This presentation focused on what the future is likely to bring to manufacturers and distributors as the nation attempts to claw its way back from the worst of the COVID-19 crisis.

1. Manufacturing & Distribution Update:
September 13, 2021
The Economic Impact on the Industry

2. Mark Fagan John Giordano Mark Henry
Leadership Team
Manufacturing & Distribution Practice
Partner
mfagan@citrincooperman.com
Partner
jgiordano@citrincooperman.com
Partner
mhenry@citrincooperman.com

3. This survey was conducted online in conjunction with the
research arm of FINN Partners between March 30 and April 14,
2021.
Respondents had to be VP/SVP of operations or above and
work within companies generating $10M annual revenue or
more.
A total of 200 respondents took the survey: manufacturing only
businesses totaled 34%; distribution only, 26%; and both
manufacturing and distribution, 40%.
2021 Manufacturing &
Distribution Industry
Pulse Survey
METHOD & DEMOGRAPHICS

4. New product and service
offerings are the story of
2020 and beyond.
Supply chain disruption
and constraints forced
businesses to pivot.
The shift to e-commerce is
no longer a trend, it’s a
landslide.
Summing Up Our Findings

5. ANIRBAN BASU, MPP, MA, JD, PHD
Chairman & Chief Executive Officer
Sage Policy Group
Presenter
Introduction

6. Manufacturing & Distribution
Pulse Survey Report – An
Economist’s Perspective
By: Anirban Basu
MPP, MA, JD, PhD
Sage Policy Group, Inc.
Manufacturing & Distribution in an Eventual
Post-Pandemic World

7. A Global Economy Transfigured
Real GDP Growth 2020, Estimated Annual Percent Change
Source: International Monetary Fund, World Economic Outlook Database, April 2021

8. Economicus Destructus!
Estimated Growth in Output by Select Global Areas, 2020
Source: International Monetary Fund, World Economic Outlook Update, July 2021
-4.1%
-8.3%
-7.0%
-2.6%
-7.3%
2.3%
-0.9%
-3.0%
-2.0%
-1.8%
-2.1%
-3.5%
-2.4%
-5.3%
-9.8%
-4.7%
-10.8%
-8.9%
-4.8%
-8.0%
-6.5%
-4.6%
-15.0% -10.0% -5.0% 0.0% 5.0%
Brazil
Mexico
Latin America & the Caribbean
Middle East & Central Asia
India
China
Emerging & Developing Asia
Russia
Emerging & Developing Europe
Sub-Saharan Africa
Emerging Market & Developing Economies
United States
Australia
Canada
United Kingdom
Japan
Spain
Italy
Germany
France
Euro Area
Advanced Economies
Annual % Change
2020 Global Output Growth: -3.2%

9. Gross Domestic Product
1990Q2 – 2021Q2*
Source: U.S. Bureau of Economic Analysis *2nd Estimate
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
1990Q2
1991Q1
1991Q4
1992Q3
1993Q2
1994Q1
1994Q4
1995Q3
1996Q2
1997Q1
1997Q4
1998Q3
1999Q2
2000Q1
2000Q4
2001Q3
2002Q2
2003Q1
2003Q4
2004Q3
2005Q2
2006Q1
2006Q4
2007Q3
2008Q2
2009Q1
2009Q4
2010Q3
2011Q2
2012Q1
2012Q4
2013Q3
2014Q2
2015Q1
2015Q4
2016Q3
2017Q2
2018Q1
2018Q4
2019Q3
2020Q2
2021Q1
2020-2021
1990-2019 % Change from Preceding Period (SAAR)
2021Q2: +6.6%

10. Citrin Cooperman (CC) Manufacturing & Distribution Pulse
Survey, Spring 2021: Major Findings/Themes
Source: Citrin Cooperman
• Supply chain disruption and constraints forced businesses to pivot. Global
supply chain disruptions resulted in greater diversification of suppliers,
outsourced manufacturing, and reshoring to the U.S.
• New product and service offerings. More than half of manufacturing and
distribution companies surveyed introduced new products or services in response
to COVID-19 and a majority of businesses expect to continue these
product/service offerings beyond the pandemic.
• The shift to e-commerce is no longer a trend, it’s a landslide. Nearly half of
respondents now say online sales make up 50-75% of their total sales. 68% of
companies saw significant or exponential growth in e-commerce sales in 2020.
69% of surveyed companies work with Amazon either directly or indirectly (i.e.,
through an agent).

11. Global Supply Chain Disruptions
Source: CNBC; Reuters
• In 2020 supply chains were pushed to the brink;
• The cost of containers from China soared and the time to get containers
slowed;
• Trade tariffs and geopolitics exacerbated these challenges;
• Recently, Chinese authorities have been unwavering in their commitment to
stamping out Covid. Accordingly, only a small number of cases can shut down
a considerable amount of activity;
• Authorities there recently shutdown large portions of the world’s third busiest
container port after a single worker was found to be infected by COVID-19.

12. CC Manufacturing & Distribution Pulse Survey:
Supply Chain Disruptions
Source: Citrin Cooperman
• According to the Citrin Cooperman Pulse
Survey, 33% of respondents listed supply
chain as one of their top 2 challenges.
• 56% listed altering the business model as
one of their top 2 challenges.
• 66% of companies surveyed said they
have changed how a product is sourced
due to a disruption in the global supply
chain:
• 66% are diversifying suppliers;
• 59% are looking to outsourced
manufacturing;
• 44% are reshoring to the U.S.
66%
59%
44%
0%
10%
20%
30%
40%
50%
60%
70%
Diversification of
suppliers
Outsourced
manufacturing
Reshoring to the
U.S.
How has disruption to the global supply chain
caused you to significantly change how your
product is sourced?

13. Major Commodities Prices Up Significantly
Source: U.S. Bureau of Labor Statistics
Bureau of Labor Statistics Producer Price Index (PPI) data for commodities
indicate that as of August 2021:
• Fuels/related products and power: +32.8% compared to February 2020
• Chemicals and allied products: +20.6%
• Rubber and plastic products: +14.7%
• Lumber and wood products: +28.5%
• Metals and metal products: +42.1%
• Iron and steel: +87.1%
• Copper base scrap: +59.1%

14. Cass Truckload Linehaul Cost Index, 2005 – 2021
Source: Cass
147.2
95
105
115
125
135
145
155
Jan-05
Jul-05
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15
Jan-16
Jul-16
Jan-17
Jul-17
Jan-18
Jul-18
Jan-19
Jul-19
Jan-20
Jul-20
Jan-21
Jul-21
January 2005=100

15. 0
1,000
2,000
3,000
4,000
5,000
2015 2016 2017 2018 2019 2020 2021
Jan. 4, 1985: 1,000
Sept. 9th
3,643
The Baltic Dry Index (BDI) is a measure of the price of shipping major raw materials such as metals, grains, and fossil fuels
by sea. The BDI is a composite of 3 sub-indices, each covering a different carrier size: Capesize, Panamax, and Supramax.
Baltic Dry Index, 2015 – 2021
Source: Trading Economics; Seeking Alpha; Bloomberg

16. Producer Price Index: All Manufacturing Industries, 2015-2021
Source: U.S. Bureau of Labor Statistics
170
180
190
200
210
220
PPI by Industry: Total Manufacturing Industries (Index December 1984=100)
As of Aug. 2021:
+13.0% from Feb. 2020
A Producer Price Index for an industry is a measure of changes in prices received for the industry's
output sold outside the industry (that is, its net output).

17. CC Manufacturing & Distribution Pulse Survey:
Hurdles to Reshoring
Source: Citrin Cooperman
• Even as many companies look to
reshore, there are significant hurdles.
• Third-party warehousing and logistics
providers have been part of the solution
— 58% of companies responding use
third-party warehousing and logistics as
an alternative.
74%
46%
40%
37%
Capital
investment
costs
Cost of U.S.
labor
Lack of
meaningful
tax incentives
Lack of
access to
skilled labor
Which of the following do you feel are
hurdles to reshoring?

18. U.S. Manufacturing Job Openings, 2015-2021
Source: U.S. Bureau of Labor Statistics
0
100
200
300
400
500
600
700
800
900
Jan-15
Apr-15
Jul-15
Oct-15
Jan-16
Apr-16
Jul-16
Oct-16
Jan-17
Apr-17
Jul-17
Oct-17
Jan-18
Apr-18
Jul-18
Oct-18
Jan-19
Apr-19
Jul-19
Oct-19
Jan-20
Apr-20
Jul-20
Oct-20
Jan-21
Apr-21
Jul-21
Manufacturing Job Openings (000s)
• From 2015-2019 the
number of unfilled U.S.
manufacturing jobs
averaged 391,000.
• In 2020 there was an
average of 414,000
unfilled manufacturing
jobs, even as openings
dropped to 279,000 in April
as many plants were shut
down and workers laid off.
• As of July 2021, there
were 889,000 unfilled
manufacturing jobs.

19. Growth in Wages & Salaries in the U.S.
Employment Cost Index (ECI), 2001Q2– 2021Q2
Source: U.S. Bureau of Labor Statistics *All Civilian Workers
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
ECI for Wages & Salaries
12-Month % Change
2021Q2:
+3.2% YOY

20. CC Manufacturing & Distribution Pulse Survey:
COVID-19 & Changes in Distribution Channel
Source: Citrin Cooperman
3%
32%
34%
52%
54%
56%
None of the above
Reduced in-person sales (brick and mortar)
Resulted in a lack of product in the marketplace
Changed demand of product
Increased direct-to-customer delivery
Increased e-commerce sales
From the following list, please indicate how COVID-19 has changed your distribution channels. The
impact of COVID-19 has...

21. CC Manufacturing & Distribution Pulse Survey:
E-Commerce is Here to Stay
Source: Citrin Cooperman
14%
54%
23%
6%
3%
0%
10%
20%
30%
40%
50%
60%
Yes,
exponentially
Yes,
significantly
Yes,
somewhat
Yes, only a
little
No
Has online/ecommerce grown for your company
over the past 12 months?
14%
35%
46%
4% 1%
0%
10%
20%
30%
40%
50%
0-25% 26-50% 51-75% 76%+ Do not know
What is your company’s current percentage of
online sales?

22. The Pandemic Shifted Spending Towards Goods
Source: Bureau of Economic Analysis
$8.4
(64%)
$7.2
(61%)
$8.2
(59%)
$4.7
(36%)
$4.7
(39%)
$5.6
(41%)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2019Q2 2020Q2 2021Q2
Real Personal Consumption Expenditures by Major Type of Product
($ Trillions of chained 2012 dollars)
Goods
Services

23. 11.4%
15.7%
13.3%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
2000Q2
2000Q4
2001Q2
2001Q4
2002Q2
2002Q4
2003Q2
2003Q4
2004Q2
2004Q4
2005Q2
2005Q4
2006Q2
2006Q4
2007Q2
2007Q4
2008Q2
2008Q4
2009Q2
2009Q4
2010Q2
2010Q4
2011Q2
2011Q4
2012Q2
2012Q4
2013Q2
2013Q4
2014Q2
2014Q4
2015Q2
2015Q4
2016Q2
2016Q4
2017Q2
2017Q4
2018Q2
2018Q4
2019Q2
2019Q4
2020Q2
2020Q4
2021Q2
E-Commerce Retail Sales as a % of Total Sales
2000Q2 – 2021Q2
Source: U.S. Census Bureau

24. CC Manufacturing & Distribution Pulse Survey:
Permanent Changes & Future Growth
Source: Citrin Cooperman
• Most companies think some COVID-19
related changes are here to stay.
• Asked how likely it is that some of the new
ways people purchase goods (online
purchases, grocery deliveries, etc.) will
become permanent fixtures post-COVID-19,
93% of respondents say that it is somewhat
or very likely that such changes are here to
stay.
• More than half of companies see e-
commerce success as one of the top two
biggest keys to future growth. Technology
and new products are also seen as keys to
future growth strategies.
E-commerce,
54%
Technology,
49%
New
products,
43%
Biggest keys to your future growth
strategy?

25. CC Manufacturing & Distribution Pulse Survey:
Post-Pandemic Readiness – You’re Ready!
Source: Citrin Cooperman
• CC’s Pulse Survey indicates
that generally, respondents
feel good about plans and
readiness following COVID-
19…
“My company has a solid business plan in place
following COVID-19”
• 52% strongly agree; 38% somewhat agree.
“My company foresees continued growth following
COVID-19”
• 48% strongly agree; 45% somewhat agree.
“My company has a solid business plan in place for
crisis management”
• 38% strongly agree; 50% somewhat agree.

26. University of Michigan Index of Consumer Sentiment
2005 – 2021
Source: University of Michigan
50
60
70
80
90
100
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
August 2021: 70.3
where 1996: 100

27. U.S. Saving Rate, July 2005 – July 2021
(Savings as Percentage of Personal Disposable Income)
Source: Bureau of Economic Analysis
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
Jul-05
Nov-05
Mar-06
Jul-06
Nov-06
Mar-07
Jul-07
Nov-07
Mar-08
Jul-08
Nov-08
Mar-09
Jul-09
Nov-09
Mar-10
Jul-10
Nov-10
Mar-11
Jul-11
Nov-11
Mar-12
Jul-12
Nov-12
Mar-13
Jul-13
Nov-13
Mar-14
Jul-14
Nov-14
Mar-15
Jul-15
Nov-15
Mar-16
Jul-16
Nov-16
Mar-17
Jul-17
Nov-17
Mar-18
Jul-18
Nov-18
Mar-19
Jul-19
Nov-19
Mar-20
Jul-20
Nov-20
Mar-21
Jul-21
Savings
Rate
(%)
July
2021:
9.6%

28. NFIB Index of Small Business Optimism: Good Time to Expand
1986 – 2021
Source: National Federation of Independent Business (NFIB)
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
July
2021:
13%
% of respondents who think the next 3 months will be a good time to for small business to expand

29. Outlook
• For an economy to flourish, both demand and supply
sides of economy must participate.
• With ongoing stimulus, demand gets a further boost,
but supply will be constrained by numerous factors,
and not just in America.
• The result is that the U.S. savings rate will remain
elevated, spring loading the economy for rapid
economic growth once vaccines become more
broadly available and Delta goes away (Mu?).
• The back half of 2021 should have been spectacular
for economic growth – now only Q4:2021 will be.
• 2022 will be another year requiring aggressive
management, constant change, and exploration of
partnership opportunities – Happy Holidays!!!

30. Thank You
Please follow me on Twitter -- @sageanirban
Please follow my newsletter at Basu.substack.com.
Please look for updates of information at www.sagepolicy.com.
Please contact us when you require economic research & policy
analysis.

31. Questions?

32. Thank You
For Watching & Listening