The 3Q21 Advanced Manufacturing Quarterly (pdf) analyzes the top five market forces and company responses discussed by leaders of 31 advanced manufacturing (AM) sector companies including those from the aerospace and defense (A&D), industrial products (IP) and chemical subsectors during public earnings calls with analysts in October and November 2021. This update tracks the movement of the top five market forces and company responses from quarter to quarter to provide a perspective on shifts in the AM landscape.
Themes that stood out include the following
Operating costs are emerging as a significant market force
Skyrocketing variable costs fueled by raw material shortages, a long-lasting surge in transportation costs and a talent shortage are impacting margins and cash flows at a time when manufacturers are already struggling to cut costs. Even when prices are increased, many manufacturers continue to endure revenue losses in the range of $300 million to $500 million for 3Q21 and are predicting similar headwinds for 4Q21. Apart from revising prices, many peers are implementing operational improvements via productivity playbooks, and Lean and Kaizen frameworks to increase efficiency and minimize head winds.
Supply chain reinvention is emerging as a significant company response
Demand upsurge, coupled with raw material shortages and congested ports, is leading to significant disruption in production schedules. AM companies are undertaking numerous initiatives to rethink their sourcing strategies and operating models. They are collaborating with customers and distributors for better visibility, contracting alternative suppliers, implementing new pricing strategies and signing long-term contracts.
The top five themes emerging from the 3Q21 earning calls are listed in the charts below. Themes are segregated as market forces and company responses, each delving deeper to identify the subthemes for each category. We have also added the prevailing sentiments and evolution of themes every quarter over the last year.
