What to Expect Going Forward
Industrial parts purchasers have the same questions as other manufacturing supply chain participants. In an unprecedented year with a pandemic, recession and a presidential election, what can we expect going forward? We have spoken with a number of industry participants and experts. This column reflects some of their input.
A first dynamic concerns projecting the timing of economic recovery. On average, recessions have lasted 11 months, some shorter and some longer. Recessions almost always start with some type of shock—usually an oil-price shock, real-estate valuation crisis or some other economic catalyst. The fact that this downturn is related to the pandemic makes it trickier for economic policymakers to calibrate and target their responses. The Federal Reserve and Congress have been aggressive in their policy changes. But the eventual economic rebound is inexorably tied to progress in eradicating the severity of the virus, in addition to economic policies.
A second dynamic is that we are already starting to see a focus on supply-chain security. While most of the press attention has been on pharmaceutical ingredients and personal protective equipment, the focus in North America also includes the range of products and components needed for national defense and domestic manufacturing. Parts specifiers are realizing, just as the U.S. military did several years ago, that we cannot rely on potentially unstable suppliers of key parts and critical materials. Supply-chain security often means having multiple supplier options, and closer to the home base. The American Foundry Society (AFS) is working with The Reshoring Initiative, led by Harry Moser, to help companies evaluate the business case for reshoring.
A third dynamic concerns changes in the way parts buyers pursue knowledge and training. Parts buyers, designers and specifiers need specialized knowledge, which organizations like the AFS Institute can provide. In fact, the Institute saw a remarkable three-fold increase in the use of its suite of 111 casting e-learning courses this past spring, which are applicable to foundries and OEMs alike. The Institute also is offering live virtual instruction via Zoom now. Details on these courses, many of which are extremely helpful to parts purchasers, can be found at www.afsinc.org.
The fourth dynamic is the uncertainty that surrounds the presidential election year. Will the election or its outcome have an effect on economic growth? That is also difficult to predict. What we can expect is for the current administration to continue to issue regulatory reform policies aggressively in the coming months, to have them in place in case the President is not re-elected. Both parties are presenting their economic platforms. While there will be differences in each party’s vision, there may be some common themes. For example, one might watch to see what each party says about infrastructure investment and how to fund it. If there are enough similarities, that could become a policy outcome in 2021 regardless of how power is shared in Washington. In the meantime, some companies may keep their powder dry on new investments until they have greater visibility into the post-election policy climate. A combination of greater certainty and recovery from Covid-19 concerns could set the stage for a year of increased capital investment in 2021. CS