Capital Expenditure Considerations for Manufacturers in 2021 and Beyond

Jun 16, 2021

For many manufacturers, the pandemic had a significant impact on capital expenditures in 2020.  Most scaled back plans to build, renovate, make general improvements, or add lines, as the pandemic required a shift to focus more on managing their current levelsof business.  However, as vaccination availability increases and the pandemic eases its grip on the U.S. population and economy, we anticipate an economic boost and a renewed focus on investing in projects that were previously placed on hold for the last year.

As life returns closer to pre-pandemic normalcy and manufacturers ramp up capital spending, the pandemic has exposed us to new lessons and innovations we would be wise to implement in the planning of capital expenditures moving forward into the rest of 2021 and beyond.

Flexibility. The needs and wants of consumers took a drastic turn during the pandemic.  As a result, many manufacturers were required to reconfigure lines or retrofit equipment to accommodate new or different products and packaging formats. Some manufacturers were able to pivot and adjust production as some products received a boost from the pandemic, while others were diminished due to lack of demand.  Whether it’s a pandemic or another significant global event in the future, having the ability to interchange and cross-utilize equipment across multiple product lines, switch quickly between products, or ramp up some SKU’s while scaling back others have become key considerations as manufacturers plan and design their future operations. It is crucial that manufacturers adopt a foundation of flexibility in all operations moving forward to remain successful.

Automation. A large-scale strategy to establishing greater physical distance between workers while maintaining output is to automate operations. Prior to the pandemic, many manufacturers were already on their way to increasing their investment in automation, however, as labor shortages and concerns with worker health conditions due to the pandemic have increased, many manufacturers who stayed on the sidelines may want to reconsider their strategy as it relates to automation sooner rather than later.

Technology. Like automation, technological advances in manufacturing have proven to be beneficial in terms of increased productivity and quality, reduced waste, quicker time to market, and increased customer satisfaction. For many manufacturers, data and data analytics will drive an increasing amount of the decisions made, and actions taken in the production process.  We have already seen the impact that robotics and additive manufacturing have had on many other industries, and we believe this is just scratching the surface of many more innovations to come.  As such, factories should strongly consider how artificial intelligence, virtual reality, mixed reality, and other advances in technology enablers can benefit their operations as they move into the future.

Worker Safety. Worker safety has always been a top priority with any and all manufacturing operations.  However, the pandemic required a little different approach in the form of keeping people safe, socially distanced, and in some cases isolated from one another.  In a labor-intensive operation, social distancing can be quite the challenge. However, we all know the impact of how shuttered production lines in the food and hard goods industries due to sick workers, can have on the economy.  We suggest manufacturers continue to take a long-term perspective on worker safety just in case this becomes an endemic and focus on the flow of personnel between sanitary and non-sanitary areas. In addition, we recommend manufacturers consider how common areas, breakrooms, and workstations can be redesigned to reduce, or limit, contact while implementing flexibility into their floorplans.

In summary, capital expenditure planning may look a little different than it has in the past in terms of what types of investments will be made and forcing manufacturers to reconsider how the traditional return on investment decisions are viewed in light of the recent pandemic. We advise manufacturers that their overall capital expenditure strategy should be one that is focused on a combination of technological advances and automation that will improve efficiencies, address the need for social distancing employees, all while offering flexibility in production.

If you have any questions or would like to discuss your capital expenditure strategy, please contact us.