3 predictions for 2022 for equipment manufacturers

Vivek Joshi

TL;DR

1. World has changed a lot in the last 21 months, and winners and losers have emerged from this crisis.
2. While some of these changes were in response to the pandemic, many of them will stick, e.g. hybrid work, less business travel, rapid adoption of e-commerce, etc.
3. But the workplace challenges caused by changing customer habits, unavailability of workers for all functions and levels of the company, and downward pressure on profit margin will be relentless.
4. Only way out of this crisis for equipment manufacturers is to digitize and automate every workflow, starting with customer-facing ones.
5. 2022 will finally be the year the digital revolution takes hold in equipment manufacturers.

As I started writing this post, I wondered if I should have the headline as “Mid-pandemic memo”? It feels as if that should really be the time frame for this note to reflect on everything that has happened since mid-March 2020. The rise of Omicron and other variants indicate that there doesn’t seem to be an end in sight.

The headline reflects the over 800,000 deaths in the US and millions more worldwide directly attributed to the COVID virus. The havoc this pandemic caused to people’s lives was incalculable; the impact on the economy was equally devastating with a wide range of consequential damage to corporations, depending on end markets and products. It caused changes in how people live, work, travel, and experience healthcare as well as leisure.

The result has been the creation of a clear set of winners and losers. Digitization boomed, and with the advent of work-from-home as a necessary mode of work, software applications that enhanced collaboration took hold in our daily lives. “Touchless” applications in restaurants and other public places gained traction. In manufacturing, software applications became available and the entire paradigm became “remote-first” followed by in-person meetings.

So what does this mean for equipment manufacturers? For some, like the material handling OEM that is our customer, business has boomed and they simply can’t keep up with demand. For others, like the ones selling to restaurants, business was severely impacted. In each case, the availability of workers has been compromised.

So as 2021 draws to a close, how should manufacturers think about the next 12 months?

As a famous CEO once said, “Eat short term to live long term”. Focus on keeping liquidity, profitability, and the talent needed to take advantage of the market opportunity in the Next Normal. But what is the Next Normal? Is it all hybrid work? Will workers ever return to offices at the same pace as before?

After speaking to customers, market observers, and industry experts, here are our 3 predictions for 2022 for equipment manufacturers:

1. Supply chain challenges will persist well into 2022, driving insourcing, nearshoring, and multi-sourcing by manufacturers.
2. Profit pressures from “not meeting plan” in 2021 will cause manufacturers to spend less on both CAPEX and OPEX investments.
3. Finally, these “investors” will race to digitize their operations, starting with customer and installed base-related workflows—service, sales, support.

Time will tell how the next generation of equipment manufacturers will separate themselves from the rest. Watch their actions closely in 2022.