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January 3, 2022 Industry Outlook: Manufacturing

While challenges persist, CT manufacturers have new opportunities in technology, clean energy, offshore wind

PHOTO | STEVE LASCHEVER Burke Aerospace President Brittany Isherwood said manufacturers will have to focus on local and domestic sourcing in 2022 to overcome supply chain issues.

Between workforce issues, the acceleration of new technology and heightened supply chain disruptions, Connecticut manufacturers have their work cut out for them in 2022.

These aren’t new trends for manufacturers, but a pandemic-induced reshuffling of the labor market and other disruptive conditions COVID-19 has imposed have exacerbated some of them.

In addition to supply chain, workforce and technology concerns, experts say the industry can expect an uptick in M&A activity and a sharper focus on clean energy in 2022.

The next year should be a dynamic and challenging one for Connecticut’s manufacturing industry, but nothing companies cannot handle, said Colin Cooper, the state’s chief manufacturing officer.

“Connecticut manufacturing has been in a constant state of flux and development since its evolution at the dawn of the Industrial Revolution,” said Cooper, who recently announced plans to retire in 2022. “While the pace of change continues to accelerate, Connecticut manufacturers are well positioned to address the coming challenges.”

Supply chain disruption

Challenges and disruption in getting and shipping material and products have always been a feature in the manufacturing industry. As shutdowns and confusion amid periodic COVID-19 spikes across the world have thrown supply chains for all industries into turmoil, manufacturers have been no exception.

Throughout 2022, manufacturers will spend a lot of time dealing with and finding solutions to supply chain issues that will emerge, said Brittany Isherwood, president of Farmington-based Burke Aerospace.

“Supply chain issues will be solved in part through local and domestic sourcing as manufacturers quickly learn to overcome them to satisfy their customers,” Isherwood said.

There’s been a lot of talk nationwide about companies “reshoring” operations to the United States, rather than outsourcing manufacturing to far-flung regions with cheap labor costs, Cooper said.

The logic is that employing more expensive labor at home could be a net positive for companies, since they will have reliable access to their products and won’t be interrupted by backups at ports or spikes in international transportation costs.

Additionally, Cooper said, productivity gains facilitated by new manufacturing technology and increased labor costs in developing markets are lowering or eliminating the cost differential for offshore producers.

But attorney Jeff White, a partner at Robinson+Cole who leads the law firm’s manufacturing practice, said he thinks talk about companies reshoring may be overblown.

“Yes, there will be reshoring, but I am not convinced that this trend will explode in 2022,” White said. “There are significant challenges for doing so, particularly when the manufacturing involved is labor-intensive.”

Recruiting and talent development

PHOTO | CONTRIBUTED
Chief Manufacturing Officer Colin Cooper (center holding red folder) visits Plantsville-based Sign Pro Inc.

Connecticut has spent years trying to develop a pipeline of younger workers to enter the manufacturing industry to replace a large number of older workers set to retire in the next few years, and that effort will continue in 2022, Cooper said.

“Even considering productivity growth, we estimate that we will need 6,000 to 8,000 new entrants into manufacturing annually for the foreseeable future,” Cooper said.

Isherwood said manufacturers will spend the next year trying to develop their talent pipelines through partnerships with other companies and schools, in order to address skills gaps and align the next generation of operators with current technology.

Additionally, Cooper said the state is actively engaged in identifying new pools of talent and providing training opportunities to those individuals.

Accelerated technology adoption

Manufacturers will also be looking at which new technologies they should adopt to streamline operations, experts said.

Automation technology and advanced manufacturing will be the two major tech focal points for companies in 2022, Isherwood said. And technology could be used to help address labor shortages.

“Automation continues to be at the forefront of improved manufacturing processes as demand returns to full capacity and the ramp up to full recovery across the industry takes hold,” Isherwood said. “Additive manufacturing becomes more prevalent and leads to cost-savings initiatives and top-line growth throughout the industry.”

Cooper said digital manufacturing technologies are increasingly being incorporated into ”smart” production processes whereby various stages of the production process are linked and interdependent. Advantages to using these new technologies include increased productivity, improved quality and shorter lead times, he said.

Technology adoption will be especially important to Connecticut manufacturers, as they compete with companies located in places with lower labor costs, Cooper said.

“Connecticut is not a low-cost region, but we successfully compete in global markets because of the innovation of our businesses and the productivity of our workforce,” Cooper said. “To remain world leaders in our markets we need to incorporate the latest digital technology into our operations.”

Acquisition activity

White said he’s expecting to see a fair number of manufacturing company acquisitions in 2022, continuing a trend from last year.

“There is no shortage of potential buyers of manufacturing companies, including strategic buyers and private equity buyers,” White said. “There has been an increase in so-called proprietary deals (i.e., where one buyer negotiates exclusively) as opposed to auctions. I think this will continue in 2022.”

Increased focus on clean energy

Cooper said the state will also see an increased emphasis on clean energy. That’s because many Connecticut manufacturers sell products to larger-end customers that are developing strategies around sustainable production and net-zero manufacturing. These companies are starting to require their suppliers to actively participate in those initiatives, Cooper said.

“In addition, there is a significant amount of development and manufacturing activity around clean energy in the state in products such as fuel cells, batteries, and electric vehicle infrastructure,” Cooper said.

Additionally, Connecticut manufacturers will likely be part of two major wind energy projects: The 704-megawatt Revolution Wind project in New London — a joint development of Denmark-based Ørsted and Eversource — and the 804-megawatt Park City Wind development in Bridgeport — led by Vineyard Wind.

“Connecticut is at the epicenter of almost 30 gigawatts of offshore wind power that will be installed off the southern New England coast over the next 10 years that will be fueled by $100 billion of capital investment,” Cooper said.

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