Why OEMs are Turning to Contract Metal Manufacturers in 2021
Recent studies are finding that OEMs are increasingly turning to contract manufacturers in 2021. In fact, this trend is expected to keep growing in the coming years. OEMs are relying more and more on outsourcing to stay competitive and profitable in these times of economic uncertainty due to labor force shortages and the lack of resources, expertise, and capacity.
LABOR FORCE SHORTAGE
Companies are having difficulties finding the right talent and retaining workers in 2021. An article from May 4, 2021 by Business Insider, titled ‘The US economy could leave $1 trillion on the table this decade because of a manufacturing worker shortage, study finds’ talks about a most recent study on the worker shortage, and stated, “… the industry still needs to recoup jobs lost to the pandemic, and the rate of recovery isn’t all that promising. Manufacturers are still down some 570,000 jobs from pre-pandemic levels despite a near record number of openings. Firms surveyed in the study said finding the right talent is 36% harder now than it was in 2018. And 77% of respondents said they will still have difficulties in finding and retaining workers in 2021 and beyond.” This shortage of employees who are needed to make their projects come to life means they are hiring more contract manufacturers to fill the gap.
EXPERTISE & RESOURCES
Contract manufacturers can use their expertise and resources to successfully complete special projects which allows the OEM more time and resources to put into research and development—allowing and helping them to stay competitive—a solid investment.
In a ‘2021 Contract Manufacturing Survey’ posted by Nutraceuticals World on March 1st, they found that the most important factors in deciding to use a contract manufacturer were:
- 34% lack of resources or expertise
- 26% ability to focus on other business priorities
- 21% cost savings
- 12% supply chain stability
- 7% other reasons.
While the survey focused on the pharma industry, you can see similar trends with metal contract manufacturing and OEM’s.
CONSOLIDATION
When the market had a downfall in 2008, several companies struggled to stay afloat with the decreased demand. For a lot of these companies, the only way to survive was to merge. Due to the recent pandemic, it the coming years we could see this increase to overcome the negative impacts. To save on costs and find tax relieve these companies are also moving outside of the U.S. and outsourcing more of their work. Because of this, OEMs are working with contract metal fabricators earlier in the process, including for engineering assistance to hand off some workload they can no longer handle.
If you need help bringing your next project to life because of a workforce shortage, lack of expertise and resources, or your plant can not handle the capacity, contact us today—we believe we can help.
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