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Home » Redwood Logistics Survey Reveals More than 50 Percent of Manufacturers Believe Domestic Production Activity Levels Will Increase in 2021
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Redwood Logistics Survey Reveals More than 50 Percent of Manufacturers Believe Domestic Production Activity Levels Will Increase in 2021

December 28, 2020
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The manufacturing sector struggled through the first half of 2020, with the coronavirus pandemic sending supply and demand on a seemingly nonstop roller-coaster ride and states issuing lockdowns that all but halted production in the spring. Lockdowns have now eased up, and many people have stopped hoarding toilet paper in favor of somewhat more typical buying habits. As a result, there is a nascent industrial recovery happening in the U.S.

When evaluating current market conditions and ongoing capacity expectations, almost half (49%) of respondents to a Redwood Logistics survey said they plan to increase their reliance on logistics providers and other specialists within their supply chain to navigate the coming year. While a substantial percentage (43%) of manufacturers planned to maintain their current relationships with logistics providers, just 8% said they expect to reduce their usage of third-party logistics providers and shift their processes internally.

The October ISM Manufacturing Purchasing Managers Index made headlines when it jumped to 59.3, its highest value in over two years. This overall growth is fueled by a strong showing across the board, with heavy growth seen in new total orders, new export orders, higher production, inventories and employment rates.

“This year has been touch-and-go for nearly every segment of the transportation and logistics industry. Manufacturers have not lost their optimism, however, and most expect recent upswings in both domestic factory activity and foreign factory activity leading to imports to continue over the next 12 months,” said Christina Ryan, executive vice president, Managed Services, Redwood Logistics. “Coming out of a year colored by a global pandemic, it is easy to understand why many manufacturers believe 2021 will prove stronger than 2020.”

The vast majority of survey respondents believe domestic manufacturing activity will be either slightly or significantly higher over the next 12 months. Surveyed manufacturers expected demand to continue to expand over the next 12 months in most of the sectors currently benefiting from pandemic spending. Over half of respondents expect to see further expansion in the food and beverage, consumer spending and electronics sectors.

Between 20% and 35% of respondents anticipate manufacturing activity to ramp up in the home and furniture, auto and parts, chemicals and oil and gas sectors as well. Respondents were slightly less optimistic about the machinery and fabricated materials sectors, but more than 10% still expected to see growth. 

“A period of yo-yoing supply and demand sent trucking capacity on a volatile ride earlier this year, but rebounding consumer spending and continued strength in essential goods markets have led to continuously tight capacity over the last several months,” continued Ryan.

While imports slowed to a crawl between March and July thanks to the coronavirus pandemic, the U.S. has been experiencing something of a mid-pandemic restocking boom since about August. Despite pandemic-related shutdowns, 2020 has not been colored by the intense trade wars and tariff hikes seen throughout 2019, and most experts expect the current surge to last through at least early 2021.

The uptick in import activity has been dramatic over the past couple of months, with the FreightWaves SONAR Ocean Shipments Index up a staggering 62% year-over-year.

Shippers expect this trend to continue in the near future. Well over half of survey respondents believe trucking capacity will either significantly or slightly tighten over the next six months. Almost 30% of manufacturers expect already-tight capacity to remain the same. Only about 20% of respondents anticipate looser capacity in the short term. Manufacturing rebounds, coupled with renewed consumer demand, have led to a tight trucking market. While most shippers expect this to remain the case over the next six months, the majority expect rate hikes to come in under 10% in the 2021 bidding cycle.

“Service spending is expected to rebound somewhat with the introduction of a coronavirus vaccine, likely bringing down spending in sectors like durable consumer goods,” said Ryan. “The timeline for these shifts is hard to pin down, however, and the confidence level of newly vaccinated Americans is even more difficult to predict. For now, the food and beverage, consumer goods, electronics and home goods sectors are expected to continue their ascent.”

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