For this column I want to talk about manufacturing, one of my favorite subjects. I have been writing about manufacturing for more than 20 years. If you have been following the space at all then you know the latest ISM (Institute for Supply Management) Manufacturing Index might be showing another month of contracting economic activity in the manufacturing sector.
To make matters worse, you are all hearing everyone say disrupt or be disrupted. I have even said that a few times in a speech or two and found myself being reprimanded as a result of using those very words by some manufacturers. Now we are 20 years later, and what is happening is we are clearly in the heart of digital transformation. As manufacturers, you are again being told you must understand the needs of consumers and an ever-demanding customer.
And that means leveraging technology to meet those needs. Here we go again. Right? Manufacturing, construction, transportation, logistics, the list goes on, are all facing a crossroads on an ever-moving tech target, immense competition, and an even smaller pool of talent. What’s worse, it seems the pool isn’t getter bigger no matter what you do.
As I mentioned at the outset of my column, I have been covering the manufacturing sector for more than 25 years and despite what appears to be doom and gloom, I believe there is no better time to be in manufacturing with the right people, process, and technology.
The November 2019 manufacturing report is a key index for measuring the status of the manufacturing space and it shows economic activity in the manufacturing sector contracted in November, even though the overall economy grew for the 127th consecutive month.
The November index registered 48.1—a decrease of a 0.2 percentage point from the October reading. In fact, November was the fourth consecutive month of contraction. New orders contracted, inventories, customers’ inventories, backlog of orders, and new export orders.
The biggest contractions between October and November came from inventories, which decreased 3.4 percentage points, and customers’ inventories with a 2.8 percentage-point reduction. The third biggest drop was in new export orders.
Other categories, like production and supplier deliveries, actually gained percentage points in November. Prices and imports also registered increases in November.
Unfortunately, when you zoom out and look at overall trends and not just the monthly fluctuation between October and November, the trend suggests the manufacturing industry is contracting.
ISM’s respondents cite issues like global trade uncertainties, “economic uncertainty” in general, and trend changes as reasons for the downward trend.
But in my view, tariffs and continued confusion about China trade has kind of held manufacturing down.
But the good news is the U.S. did add 266,000 jobs in November, vs. the 187,000, which was much higher than expected. Manufacturing also bounced back adding 54,000 workers after the 43,000 decline the previous month reflecting General Motors employees returning back to work. Drilling into the numbers even more, which is very telling, shows that within manufacturing alone, jobs in motor vehicles and parts climbed by 41,000 this past month.
But if you’re a numbers person, the overall sector has softened by reporting purposes, but it is still stronger than 2016, which helped to propel the president’s election. And if you examine the numbers further it appears the U.S. is fending off the global manufacturing crises despite the trade tensions.
So you may be wondering, what should we do with this information? If you are manufacturer you should be cautious, and perhaps take a somewhat optimistic approach to your 2020 planning.
ISM’s data is showing a growing economy. Interestingly, many of the same challenges manufacturers faced this year may persist in 2020. But as I see it, perhaps the really good news though is that some of them may begin to lesson over time as the political climate changes after the presidential election one way or the other.
What’s more, if history is any indication, it’s hard to know when these corrections will happen, but as an optimist, I like to believe that manufacturing can do anything.
What’s more, cash flow planning is going to be really important. And depending on your sector, you may need to take a second or third look at your capital spend plans for the next year based on what trends you’re seeing.
But this is where I think you need to be looking at the whole, not the parts. How can technology help you streamline? How can it help you do business smarter? How can you upskill? I always say when the economy gets tough, manufacturers (like construction companies) get tougher. It’s time to hunker down and really look at your people, processes, and technology. During times of economic contraction, we need to lean on technology to help us do more with less.
And you need to have the right vision and with vision is optimism and that means anything is possible. Manufacturers already suffered a terrible downturn. Thus, as leaders, you shouldn’t be fearful of the future or think it’s all doom and gloom.
There are also some really exciting things going on in manufacturing right now and that is why I am feeling very optimistic about what the future holds and looking forward to 2020.
Let’s take a quick look at a few innovative startups that are influencing the manufacturing space I and I talked about these companies on The Peggy Smedley Show.
One company is Fortify, which was founded by Randall Erb and Joshua Martin after they spent a lot of time researching composite 3D printing during their time at Northeastern University in Boston, Mass.
Aiming to make quick, seamless fabrication of composites with optimized microstructures, the two entrepreneurs are now leveraging this technology to shorten lead times and improve upon the quality of materials used in traditional manufacturing.
Fortify’s Fluxprint technology uses a patented magnetic 3D printing process that produces composite parts with “ideal mechanical properties.”
It’s so exciting to hear about young entrepreneurs applying their innovative natures to problem solving in manufacturing.
Another up-and-coming company is Azul, which offers 3D manufacturing solutions. One common tradeoff in manufacturing is speed for size or scale.
Azul’s HARP (high area rapid printing) technology addresses this tradeoff dilemma. What if you could have limitless scale, limitless materials, high throughput, and still be fast?
Azul says its innovative technology offers unrivaled scale and speed and, as a result, unrivaled throughput. It’s a really interesting concept—one that could change how we manufacture goods.
In Europe, 3D Hubs, an Amsterdam-based startup that offers an online manufacturing platform, is growing as well. The company just announced last week that it will expand into France.
3D Hubs is interesting because it provides on-demand access to a global network of manufacturing facilities. To me, this is the product of the connected world we live in. We don’t need to work in isolation anymore. There’s no need to reinvent wheels, so to speak, when we have access to so much knowledge and have so many different ways to gather that knowledge at our fingertips.
Okay, manufacturing is experiencing a bit of a slump, and yes, that’s unfortunate. But there is also some really great innovation happening in manufacturing right now, and it’s up to manufacturers to look at ways they can leverage technology to get past the traditional manufacturing hurdles.
From my experience, I know that data from the past can help us understand the current market conditions in manufacturing and project market conditions that can help into the future.
But there is also one wildcard that these reports are not taking into account in all of this discussion and that’s the dawn of 5G. Even though manufacturers have yet to “really” embrace 5G, I am confident it can bring new capabilities, innovation, and efficiencies to many factories and the plant floor. It will be a game changer. Once we add 5G to the mix, I am very confident we can expect manufacturing to benefit in several different ways including the economics discussion.
In fact, I recently read an article by Emily Canal in Inc. that stated 5G will spark new life into the future of manufacturing. Canal interviewed Mo Katibeh, CMO, AT&T Business who added, “5G is going to give rise to an entirely new set of startups.”
And perhaps even more important, Katibeh pointed out the importance of using 5G to transfer knowledge, onsite training, safety, among more. So let’s awaken more innovators to uncover more amazing solutions to keep those factories humming in 2020 and beyond.