Manufacturers Invest in Tech and R&D, Cut Capex Spending
The coronavirus pandemic has disrupted manufacturers’ operations and as a result, companies have cut spending on capital expenditures that improve processes or new equipment. But one area the industry isn’t letting up on investing in is technology and research and development, according to The Wall Street Journal.
Forbes senior contributor Anna-Katrina Shedletsky said the problems resulting from COVID-19 aren’t going away any time soon and she expects manufacturers will rise to the occasion and adopt innovative technologies faster than ever before. “We will see five years of innovation happen in the next 18 months,” she said. “Necessity is truly the mother of invention.”
Manufacturers say they are continuing with software upgrades and technology initiatives to keep up with changing customer needs and remain competitive, The Wall Street Journal reported. The article cited Xylem, a Rye Brook, N.Y.-based provider of technology ranging from irrigation systems to pumps for water parks, as an example of how larger manufacturers are reducing capex spending and investing in technology.
Xylem CFO Mark Rajkowski said the company expects to cut its annual capex spending by $40 million to about $200 million this year. For example, when the water technology company saw demand from its industrial and commercial customers drop as mining and construction projects shut down, it stopped investments in new pumps and other equipment it would have rented out to those customers.
However, Xylem’s utility customers that provide drinking water and wastewater services wanted to operate their systems remotely, so the company increased its investment in software for tools that identify technical issues.
“If you’re building out your technologies, building out your capabilities, you’re doubling down on innovation and [research and development], you’re going to emerge from this in a very strong position,” Mitch Berlin, Americas operational transaction services leader at Ernst & Young, told The Wall Street Journal.