely something that we design for currently, but it’s becoming an increasing topic in the design industry, and I think this will continue to push that forward, giving people the sense of feeling secure and safe. And I think design can have a big impact on that.

You really have to put yourself in the shoes of the person using the end product. A lot of it is interviews and design research to really understand what the consumer is feeling and thinking, and why they’re doing the things they’re doing, or why they’re using the product the way they’re using it. So, we can uncover a lot of information by just talking to consumers and users.

For more on the VITAL ventilator, see How Engineers at NASA-JPL Persevered to Develop a Ventilator.

 

Lloyd Armbrust, Armbrust American

Lloyd Armbrust is founder and CEO of Armbrust American, a company that began making medical grade face masks at its Austin, Texas, facility in May.

D2P: How do you see the COVID-19 pandemic affecting American manufacturers’ decisions on where to manufacture or source their parts or products?

Lloyd Armbrust: I think COVID-19 has dramatically ramped up a lot of the decisions that were going to be made anyway. With American manufacturing, I think that it has been a wakeup call.

We’ve given China a strategic advantage on manufacturing because we were incentivized in the United States to make things as cheaply as possible. We went to China for the cheap labor. But there are places in Shenzhen, where, if you need a sensor, and it’s 3 o’clock in the morning, you can go to the market at 3 in the morning, and it’s there. We don’t have an infrastructure like that.

There are places in China that are able to stand up a brand new manufacturing line. If you needed 10,000 conveyor belts tomorrow, for a new project, it could be done, no problem. Because there’s a manufacturer who can give you those. They have a lot of them, and the rest they can make in a couple days. That’s not a thing in the United States. We don’t have that infrastructure.

And I think for manufacturers who understand that, it’s really woken them up to the fact that we need to build that infrastructure. As I say in one of our videos, ‘Masks are just the beginning’ for us. The mask business I know a lot about, and I’m passionate about the safety aspects of this, but what I’m really passionate about is the strategic manufacturing element. I think we need to build that infrastructure here in the United States, and that’s what I’m looking to do.

D2P: Do you envision producing any other PPE, or any other critically needed parts in the future?

LA: Yes, we’ve already been approached by several governmental organizations asking, ‘Could you guys make this? Could you make that?’ Because the fabric machines that we have that are being set up allow us to make most of the PPE that you need, except for cotton swabs.

So, yes, we do want to do that. But moreover, I’m interested in expanding this vision even broader than that. One of the things that we had talked to my investors about doing is creating a better way for air filtration and delivering air filters to homes. There are a lot of elements like that that we want to get into. I’m really passionate about all of these support systems that surround manufacturing, that build it up.

D2P: We talked a little bit about some of the reasons why manufacturing within the country is important. Have you seen any solid indications that would lead you to believe that reshoring has the potential to be a very big thing going forward?

LA: Yes. We have a lot of people who are out of work right now, we have record unemployment. But, moreover, with the jobs that technology has been eliminating, or will eliminate, there are going to be people who need work. And the work that we (Armbrust American) are doing, and the work that we’re asking people to do, can be taught. It can be taught in a short period of time, and because it’s a very specified thing, it commands more than a living wage.

So, I really think this is the next boom—I think that manufacturing is the new tech boom. I was part of the tech boom because that’s where you went when you were getting out of college in 2006. That was the up and coming thing. And now, I really think it’s going to be manufacturing.

And I think we need to bring more manufacturing back. Americans don’t like being unprepared. Americans want to be number one, we’re used to being number one. And if we don’t figure this out, then we won’t be number one for very long. So, I think it’s really important.

For more on Armbrust American, see Finding Our Heroes Among Us and Armbrust American Opens Austin, Texas Facility to Produce Surgical Masks.

 

Kirk Barrett, Graphicast

Kirk Barrett is sales and operations director at Graphicast, Inc., a custom metal casting company in Jaffrey, New Hampshire.

D2P: How has the pandemic affected your business?

Kirk Barrett: RFQ activity for us has fallen off. We still see quotes, RFQs come in, but it’s not at the pace that we had seen it before. I think the statement that everyone’s in a holding pattern right now probably is pretty accurate, wherever you go in life—personal, business, social.

D2P: What lessons can we learn from the pandemic regarding resilience or readiness of a supply chain to provide the parts and supplies needed during a crisis?

KB: I think one of the things you’re going to see happen—and it will stick this time—is you’re going to see products of importance made in the United States. I don’t think this is just a fad, or something in vogue right now, and out later.

I think you’re going to hear stories of important value-added stuff being made in the United States. So, if something bad happens to the global supply chain, we’re going to fare a little bit better than we did this time around. There’s certainly been some lessons learned.

For more on Graphicast, see Finding Our Heroes Among Us.