July 18, 2014
This is a guest article by Adam Robinson at Cerasis, Inc.
We are at an interesting time in the history of American manufacturing and there are so many manufacturing issues in America that should be at the forefront of every manufacturing executive’s mind. To increase awareness, we have compiled a list of the top eight pressing manufacturing issues and trends in American manufacturing to share with you. Awareness of these extremely important topics will aid in the sustainability and growth of American manufacturing, which in turn will allow our economy to grow and thrive.
Closing the Manufacturing Skills Gap
Manufacturing has evolved far beyond the days of the moving assembly line when thousands of factory workers labored side by side in repetitive motion. The “skills gap” is one of the most oft-discussed manufacturing issues in America, and most of the major news outlets have covered the issue in great detail in the last year.
Today, manufacturing is highly technical and requires an understanding of and proficiency in a wide variety of competencies. However, this demand for highly skilled workers comes at a time when the industry is facing the retirement of a large percentage of its workforce and an incoming generation of workers who lack the skills and technical knowledge needed for American manufacturing. The oldest baby boomers turned 65 on Jan. 1, 2011, and every day thereafter for about the next 19 years, some 10,000 more will reach the traditional retirement age according to the Pew Research Center. Many manufacturers are seeing an advantage to “reshore” their production back to North America, but they can only do this if they have access to skilled workers.
A key component has been the development of the (National Association of Manufacturers) NAM-Endorsed Manufacturing Skills Certification System—a system of stackable credentials applicable to all sectors in the manufacturing industry.
Additionally, in June 2011, President Obama announced that the Skills Certification System was the national talent solution for closing the skills gap addressing this top of many manufacturing issues in America. In addition to supporting and advancing the Certification System, the Society of Manufacturing Engineers (SME) Education Foundation encourages youth to get involved in manufacturing technologies through STEM-related activities in the K–12 levels.
Reshoring/Insourcing Manufacturing to the United States for Increased Quality
Now in 2013, another major manufacturing issue is reshoring and insourcing: more companies are moving their services and manufacturing operations back to the United States. Caterpillar moved operations from China to Mexico and the US. Dell moved its customer support from India to the US. K’Nex Brands moved manufacturing from outsourcing in China to the US. , “by moving production closer to the US retailers, K’Nex can react faster to fickle shifts in toy demands and deliver what is needed faster.” It also has greater control over quality and materials, which is crucial to product safety.
The common factor of businesses evaluating reshoring is quality concerns. When you have lack of control or visibility of your suppliers, partners, or the supply chain, you will end up with inferior products while also suffering from reliability and safety issues. There need to be consistent processes and a harmonized approach to safety, as well as risk-based management of issues, suppliers, standards, and collaboration. Quality is touted as a competitive advantage – look at the number of TV commercials with the J.D. Power & Associates quality award, or Malcolm Baldridge Quality award. Reshoring, is still an ongoing debate, and time will tell if this trend continues, or if offshoring will cycle back in the next 20 years.
Fuel and energy use represent a consistently recurring issue for manufacturing executives. Oil has always been, and continues to be, the most popular form of fuel used in both the shipping of manufacturing products, and in the process of manufacturing. Oil has also made the American manufacturing community, and thus the economy, quite dependent on foreign importing, thus driving up manufacturing costs.
However, with the recent advent of manufacturing natural gas from shale, such as from the Marcellus Formation in the Appalachian Basin, in Corpus Christi, and other parts of America, many manufacturers are finding alternative and cheaper ways to procure fuel for production and decrease transportation costs as the use of LNG (liquefied natural gas) motor carriers increases. The procedure to extract this natural gas is known as Fracking.
With this decrease on foreign oil dependence, and the increase in supply of natural gas, economists foresee a potential rebirth of American manufacturing including such basic industries as steel and plastics that had gone overseas and that many Americans thought they would never see again.
General Electric Co. chief executive Jeff Immelt is convinced that American manufacturing can rise again, thanks to the natural gas shale revolution. According to Immelt, “The availability of shale in the United States and around the world has to be one of the biggest game-changers I’ve seen in my career.”
“Made In America” Is the New Black (Again)
Finally, in this first part of pressing manufacturing issues in American Manufacturing, we close with the Rise of Demand of “Made In USA.” “Made in America” was a huge subject around the mid-1990s when the FTC updated its labeling requirements, originally instated in 1938, and then with more stringent “Made In USA” rules amended in 1996.
American manufacturing in certain areas is on the rise thanks to increasing Chinese wages and crowdfunding fueled new production startups. Although there were some weak manufacturing data out as recently as May of 2013, the demand for American made goods seems to be increasing. At least that is the case when it comes to goods with the “Made in America” or “Made in USA” labels. This is especially true in the apparel industry. Indeed, many consumers like the quality perception boost associated with these labels serving as certificates that these goods were in fact made in America. Surprisingly, in some cases U.S. shop owners couldn’t afford to go with the Chinese manufactured options because increased Chinese wages have made goods manufactured in China much more expensive than in the past.
Mitigating Manufacturing and Supply Chain Risk
Unexpected events, whether catastrophic like the oil leak in the Gulf of Mexico or Hurricane Sandy, or disruptive like a supply chain shortage, can change the future of a manufacturing company. To prevent such difficulties or at least minimize their impact, some companies spend millions of dollars on daily analysis of enterprise-wide risks.
Where supply chain and logistics are traditionally a focus of risk analysis teams, manufacturing and quality teams are now charged with improving process predictability. A more thorough, predictable process helps a company realize those benefits.
Manufacturing Industry Trends in Technology for Process Improvement, Visibility, and Compliance
Demand for technology platforms in manufacturing that provide both information and automation systems is soaring because of process improvement, visibility, compliance, and the ability to get valuable reports from data.
There are many technology investments manufacturers can make to realize more efficient process such as advanced robotics, ERP, a Warehouse Management System, or Transportation Management System. Beyond decreasing efficiency, such technological investments and improvements by manufacturers will provide an increase in visibility of the supply chain, regulatory compliance, and insightful information through data analysis. Such efficiencies allow manufacturing companies to stay more strategic and thus make smarter business decisions based on data. In addition to risk mitigation, compliance, and continuous improvement, manufacturing technology can make a company more economical not only by intimately understanding the impact of their decisions on their bottom lines, but also use the automation features in the manufacturing technology to decrease time spent on activities which are not the core focus of the manufacturer.
Additive Manufacturing and 3D Printing Manufacturing Industry Trends
Additive manufacturing (AM), often referred to as three-dimensional (3D) printing, is a new way of making products and components from a digital model, and will have implications in a wide range of industries including defense, aerospace, automotive, and metals manufacturing.
According to the Manufacturers Alliance for Productivity, “Growth on the industrial side is coming from metal additive manufacturing. The key sector is aerospace, where GE and Honeywell have made major investments to deliver on commitments to produce lighter weight components. Consumer goods manufacturers Nike and New Balance both have specialty shoes in production using AM components.”
Hailed by The Economist as catalyst of “the third industrial revolution,” it appears that additive manufacturing will have a significant impact on manufacturing in the near future and in his 2013 second term State of the Union address, President Obama described 3D printing as “having the potential to revolutionize the way we make almost everything.”
Currently, around 28% of the money spent on 3D printing things is for final products, where the rest is on testing and prototyping, according to Terry Wohlers, who runs a research firm specializing in the field. He predicts that this will rise to just over 50% by 2016 and to more than 80% by 2020.
Regulation and Policy
Finally, there is no way to talk about the issues and industry trends that affect manufacturing without talking about government regulation and policy. In a span of only 12 months, manufacturers have dealt with the fiscal cliff, the sequester, the new hours of service rules, which affected transportation and logistics departmental costs and processes within manufacturing companies, and will then have to deal with the forthcoming MAP-21 act, affecting transportation costs again, and then finally the Affordable Care Act, affecting the operational cash flow of a company in the way of health insurance offered to employees, commonly referred to as “Obamacare.”
In general, manufacturers want the government to stay out of their operations, as the private sector does a great job at driving manufacturing growth, but think regulation is important when it comes to human and labor rights, the environment, and infrastructure. According to a poll on Debate.org, businesses gave a 76% “No” to the question, “Should the government intervene with the free market and save failing businesses?” With many of the comments expressing the idea that the government should protect human rights and the environment, but not intervene in operations. The Obama administration touts bringing back manufacturing jobs by claiming the restoration of 1,000,000 manufacturing jobs during his final term. So far, according to The Alliance for American Manufacturing (AAM) job tracker, President Obama is still 98.7% away from fulfilling this promise, meaning he will need to create 23,000 jobs each month to reach his goal.