Market Update: Contract Manufacturing Q2 2022
Throughout 2022, the contract manufacturing industry will continue to be driven by technology advancements, marketplace needs, and business objectives. COVID-19 continues to impact the supply chain as consumer demand and material delays persist. Notwithstanding, 2022 has introduced plenty of new opportunities for contract manufacturers to capitalize on, including transitioning to becoming smart factories. Smart factories include newer machines and equipment with onboard sensors, monitoring tools, and sophisticated software applications all of which are improving operational efficiency and cutting costs. Along with this technological shift we are seeing, manufacturing companies are beginning to put heavy emphasis on sustainability and carbon neutrality. Sustainability requirements from government, municipal, and institutional contracts are becoming increasingly stringent along with the ESG standards of contract manufacturing clients. Industry powerhouses are adjusting their practices accordingly by adopting carbon-neutral practices. Finally, we continue to see a transition from the offshoring business model to reshoring as contract manufacturers shorten response times from manufacturer to consumer. Contract manufacturers are also extending their competency into product development thereby establishing deeper strategic relationships with their clients.
Despite near-term headwinds such as supply chain bottlenecks and cybersecurity attacks, the contract manufacturing industry is projected to reach 121 billion in revenue in 2025, a 10.2% CAGR (CPA, the Association for Contract Packagers and Manufacturer’s State of the Industry Report). 7MA will continue monitoring such near-term headwinds and how it all relates to the future of the contract manufacturing industry.