Although manufacturing activity has slowed, fabricators can’t sit idly by
August 3, 2012
Even as the June 2012 survey numbers suggest that manufacturing activity has retreated from robust highs in early 2012, manufacturers can't afford to start cutting back. They are in a race to reinvent themselves to be more responsive to cost-sensitive customers, and for many, that means investment in new technology. That's why shows such as the International Manufacturing Technology Show, Sept. 10-15, in Chicago, remain important.
Is the U.S. manufacturing slowdown a speed bump or a sink hole? Honestly, the answer really doesn’t matter.
The June 2012 Institute for Supply Management™ Manufacturing Business Survey—the Purchasing Managers’ Index—declined 3.8 percentage points from the May numbers, falling to 49.7 percent, which typically means U.S. manufacturing went into contraction. This is noteworthy because the retrenchment comes after almost three years of consecutive months of growth; the last time the survey came in under 50 percent was in July 2009.
Enlightened manufacturers might show some concern, but they are looking ahead because they know U.S. manufacturing is about to undergo a big change. The work is going to be there for those that can deliver quickly and be cost-competitive. That’s why shows like the International Manufacturing Technology Show 2012, Sept. 10-15, in Chicago remain important: Technology is a key competitive component.
So what’s the big change? Apparently, the jobs trickling back from China just may be the first of a wave of work that is being “reshored,” according to The Boston Consulting Group (BCG). In a February survey of more than 100 executives of manufacturing companies from several industry sectors, 37 percent said that their companies were planning to bring manufacturing operations back to the U.S. or are “actively” considering it. For those companies with $10 billion or more in annual revenues, a third of the sample, that rate jumps to 48 percent.
Mike Zinser, a BCG partner, said labor savings associated with manufacturing in China aren’t what they once were. As a result, when a company takes into account the Chinese wage rate increases, the appreciation of the Chinese currency, the continued productivity gains by U.S. workers, and management headaches of trying to orchestrate manufacturing activities from across an ocean, manufacturing at home makes a lot more sense.
BCG identified seven industry sectors as nearing a “tipping point,” where rising production costs in China would offset any economic advantage companies might find by manufacturing there and might encourage them to shift production to the U.S. Those industries are computers and electronics; appliances and electrical equipment; machinery; furniture; fabricated metals; plastics and rubber; and transportation goods. The BCG study states that the U.S. imported nearly $200 billion worth of products in these categories from China in 2010.
“Today you are starting to see a trickle [of jobs coming back]. You are starting to see some evidence,” Zinser said. “But our expectation is that as those trends lay out in the next few years, you’ll see this accelerate.”
Michael Verkamp, director, business services, Sandvik Coromant, sees major shifts occurring in manufacturing independent of reshoring trends. These changes are related to compressed product life cycles, which means metal fabricating and machining shops can’t plan on long-term production runs like in the past, and a shop’s ability to be flexible enough to react quickly to customers’ demands.
“It’s a challenge for manufacturing today because no longer can you just invest in an asset, maximize its output, and think that it is going to be good enough to maintain profitability and grow your bottom line,” Verkamp said.
He’ll address these trends in his IMTS presentation, “The Shift in Manufacturing Towards Value-added Services,” on Sept. 14 at 10 a.m. in Room W194B. His presentation will be one of 72 sessions. Conference topics and presentations will focus on materials, manufacturing technology, alternative manufacturing processes, quality/metrology, and plant operations.
Show attendees also might find a workforce development presentation interesting. In “Utilizing Technology to Address the Need for a Manufacturing Workforce,” Deanna Postlethwaite, marketing manager, Lincoln Electric Automation, will explore the need to alter the prevailing perception that a manufacturing job is not a worthwhile career path and to change the way that traditional industrial technology subjects are presented to young people.
“Every kid is not going to become a lawyer or a doctor,” Postlethwaite said. “I think the mindset of counselors and parents is that they don’t want to put their kids in a manufacturing environment because there is this stigma that all of these jobs are going to China. They aren’t.”
That’s why metalworking industry professionals are looking for the latest technology to help them stay afloat in the midst of these sea changes. IMTS officials are expecting at least 85,000 visitors from all over the U.S. and more than 100 countries to walk the McCormick Place carpet, looking for the answer to a process or production pain.
In between booth visits, attendees can swing by the Emerging Technology Center where Local Motors will be building a car live on the show floor. They also can see the latest advances in the field of additive manufacturing, in which parts are replicated from 3-D models in a matter of minutes.
For more information, visit www.imts.com.