Brought to you by Thewww.jacketmediaco.comManufacturing&BusinessPodcastNetworkLISTENTOOURPODCASTSAT:OURPODCASTS: JULY ISM PMI: 52.8% Released August 1st -The Full Executive Summary Report On Business - Page 22 [ FEATURE STORY: ASIA OUTLOOK: PART 2 PAGE 8 RESHORING MANUFACTURING AND ASSEMBLY SERVICES PAGE 12 WHAT TO DO ABOUT SUPPLY CHAIN DISRUPTION? PAGE 16 NORTH AMERICA OUTLOOK PAGE 28 ENERGY OUTLOOK PAGE 44 CYBER SECURITY OUTLOOK PAGE 48 RARE EARTH WARS PAGE 26
2 Manufacturing Outlook / August 2022 © 2022 Jacket Media Co. No part of this publica tion may be reproduced or used in any form without the prior written permission of the publisher. Manufacturing Outlook is a registered trademark of Jacket Media Co. Publisher LEWIS A WEISS Editor in Chief TIM GRADY Creative Director CRAIG ROVERE Contributing Writers ROYCE LOWE CHRIS KUEHL THOMAS R. CUTLER AMELIA LAWRENCEJEANNE-MARIEROYLOWRIECHRISANDERSONMAKAGONCHRISTINECASATIKENFANGER Production Manager LINDA HOPLER Advertising ADVERTISE@MFGTALKRADIO.COM Editorial Oice JACKET MEDIA CO. 75 LANE ROAD FAIRFIELD, NJ 07004 (973) 808-8300 TABLE OF CONTENTS by TR Cutler by TR Cutler MANUFACTURERS INCREASINGLY REDUCE RISK WITH HR OUTSOURCING AND BRING BACK BABY BOOMERS TO THE FEMALEWORKFORCEUKRAINIANLEADERSHIP PREVAILS 18 20 Revolutionising Biopharmaceutical Manufacturing For The Nation INNOVATION OUTLOOK 42 Some Things Improve, Some Not So Much PUBLISHER’S STATEMENT 5 A Few Words From TR Cutler LETTER TO THE EDITOR 4 No Normalcy With Black Swans by Chris Kuehl NORTH AMERICA OUTLOOK 30 Nearshoring From Colombia Versus Asia by TR Cutler SOUTH AMERICA OUTLOOK 34 Of ICEs, EVs and Other Things by Lawrence Makagnon AUTOMOTIVE OUTLOOK The Plane Market by Royce Lowe AEROSPACE OUTLOOK 44 Natural Gas; King of the Hill. by Royce Lowe ENERGY OUTLOOK 46 Global Manufacturing Still Sliding by Royce Lowe MANUFACTURING OUTLOOK 7 Why It Pays to Weaponize Relaxation In Your Cybersecurity Approach by Ken Fanger CYBER SECURITY OUTLOOK 50 ISSUES OUTLOOK 52 The Skilled Labor Problem; Solutions?by Royce Lowe Insights From Inside Manufacturing In Action MANUFACTURING TIDBITS Global Growth Wanes As Recession Fears Grow by Norbert Ore GLOBAL PMI OUTLOOK 39 Open call for... Contributing Writers for new and existing content. Let’s start a conversation –Contact us at info@jacketmediaco.com or visit mfgtalkradio.com/writer for more information. ISM MANUFACTURING REPORT ON BUSINESS 24 The Manufacturing PMI is 52.8% 8 FEATURE STORY: ASIA OUTLOOK: PART TWO by Christine Casati African Economic Predictions Vary Greatly by TR Cutler AFRICA OUTLOOK 36 Contraction Making Its Appearance by Chris Anderson EUROZONE OUTLOOK 38 by Tim Grady RESHORING MANUFACTURING AND ASSEMBLY SERVICES 12 U.S. DEPARTMENT OF LABOR ANNOUNCES APPRENTICESHIP BUILDING AMERICA PROGRAM, $113M IN AVAILABLE FUNDS TO STRENGTHEN, MODERNIZE REGISTERED APPRENTICESHIPS 14 by Chris Keuhl WHAT TO DO ABOUT SUPPLY CHAIN DISRUPTION? 16 COVER STORY: RARE EARTH WARS 28 by Royce Lowe 48 Cass Transportation Systems CASS INDEX LOGISTICS REPORT 22
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Thomas R. Cutler Industrial Journalist/Content Influencer. Founder of the Manufacturing Media Consortium. TR Cutler, Inc. 954-682-6200.
n We want your participation. Now interviewing for additional podcast hosts Now interviewing for regular and contributing writers for Manufacturing Outlook ezine New ideas wanted for monthly Manufacturing Talk Radio topics Contact Jacket Media Co. at 973-808-8300 info@jacketmediaco.comor LETTER TO THE EDITOR
To the readers, sponsors, and team at Jacket Media, it is a privilege, and I look forward to sharing insights, perspectives, and thought leadership for many more years.
4 Manufacturing Outlook / August 2022 Letter to the Editor: For the past several years, each month, it has been an honor to contribute several feature articles to Manufacturing Outlook. Want to take a moment and express why this publication is so critical and distinct from other industrial media outlets. Since founding the Manufacturing Media Consortium in 1999, we now have more than 9000 members, including editors, freelancers, economics, and content creators. What is most exciting about this publication is its forward-looking approach. So many media outlets are looking in the rearview mirror at what happened last month, last quarter, or last year. It does not necessarily provide any insight, anticipation, or prognostication of what’s next. Manufacturing Outlook is different. The emphasis is the outlook for the next big thing, whether geographic trends (covering Africa, for example) or technology trends (such as B2C eCommerce for manufacturers). As a journalist who authors more than 1000 feature articles annually for publications globally, it is a joy to connect the dots of what is happening now and how it portends what is coming in the near and distant future. It would be easy to write about all the bad news, from labor shortages to supply chain disruption. In fairness, I do write those articles as well. The problems today represent an opportunity to reimagine, reconsider, and reinvent how the industrial sector can best address and answer the riddle of what’s next.
Twitter: @ThomasRCutler - www.trcutlerinc.com -
5Manufacturing Outlook / August 2022 PUBLISHERS STATEMENT
Businesses are watching the GDP numbers, inflation rate, Fed interest rates, and other factors, trying to determine if we are headed for more than a technical recession. Since the Great Depression in the 1930s, there has been a leading indicator in hindsight that many thought was a lagging indicator: Typically,Unemployment.inhindsight,
the unemployment rate (U-3) increased as the recession set in, but it wasn’t immediately visible because the government reported its numbers after the fact. It became apparent in retrospect when studying U-3 month by month and recessions’ beginning and end dates. This time around, things may be different. The pandemic may have disguised this leading indicator.
For many months, an open jobs figure of 11 million has been floating around. Businesses have been hiring, but it hasn’t been easy. There are early indicators that companies are now hedging their hiring.
A Recession in Disguise?
Restructuring is an ongoing process across all industries globally as employers adapt to the new workfrom-home workforce, automation, robotics, and operator consolidation in production as more machines can be managed from a single employee workstation with increasing machine intelligence. Thus, the forward outlook is for a recession that may not trigger significant unemployment but will entail a realignment of how work is accomplished. Much of that realignment will focus on technical job skills and employee digital dexterity to keep up with artificial intelligence, machine learning, and perhaps the rise of the machines. n Lewis A. Weiss, Publisher Contact laweiss@mfgtalkradio.com for comments, suggestions and ideas and guest requests for MFGTALKRADIO.COM podcast or any of our podcasts. SUBSCRIBE
According to Alignable’s July Hiring Report (www.alignable.com), a survey of 5,350 small businesses conducted from May 10 through July 19, 2022, shows that 45% of small businesses have stopped hiring. 52% can’t afford to hire staff because wages are 25% more than pre-pandemic levels. 4% are planning layoffs. 48% believe the U.S. is already in a recession, and 32% predict it is coming later this year. Tech companies have been quietly laying off workers. Walmart confirmed it would cut hundreds of corporate roles in a restructuring response to a diminished outlook and softening consumer spending. Tesla has also reduced staffing. Oracle, Vox Media, Shopify, InVision, 7-Eleven, Ford, Asurion, Vimeo, Victoria’s Secret, OhioHealth, GameStop, Twitter, and dozens of others have announced or undertaken staff reductions. But the unemployment rate continues to decline. Why? Those 11 million job openings are disguising the impact on U-3. Rather than cutting staff, companies are closing job openings, taking a make-due approach, or spreading job responsibilities to existing staff.
The Flagship Reports, a podcast on Manufacturing Talk Radio hosted by Dr. Chris Kuehl, and available digitally for $7 a month, shows 5.7 million unemployed (back to pre-pandemic levels) with 1.1 million long-term unemployed. Employment in most sectors is above pre-pandemic levels, but Leisure and Hospitality, Healthcare, Education, and Social Assistance have not recovered. Although Retail has, it is beginning to react to the softening in consumer spending. However, we may not see U-3 rise substantially if the economy continues to weaken. Instead, many of the 11 million job openings may be withdrawn.
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6 Manufacturing Outlook / August 2022 MANUFACTURING OUTLOOK
The JP MORGAN GLOBAL MAN UFACTURING PMI – a composite index produced by JPMorgan and S & P Global in association with ISM and IFPSM (International Federation of Purchasing and Supply Management) – fell from 52.2 in June to 51.1 in July, a two-year low. The global manufactur ing sector started the third quarter on weak footing, as production stagnated and new order intakes contracted. In ternational trade flows continued to fall back, and the pace of job creation was near to stalling. Business optimism fell to its lowest level since May 2020. There is really no good news to report, maybe even upcoming, on global manufacturing. The broad outlook, considering what is going on in the world, and recession fears, is still pes simistic. There is, however, an under lying hint of optimism. Manufacturing in the Eurozone is in contraction, and the only major manufacturing coun try reporting a PMI increase is India, with an 8-month high. We can’t ignore the war in Ukraine and its part in all this, particularly on manufacturing in Europe and that area’s role in global commerce.
By: Royce Lowe The Bureau of Economic Analysis says the U.S. Real Gross Domestic Product decreased at an annual rate of 0.9% in the second quarter, according to the advance estimate. This was following a decrease of 1.6% in the first quarter of The2022.IMF recently published what it fore casts as GDP growth rates for 2023 in the G7 countries, with Canada at 1.75%; Japan at 1.7%; France at 1.0%; U.S. at 1.0%; Germany at 0.75%; Italy at 0.7% and UK at 0.5%. Or a little over 50%, overall, of what they forecast 2022’s GDP growth will be.
OUTLOOKMANUFACTURINGGLOBALMANUFACTURINGSTILLSLIDING.EUROZONEINCONTRACTION.OPTIMISMINDEXFOLLOWINGSUIT.BUTBETTERTIMESMUSTBEAHEAD? continued
GLOBAL CRUDE STEEL PRODUC TION WAS DOWN BY 5.9 PER CENT YEAR-OVER-YEAR IN THE MONTH OF JUNE for the 64 report ing countries – which represent 98 per cent of world crude steel production –to 158.1 million tons (MT). Production for the first six months was down 5.5% year-over-year. We can’t look to any in crease in steel production, nor any need for it, for a goodly while. But there is still significant new capacity planned to be brought online in Europe, North America and Asia. U.S. light vehicle sales for July - those reported were Japanese and South Korean - were down 23% on the same period last year. Meanwhile, the global production of primary aluminum con tinues at its normal pace, with Russia contributing its normal quota.
Outlook.ingCorrespondent,InternationalContributWriter,Manufacturing
Author profile: Royce Lowe, Manufacturing Talk Radio, UK and EU
THE ECONOMIST magazine, in its latest weekly report on world econ omies, highlights changes in Gross Domestic Product (GDP), Consumer Prices and Unemployment Rates for what it considers the world’s major economies. These data are not neces sarily good to the present day, but are mostly applicable to at latest the past two months, and show definite trends in the world economy. The figures are qualified as being the latest available, and with reference to a given quarter or month. The figures for GDP repre sent the percent change on the previous quarter, or annual rate. The consumer price increases represent year-over-year changes. The unemployment percentag es are for the month as noted. n
7Manufacturing Outlook / August 2022 MANUFACTURING OUTLOOK
8 Manufacturing Outlook / August 2022 continued
ASIA OUTLOOK: Part Two
• Petrochemical products (Thai land, Indonesia, Malaysia)
• Electronics (Vietnam, Malaysia, Philippines, Singapore)
Part One of this two-part series was published in the July issue of Manu facturing Outlook
• Automotive: (Thailand, Indone sia, emerging in Vietnam)
• Hi-tech manufacturing (Malay sia, Singapore)
• Textiles/Apparel (Vietnam, Phil ippines, Thailand) Some of these locations are free mar ket economies like Singapore. Others are planned economies like Vietnam. Some are currently experiencing political turbulence, such as Thailand. Others, like Indonesia, are considered to be “a bastion of stability.” Indeed, this coming November, the leaders of the Group of 20 Nations, including the United States, will meet at the G20 Summit in Bali, a Province of Indonesia, where Indonesia will be taking over the G20 Presidency for a year according to rotation.
Last month we focused on some key facts, figures, and acronyms sur rounding the trade initiatives, which are boosting competitiveness and manufacturing potential in the ten nations that make up the ASEAN region. We also looked at why some companies are relocating to Southeast Asia (SEA) from China and the im portance of diversifying their supply chains beyond a single source. This month we will focus on key consider ations and information for manufac turers who are interested in relocating to the Manufacturingregion.
• Processing of Agricultural Prod ucts (Vietnam, the Philippines, Indonesia, Thailand, and most others)
Indonesia is a ‘presidential repre sentative democratic republic’ where The President, Joko Widodo, is the head of both state and government. Widodo traveled to Beijing on July 26th to personally invite President Xi Jinping to the Bali Summit. It was Xi’s first hosting of a head of state By: Christine Casati
FEATURE STORY
Clusters - Unlike manufacturing in China, where you can make products of nearly any kind across the country, manufacturing in Southeast Asia is clustered around certain industries in specialized loca tions. Let’s look at some of the major industries and the nations where they have clustered:
9Manufacturing Outlook / August 2022 continued FEATURE STORY since Putin during the Olympics, and underscores how important South east Asia is to China, and vice versa. Indonesian leaders are walking a tightrope trying to balance trade rela tions between China and the USA. A side note: President Xi and President Biden are preparing for their first in-person meeting at the G20 Bali Summit in mid-November. Small factories dominate in these countries around the above-men tioned clusters where light, labor-in tensive goods, lower value-added electrical, electronic and automotive subcomponents are produced. The notable exceptions are Singapore, where larger scale, more complex industrial products, including elec trical, electronics, transport, marine equipment, and robotics are pro duced, among others. And nearby Malaysia has developed into a good location for higher value-added industries and hi-tech manufacturing. The Philippines has had some success with heavy industries like shipbuild ing. Thailand is the largest automo tive manufacturer in the region and the second largest exporter of comput er hard drives in the world. Vietnam is also a rising electronics manufac turer and is the largest exporter of Samsung phones globally.
We want your participation. Now interviewing for additional podcast hosts Now interviewing for regular and contributing writers for Manufacturing Outlook ezine New ideas wanted for monthly Manufacturing Talk Radio topics Contact Jacket Media Co. at 973-808-8300 info@jacketmediaco.comor
Lower Wage Costs - The Chinese have invested in small and medi um-sized enterprises all over the ASEAN region due to lower wage costs. Wage costs in China are ex pensive by SEA regional standards. So China has done what the United States did decades ago: moved the manufacturing of lower value-added products offshore where the cost of labor was lower, while its own indus try and supply chain bases matured and became more costly. One glaring example is solar panel component manufacturing which Chinese com panies have relocated to Malaysia, Thailand, Vietnam, and Cambodia. The U.S. government is allowing solar build-out projects in the USA to import these panels for another two years free of China-related tariffs, including retroactive tariffs, because we don’t yet have the manufacturing capacity to fulfill orders needed here. There are differences in wage costs among the ASEAN nations them selves. Malaysia does have a relative ly higher wage cost than Indonesia and Cambodia, especially in the high-tech sector, where costs are ap proaching the Chinese but are lower than nearby Singapore. Vietnam and
SMA Industrial Parks - The first three Strategic Partner companies for developing the industrial parks under the SEA Manufacturing Alliance are CapitaLand, Sembcorp Development, and Gallant Venture. Collective ly, they operate over 10 industrial parks across Malaysia, Vietnam, and Indonesia. Under a collaboration agreement formalized at the launch of SMA, companies that intend to invest in both Singapore and CapitaLand’s Nusajaya Technology Park in Malay sia will be entitled to special benefits, such as:
The Pace of Digital Transformation -
Asia Manufacturing Al liance (SMA) - Singapore launched a major manufacturing initiative in 2021 called the Southeast Asia Man ufacturing Alliance (SMA). SMA is a tripartite agreement between the Singapore Economic Development Board (EDB), Enterprise Singapore (ESG), and private sector partners to promote a network of industrial parks in other SEA locations for companies who want to invest in both Singapore and the broader region. Their goal is to propel manufacturing in SEA by reimagining manufacturing and sup ply chains. Their motto is “Twin to Win.” This means linking up Singa pore as a business base with manu facturing bases at industrial parks in Malaysia, Vietnam, and Indonesia to grow the manufacturing footprint of small and medium-sized enterprises (SMEs) and diversify their supply chains. Foreign investors are also welcome to apply to SMA for help with expanding in the region.
• support for eligible innovation activities in Singapore. The above is just one example of the many opportunities for cooper ation under SMA with the strategic partners, the Singapore Economic Development Board, and Enterprise Singapore.
10 Manufacturing Outlook / August 2022 the Philippines have similar wage costs which are much lower than China, Malaysia, and Singapore. The lowest wage costs are for workers in the more remote locations of SEA, or where the infrastructure is less devel oped. Those who want more detailed information on wage differences in SEA can consult KPMG or McKinsey Singapore. Both have done extensive comparative regional wage studies. Raw Material Sources in SEA (non-agricultural; non-gemstone)Tin is the most important metallic mineral in the region in terms of value. Thailand, Malaysia, and In donesia account for more than half of world production, but this resource is becoming depleted. Nickel, copper, iron ore, chromite, zinc, gold, and silver are also mined in lesser quanti ties. Southeast Asia also has consid erable reserves of oil and natural gas, especially Indonesia, Malaysia and SoutheastBrunei.
• differentiated tier pricing for logistics services; • complimentary consultation on business set-up in Malaysia; • supplier identification and match ing services;
• facilitation and support for Indus try 4.0 pilot implementation with Singapore solution providers;
According to the World Bank Survey on the Ease of Doing Business, there has been a marked improvement in many ASEAN countries, but much more work needs to be done to achieve economic growth targets. Countries that have implemented automatic compliance processes are scoring much higher, such as Ma laysia and Thailand. The leaders of ASEAN nations recognize that digital transformation is the key to building higher value-added manufacturing bases throughout the region and upgrading their healthcare infrastruc ture. Economic growth in the region is becoming more closely tied with digital transformation. China’s expo nential growth over several decades was tied to its speedy digital trans formation. Many of the Southeast Asian external trade agreements and intra-regional initiatives we looked at last month include provisions for pro moting investments in digital trans formation. Foreign investors must carefully consider the digital footprint they need in selecting a manufactur ing location in Southeast Asia.
Author Profile: Author ResourcesoffounderChristineprofile:isco-andPresidentChinaHumanGroup, Inc, a management consulting firm based in Princeton NJ. She has provided U.S. companies with strategic development and project implementation services for projects in China since 1986 n
FEATURE STORY
U.S. TOLL FREE 800.600.9290 - IN CANADA: 416.363.2244
12 Manufacturing Outlook / August 2022
Despite the thriving business ecosystem in America during the 2000s, the high cost of local production pushed American manufacturers to outsource manufacturing services abroad, mainly to China. However, the manufacturers did not always get the best product. Some incurred hefty losses despite having well-crafted strategies to lower production costs and increase profit margins. In 2012, Jim Orrico, Founder and President of Dream to Product, recognized the outsourcing trend as a problem for the economy and an opportunity for local manufacturing.
Reshoring Manufacturing and Assembly Services
By: Tim Grady
“We started small in a co-working space called ICNC in downtown Chicago. Our vision was to establish an entrepreneurial contract manufacturing, assembly, and design company that promoted local or regional resources while offering economically feasible consumer and industrial production solutions,” Mr. Orrico said. In 2016, four years after the company was established, Dream to Product had grown exponentially. That growth necessitated acquiring a warehouse in Evanston, Illinois for various facets of the business. According to Jim, the company is a haven for manufacturers seeking Dream to Product’s emphasis on employing the optimal manufacturing and assembly practices, like designing custom assembly stations and using the appropriate tools and parts during the assembly or production process. Dream to Product focuses on reducing the complexity of manufacturing and assembly processes while maintaining the high levels of American standards in all products. “One of our clients was at risk of landfilling over 50,000 pounds of product made in China because the product was made with low-quality material. We worked out a solution for them, sourced the right parts, and are currently in the final stages of reworking and delivering the final product,” said Jim. Besides reworking defective products,
MANUFACTURING TIDBITS continued
We have become a manufacturing, design, and assembly powerhouse by combining our employee’s resourcefulness, dexterity, and motivation with automation, local resources, and accelerated end-toend results – literally from Dream to Product.”
“Apart from guaranteed quality, manufacturing and assembling products locally has many significant benefits. Manufacturers reduce the freight cost and save valuable time with local shipping compared to waiting on overseas shipments to arrive. Product can get to the market sooner – key to end-user deliveries and inventory turns. When necessary, Dream to Product sends its representatives to audit processes at suppliers to ensure efficiencies. Further, manufacturers get to inject money into the local economy through employment and Made in the USA components that can have greater cost-benefits now that we face global inflation.”
Author Profile: Tim Grady is Co-host of Manufacturing Talk Radio. n
the company offers a range of solutions, including product design, prototyping, part sourcing, CAD modeling, custom fixture building, automated assembly, hand assembly, and engineering consultancy services.
MANUFACTURING TIDBITS
Manufacturers who outsource services abroad look at the process through a labor cost lens. However, Jim looked at it differently.
Asked what has fueled the company’s growth over the years, Jim said, “Our core strength is the open organizational leadership model we have embraced. Our recognition of every employee’s value has seen our organization become a marketplace of ideas, enabling us to build a closely knit workforce with dynamic human systems that have given us the most creative problem-solving ecosystem.
13Manufacturing Outlook / August 2022
For more information, please visit the company at www.dreamtoproduct. com.
The U.S. Department of Labor announced a grant program to strengthen, modernize, expand and diversify its Registered Apprenticeship Program to enable more workers to earn while they learn and find reliable pathways to the middle class. Part of President Biden’s ongoing strategy to strengthen Registered Apprenticeships, the department’s “Apprenticeship Building America” program will make $113 million in grant funding available, including up to $50 million to support equity partnerships and pre-apprenticeship activities to increase enrollment in Registered Apprenticeship Programs. The grants will further the Biden-Harris administration’s goals and priorities for a strong and equitable post-pandemic economic recovery by connecting Americans to good quality jobs in priority industry sectors, including critical supply chain industries and among populations disproportionately affected by the pandemic.
Department Of Labor Announces Apprenticeship Building America Program, $113m In Available Funds To Strengthen, Modernize Registered Apprenticeships MANUFACTURING TIDBITS continued
U.S.
“For a young person starting their career or someone seeking a career change, Registered Apprenticeships provide equitable pathways to the middle class,” said U.S. Secretary of Labor Marty Walsh. “This earn-asyou-learn model is helping to grow our economy and supports the BidenHarris administration’s strategy to ensure marginalized populations access to good jobs, a key to a successful and equitable recovery.”
14 Manufacturing Outlook / August 2022
Up to $50M designated for equity partnerships, pre-apprenticeship activities.
“The Apprenticeship Building America grant program will support the Department of Labor’s efforts to empower workers – morning, noon and night – advance racial equity, give workers at-risk of exploitation a path to a good job and provide workers with access to health care and secure retirements throughout their careers,” Secretary Walsh national investment strategy, the Apprenticeship Building America grant program will strengthen and modernize the RAP system, increase equity and accessibility in delivery to apprentices, bring the Registered Apprenticeship model to more industries, and improve RAP completion rates for under-represented populations and underserved communities.
program
Apprenticeship Building America program grant recipients will work with various partners to support and develop the Registered Apprenticeship ecosystem. These partnerships will include:
Additional eligibility requirements
• State apprenticeship system building and modernization.
• Registered Apprenticeship hubs. applicants include nonprofits, labor organizations, public and state institutions of higher education, and county governments. will will from $1 to $8 million. department’s career
broader efforts to connect
Eligible
• Expansion of ApprenticeshipRegisteredProgram opportunities for youth.
be included. Finalists
15Manufacturing Outlook / August 2022
Usingadded.a coordinated
seekers with apprenticeshipopportunitiesapprenticeshipandexpandintonewsectors and Agency:industries.Employment and Training Administration Media Contact: Monica Vereen Phone Number: 202-693-4686 Email: Vereen.Monica.C@dol.gov Media Contact: Arjun Singh Phone Number: 202-693-0214 Email: singh.arjun.p@dol.gov n MANUFACTURING TIDBITS
• Ensuring equitable Registered Apprenticeship Program pathways through preapprenticeship leading to RAP enrollment and equity partnerships.
receive awards
Read more about the
continued
chain expectation now? Is JIT really dead? There has been a great deal of speculation regarding supply chain trends going forward. Trend Number One – Diversification. Poll after poll indicates that the majority of those currently doing business in China are actively looking for alternatives. They are not necessarily abandoning operations in China, which would be economically short sighted. They are looking to diversify their supply chain by expanding to other Asian countries such as Vietnam, Thailand, and India. They are looking at nations in Africa and Latin America as well. These shifts are not simple as these countries lack the infrastructure for trade which China has developed over the last few decades, but they are catching up and are pulling market share away from China. These moves will limit exposure to the variable nature of China engagement but will present new challenges as these nations all have their own set of issues and inhibitions.
16 Manufacturing Outlook / August 2022
MANUFACTURING TIDBITS
Trend Number Two – Reshoring.
More than a few companies have elected to bring significant levels of production back to their home countries. The U.S. has already seen about a trillion dollars of reshoring and that is likely to expand by another trillion before the year is out. The advantages are obvious – shorter transportation routes, easier management, and proximity to the customer base. There are disadvantages as well. Costs are higher due to higher taxes, more regulation, and higher labor costs. Not only are workers more expensive, but they are also harder to by Chris Kuehl
What to do About Supply Chain Disruption?
It was just a few years ago that Just-InTime (JIT) was all the rage. One could not open a business publication without seeing a piece extolling the virtue of a global supply chain. The advances in technology made ordering from across the world as easy as ordering from across the street. Communication and transportation were at the center of this revolution. This seemed to provide a solution to one of the more vexing aspects of business – inventory control. Holding vast quantities of inventory is a cost but not having what is needed is more expensive yet. The ability to get what was needed at exactly the moment it was required changed all that. Unfortunately, there have been some major inhibitions to the JIT process and these have all become very obvious in the last few years. What is the supply
Trend Number Four – Delays. Not all these trends are positive ones. The most immediate reaction to the global supply chain crisis has been delay. The reality is that goods are not moving with any degree of efficiency or reliability at this time and the future promises more of the same set of delays. China is not yet backing away from its policy of lockdown and that will continue affecting output and the efficiency of the ports. Political confrontations show no sign of abating – Taiwan and Ukraine are at the top of the list, but they are far from the only ones. Leftist governments in Latin America have all but shut down exports. Argentina’s food exports have been severely limited while Peru and Chile have seen copper and other metal exports reduced by political edict. The fact is that manufacturers can’t make promises they can’t keep. We have been watching this with the automotive sector for months, but it has affected every industry. Delays can be very lengthy, and this is not a situation that will correct quickly. Even if the supply chain limitations of today were addressed in the next month or so it would be a year before the economy as a whole would return to normal and there is no signal that these issues will be resolved quickly. This article was previously published in The Flagship Report. A free trial subscription can be obtained here.
Chris Kuehl
17Manufacturing Outlook / August 2022 find. Most of those that are moving to the U.S. have elected to emphasize technology and robotics to allow them to compete with those low production cost competitors in other parts of the world. Trend Number Three – Inventory. There may be some long-term solutions such as diversification and reshoring but in the short term there have to be other adjustments. The simplest (to some extent) is holding more inventory so that disruptions are minimized. This is expensive in its own right as it means investing money to hold product that may not be deployed for months. It means paying for warehouse space or building capacity within the core operation. There is a reason that the manufacturing sector is the fastest growing segment for commercial construction.
Dr. KuehlChristopher(Ph.D.)is a Managing Director of Armada companytheIntelligenceCorporateandoneofco-foundersofthein1999.
n MANUFACTURING TIDBITS
Minimize Compliance Risk With Outsourced HR - While not alone, companies like Asure offer budgetfriendly HR outsourcing that can help improve compliance and minimize manufacturers’ exposure to litigation. The certified professionals are always up to date on the latest laws and requirements and can deliver personalized support for employee handbooks, hiring practices, training, and more.
MANUFACTURING TIDBITS
18 Manufacturing Outlook / August 2022 Federal, state, and local regulations are complex, numerous, and ever-changing. Industrial HR managers have regularly expressed the near impossibility of keeping up with these necessary details while running the day-to-day operations of a small business. These details often kill a business from costly compliance violations. The consequences can cause the death of a company in this highly litigious world.
Manufacturers Increasingly Reduce Risk with HR Outsourcing and Bring Back Baby Boomers to the Workforce
With almost 90% of US manufacturers employing fewer than 500 people, smaller businesses have a razor focus on revenues, profit, and other factors that weigh significantly on a company’s success but neglect things like potential lawsuits. Even risk-conscious companies may not have all of the tools they need to successfully navigate the often complex legal and regulatory regime related to employment. An by TR Cutler continued
- Given continued reporting on how older workers are returning from retirement to re-enter the workforce amid inflation and generous benefits packages, workplace health expert Cheryl Morrison-Deutsch shared what employers need to do to support these employees. Morrison-Deutsch is the CEO of Zillion, a provider of employerbased digital health and wellness programs, including RestoreBalance, specifically designed to help employees going through menopause. Amidst those making up the backlash to the great resignation are baby boomers, and the share of the workforce over the age of 75 is expected to grow by 96% over the next decade. As older workers return to the workforce new resources and flexibility may be required from employers that are less important to younger generations.
article published by Law360 (quoting the Hiscox Guide to Employee Lawsuits) stated that organizations with fewer than 500 employees have an 11.7% chance of having an employee file a suit or claim for discrimination. With the average cost of responding to and settling a discrimination claim being close to $130,000, this percentage should be significant to all business owners. Lawsuit Prevention - Although there is no way to prevent potential discrimination claims completely, businesses with sophisticated human resource departments can significantly minimize the risk. Industrial companies must dedicate time and resources to understanding and implementing the Equal Employment Opportunity Commission (EEOC) requirements. This should be coupled with training managers on EEOC requirements and providing an adequate means of resolving any issues that could give rise to a claim before involving the EEOC or the courts. Human resource managers with the proper competencies typically demand higher compensation and may require a support staff. Smaller companies with limited resources may seek to minimize this cost by staffing less seasoned professionals and making it a department of one individual, which may not give the company the appropriate focus, skills, and expertise required to avoid this potential liability.
Morrison-Deutsch suggested that manufacturing industrial employers must understand the increased presence of chronic health issues and the impact on day-to-day work by providing condition-specific health resources. She noted the need to destigmatize the age-related health conditions faced by older employees by providing the resources to minimize their impact on productivity culture.
While Boomers returning to work may only put a dent in the ten million unfilled positions, their work ethics, punctuality, money motivation, and fear of not having money saved to retire keeps them as a valuable resource for HR managers seeking reliable, trained, and experienced workers. Author Profile:Thomas R. Cutler is the President and CEO of Fort Cutler,Florida-based,Lauderdale,TRInc.,celebrating its 24th year. Cutler is the founder of the Manufacturing Media Consortium including more than 9000 journalists, editors, and economists writing about trends in manufacturing, industry, material handling, and process Cutlerimprovement.authors more than 1000 feature articles annually regarding the manufacturing sector. Cutler has established special divisions including African manufacturing, Colombian manufacturing, Gen Z workforce, and Food & Beverage. Cutler was recently named the Global Supply Chain journalist of the year for the second time in a row. Over 5200 industry leaders follow Cutler on Twitter daily at @ThomasRCutler. Contact Cutler at trcutler@trcutlerinc.com. n
Remember, the responsibilities of human resource departments encompass myriad tasks in addition to avoiding discrimination claims.
MANUFACTURING TIDBITS
19Manufacturing Outlook / August 2022
Whether HR Is Outsourced Or Not, Boomers Are Coming Back To Work
Lydia DiLiello, the CEO and founder of Capital Pricing Consultants, a revenue consultancy and is a host of the WAM (Women And Manufacturing) podcast, a Jacket Media Co production; she recently interviewed Kate Yanshyna of OroCommerce. Kate Yanshyna is an IT project manager for womenwomenpodcast,whichOroCommerce,liketheWAMsupportsempoweringinbusiness and manufacturing. A Ukrainian woman, now living in Poland, who is working in the IT software industry. OroCommerce is the eCommerce platform helping B2B businesses to grow and to make their businesses digital and futureproof. Two years ago, Yanshyna joined the company and prior to the interview she worked in Kyiv, Ukraine. Yanshyna reflected on her work at OroCommerce in Ukraine, “I realized how lucky I am to work with these kinds of people at OroCommerce. We were shocked, and we could not
More than 75% of supply chain organizations consider gender and ethnicity/race in their DEI strategies and objectives. This is a significantly higher rate than in 2020, when 59% of respondents considered gender, and 62% considered ethnicity/race.
Yanshyna understands the move to digitization
While three-quarters of supply chain organizations report that they focus on by TR Cutler
“I really like the quote from our cofounder and CTO that people can give their best only when they’re free. And I realized how important and how helpful it was because I knew that the team I’m working with is self-sufficient and they can support me at any moment of time and I can rely on them because they’re independent individuals, professionals,” noted Yanshyna.
TIDBITS understand why this was happening in our country. The company made sure to keep us safe, relocate us to the safe places, and showed us that employees are their first priority. My company made everything possible to reassure that employees are safe and can continue working.”
It is a big a step for customers to move to the digital sphere and automate solutions. It is such a shame to waste precious people’s time and people skills over something that can be automated. At Oro, Dunlop, a protective footwear company, is a fascinating case study. The company had a lot of small retailers which were also important however they consumed a lot of human resources communicating with them. OroCommerce gave those small retailers a self-service portal, accessibility of prices, inventory, and all the information about products; they were able to repurpose two people to work with higher profile customers.
Female LeadershipUkrainianPrevails continued
MANUFACTURING
Yanshyna commented, “Many of my colleagues as well as my management appeared to me from a different perspective, and I was mesmerized by the support given to us. That was so important in that moment. Our management made it possible for us to relocate either to Europe to safer regions or just to safer regions within Ukraine.” Di Liello asked Yanshyna to share the progression of opportunities for women in IT, “I joined IT ten years ago and over these ten years, I can totally say that there were a lot of changes, a lot of good changes in this sphere. When I first started in this industry, mostly men dominated industry, it was possible for people to ask about your age, about your plans for kids. I’m lucky to witness the change over the years, we are moving towards skills over gender.”
Diversity, Equity, and Inclusion
20 Manufacturing Outlook / August 2022
These stories are supported by recent Gartner findings from its Supply Chain Diversity, Equity and Inclusion (DEI) Survey in collaboration with the Association for Supply Chain Management (ASCM). Findings included the fact that representation of people of color in supply chain organizations is much higher at every level when the company is publicly held, representing 35% of the overall supply chain workforce in publicly held companies and 13% of vice presidents.
Figure 1: People of Color in Supply Chain Organizations: Publicly Held Companies Have Stronger Pipelines Source: Gartner (June 2022) Goals, Actions and Accountability are Key to DEI Success According to the survey, more than 75% of supply chain organizations consider gender and ethnicity/race in their DEI strategies and objectives. This is a significantly higher rate than in 2020, when 59% of respondents considered gender, and 62% considered ethnicity/race. However, while threequarters of supply chain organizations report that they focus on some dimension of diversity, only 40% are working on specific DEI projects or initiatives. “Supply chain organizations in global and/or publicly held companies are showing that DEI success is dependent on the supply chain having its own DEI goals and supply chain-led initiatives, as well as measures in place to hold supply chain leaders accountable for reaching goals. Nearly all (93%) of respondents in large, global organizations report that they have DEI goals – compared to 37% of their peers in smaller organizations. Large, global organizations are also 2.5 times more likely to have targeted DEI initiatives,” added Stiffler. DEI Investments Focus on Recruitment, L&D and Employee Engagement Recruitment, learning developmentand (L&D), and areengagementemployeethetypes of DEI initiatives most often seen in supply chain Moreorganizations.than75% of respondents have those initiatives in place. “Recruitment initiatives could be the adoption of diverse interview panels or diversity referral programs; L&D initiatives might include diversity mentorship programs or inclusive leader training. Employee engagement initiatives often center around employee resource groups (ERGs) or community volunteering,” Stiffler added. Fewer than half of supply chain organizations are implementing initiatives focused on specific benefits – such as elder care benefits or financial wellness programs –pay equity or advancement and progression of minority groups. This may pose challenges in retention of underrepresented groups if they do not feel that they receive an equitable work experience or opportunities for role progression. However, 32% of supply chain organizations state recruitment is the most effective initiative, followed closely by L&D (28%) and employee engagement (24%). “With no let-up in sight for this continued state of disruption, companies who fail to secure the talent necessary to keep global supply chains running sustainably and profitably, will no doubt find themselves in the red. Public or private, large or small – companies who invest in DEI initiatives will fare better,” noted Eshkenazi.
MANUFACTURING TIDBITS
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Author ThomasProfile:R.Cutler is the President and CEO of Fort Lauderdale, Floridabased, TR Cutler, Inc., celebrating its 24th year. Cutler is the founder of the Manufacturing Media Consortium including more than 9000 journalists, editors, and economists writing about trends in manufacturing, industry, material handling, and process Cutlerimprovement.authors more than 1000 feature articles annually regarding the manufacturing sector. Cutler has established special divisions including African manufacturing, Colombian manufacturing, Gen Z workforce, and Food & Beverage. Cutler was recently named the Global Supply Chain journalist of the year for the second time in a row. Over 5200 industry leaders follow Cutler on Twitter daily at @ThomasRCutler. Contact Cutler at trcutler@trcutlerinc.com.
21Manufacturing Outlook / August 2022 some dimension of diversity, only 40% are working on specific DEI projects or “Weinitiatives.seea similar dynamic when we compare global companies – with a revenue of over $5 billion – to their smaller peers,” said Dana Stiffler, Vice President analyst with the Gartner Supply Chain practice. “Looking at manager level and above, the big players have much stronger pipelines when it comes to representation of people of color.” In addition, the pay gap is narrower between different racial and ethnic groups for publicly held organizations. “While all supply chain professionals earned higher pay across the board in 2021, it’s encouraging to see that the gap for people of color has narrowed – at least for public enterprises,” said ASCM CEO Abe Eshkenazi, CSCP, CPA, CAE. “What we need to do is completely close the gap – so that all organizations, public and private, are places where racial and ethnic minorities, women, LGBTQ, physical ability and others have equal opportunities.”
• On a SA basis, expenditures fell 2.4% m/m in July, with shipments up 0.6% m/m and rates down 2.9%. We estimate roughly 8pps-10pps of the y/y increase is currently due to fuel prices alone, and part of This CASS INDEX has been posted with the permission of Cass Information Systems, Inc. continued by CASS INFORMATION SYSTEMS, INC.
The shipments component of the Cass Freight Index® rose 0.4% on a y/y basis in July, after a 2.3% decline in June and in line with expectations.
the record level in June, evenly split with shipments down 1.7% and rates down 1.8%.
• The Cass Expenditures Index was still 28% higher than year-ago levels in July, a slight reacceleration, though likely short-lived.
• On a seasonally adjusted (SA) basis, shipments rose 0.6% m/m in July, after a 4.1% decline in June.
22 Manufacturing Outlook / August 2022 CASS INDEX OUTLOOK
Cass
Cass Freight Index - Shipments
• Inventory to sales ratios are still below historic norms, so this major tailwind for freight demand over the past 18 months is likely fading but has not turned to a headwind at this Normalpoint.seasonality from this index level would imply shipments down slightly y/y in Q3 and down 4%-5% y/y in Q4. Freight Expenditures The expenditures component of the Cass Freight Index®, which measures the total amount spent on freight, fell 3.6% m/m in July from Transportation Index Report
• Freight demand has flattened out this year with inflation near 9% and significant substitution from goods back to services.
Considering the extraordinary goods consumption during the pandemic, a reversal as services have reopened shouldn’t be much of a surprise.
Cass Inferred Freight Rates are a simple calculation of the Cass Freight Index data, expenditures divided by shipments, producing a data set that explains the overall movement in cost per shipment. The data set is diversified among all modes, with truckload representing more than half of the dollars, followed by LTL, rail, parcel, and so on.
Inferred Freight Rates
Truckload Linehaul Index
On a m/m basis, the Cass Truckload Linehaul Index® fell 1.8% for the second straight month. After an extraordinary truckload rate cycle over the past two years, the market balance has shifted, with capacity now growing briskly and demand falling slightly year-to-date. This is starting to press the Cass Truckload Linehaul Index® lower. Similar to what has occurred in the spot market, the surge in fuel costs to shippers, which are excluded from this index, will also likely act as a brake on linehaul rates.
One of the most interesting observations about truckload spot rates this year is the symmetry of the decline of about 75c-80c/mile, ex-fuel, which is exactly the amount they jumped after the initial market tightening in 2H’20. Spot rates have rebounded a bit in recent weeks, exfuel, with at least some temporary relief from the significant drop in diesel prices. This brings to mind some of our favorite axioms, like “the laws of supply and demand have yet to be repealed” and “the cure for high prices is high prices.”
Now that the pendulum is swinging, “how bad?” and “how long?” have become some of the most crucial questions about the freight rate cycle.
The The Cass Truckload Linehaul Index® rose 10.5% y/y in July to 162.7 after rising 11.6% y/y in June.
The ACT Freight Forecast report provides monthly, quarterly, and annual predictions for the truckload (TL), LTL, and intermodal markets, including capacity, volumes, and rates. The report provides monthly updates of forecasts for the shipments component of the Cass Freight Index® and the Cass Truckload Linehaul Index® through 2024, as well as DAT spot rates by trailer type, including and excluding fuel surcharges. n
23Manufacturing Outlook / August 2022 CASS INDEX OUTLOOK
The freight rates embedded in the two components of the Cass Freight Index® still rose 28% y/y in July, a slight deceleration from June.
Cass Inferred Freight Rates, a series that tracks changes in the cost of a shipment, fell 1.8% m/m (2.9% SA) in July. Lower fuel prices were part of the decrease, but with looser truckload market conditions, further deceleration is very likely. While there has been some mixrelated noise in recent months, a 3-month moving average of this data series peaked in April in seasonally adjusted terms and was down 1.5% from that level with the July data. With the tight supply/demand balance in U.S. trucking markets easing considerably this year, industry rates are topping out and set to slow sharply in the months to come. Based on the weekly trends, fuel should provide additional relief in August as well. Diesel prices continue to reflect elevated refining margins, and could fall further, but could also easily revert higher if the situation in Europe worsens. While shippers aren’t seeing any real savings yet, such relief is now highly probable, which is welcome news for the broader inflation picture.
the m/m decline in rates was due to lower fuel prices. This index includes changes in fuel, modal mix, intramodal mix, and accessorial Simplycharges.following normal seasonality from here, this index is on track for a 23% increase and would turn down on a y/y basis in December.
Freight Expectations
24 Manufacturing Outlook / August 2022 THE INSTITUTE FOR SUPPLY MANUFACTURINGMANAGEMENT’SREPORT ON BUSINESS®BREAKINGNEWS ISM PMI at 52.8% for July 2022 ISM REPORT OUTLOOK AUGUST52.8%2022 Released August 1st ISM PMI for the past 5 years Expanding Contracting continued
PMI® at 52.8%
MANUFACTURING INSTITUTE FOR SUPPLY MANAGEMENT® reportonbusiness Analysis by Timothy R. Fiore, CPSM, C.P.M. Chair of the Institute for Supply Management® Manufacturing Business Survey Committee
*Number of months moving in current direction. Manufacturing ISM® Report On Business® data has been seasonally adjusted for the New Orders, Production, Employment and Inventories indexes.
Eleven manufacturing indus tries reported growth in July, in the following order: Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Petroleum & Coal Prod ucts; Printing & Related Support Activities; Computer & Electronic Products; Transportation Equip ment; Machinery; Textile Mills; Primary Metals; Plastics & Rubber Products; and Electrical Equipment, Appliances & Components. Also, four of the six biggest manufactur ing industries — Petroleum & Coal Products; Computer & Electronic Products; Transportation Equip ment; and Machinery — registered moderate-to-strong growth. ISM Commodities Up in Price: Adhesives and Paint (8); Aluminum* (26); Caustic Soda (5); Corrugate (6); Corrugated Packaging (21); Crude Oil (3); Diesel Fuel* (19); Electrical Components (20); Electricity (2); Electronic Components (20); Freight (21); Labor — Temporary (15); Logistics Services; Maintenance, Repair and Operating (MRO) Supplies; Natural Gas* (13); Petroleum Based Products (3); Plastic Resins* (7); Polyethylene; Rubber Based Products (12); Solvents; and Steel Products* (23). ‡Miscellaneous Manufacturing (products such as medical equipment and supplies, jewelry, sporting goods, toys and office supplies).
Commodities Reported Note: To view the full report, visit the ISM ® Report On Business® website at ismrob.org
The number of consecutive months the commodity has been listed is indicated after each item. *Reported as both up and down in price.
25Manufacturing Outlook / August 2022 ISM REPORT OUTLOOK continued 12 ISM WORLD.ORG The U.S. manufacturing sector grew in July, as the Manufacturing PMI® registered 52.8 percent, 0.2 percentage point lower than the June reading of 53 percent. The Manu facturing PMI® continued to indicate sector expansion and U.S. economic growth in July. Three of the five subindexes that directly factor into the Manufacturing PMI® (Produc tion, Supplier Deliveries and Inventories) were in growth territory. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting. PMI 48.7% = BreakevenEconomyOverallLine 50% = LineEconomyManufacturingBreakeven 202220212020 52.8% Manufacturing at a Glance INDEX IndexJul IndexJun %ChangePoint Direction Rate Changeof Trend* (months) Manufacturing PMI® 52.8 53.0 -0.2 Growing Slower 26 New Orders 48.0 49.2 -1.2 Contracting Faster 2 Production 53.5 54.9 -1.4 Growing Slower 26 Employment 49.9 47.3 +2.6 Contracting Slower 3 Supplier Deliveries 55.2 57.3 -2.1 Slowing Slower 77 Inventories 57.3 56.0 +1.3 Growing Faster 12 Customers’ Inventories 39.5 35.2 +4.3 Too Low Slower 70 Prices 60.0 78.5 -18.5 Increasing Slower 26 Backlog of Orders 51.3 53.2 -1.9 Growing Slower 25 New Export Orders 52.6 50.7 +1.9 Growing Faster 25 Imports 54.4 50.7 +3.7 Growing Faster 2 Overall Economy Growing Slower 26 Manufacturing Sector Growing Slower 26 Economic activity in the manufac turing sector grew in July, with the overall economy achieving a 26th consecutive month of growth, say the nation’s supply executives in the latest Manufacturing ISM® Report On Business® The July Manufacturing PMI® registered 52.8 percent. The New Orders Index registered 48 percent, 1.2 percentage points lower than the 49.2 percent recorded in June. The Production Index reading of 53.5 percent is a 1.4-percentage point decrease compared to June’s figure of 54.9 percent. The Prices Index registered 60 percent, down 18.5 percentage points compared to the June figure of 78.5 percent; this is the index’s lowest reading since August 2020 (59.5 percent). The Employment Index contracted for a third straight month at 49.9 percent, 2.6 percentage points higher than the 47.3 percent recorded in June.
52.4% = Federal
55.2%53.1% Inventories
Employment ISM’s Employment Index registered 49.9 percent. Eight of 18 manufacturing indus tries reported employment growth in July, in the following order: Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Printing & Related Support Activities; Transportation Equipment; Petroleum & Coal Products; Plastics & Rubber Products; Machinery; and Electrical Equipment, Appliances & Components. Supplier Deliveries
The delivery performance of suppliers to manufacturing organizations was slower in July, as the Supplier Deliveries Index registered 55.2 percent. Ten of 18 manufacturing indus tries reported slower supplier deliveries in July, in the following order: Textile Mills; Paper Products; Nonmetallic Mineral Products; Primary Metals; Miscellaneous Manufacturing‡; Petroleum & Coal Products; Computer & Electronic Products; Transportation Equipment; Machinery; and Chemical Products. Inventories The Inventories Index registered 57.3 percent. Of 18 manufacturing industries, the 13 reporting higher inventories in July — in the following order — are: Apparel, Leather & Allied Products; Textile Mills; Computer & Electronic Products; Nonmetallic Mineral Products; Printing & Related Support Activities; Electrical Equipment, Appliances & Components; Wood Products; Petroleum & Coal Products; Machinery; Plastics & Rubber Products; Transportation Equipment; Fabricated Metal Products; and Chemical Products. ‡Miscellaneous Manufacturing (products such as medical equipment and supplies, jewelry, sporting goods, toys and office supplies). 2022
ISM REPORT OUTLOOK continued
26 Manufacturing Outlook / August 2022 ISM® Report On Business® Manufacturing PMI® Analysis by Timothy R. Fiore, CPSM, C.P.M. , Chair of the Institute for Supply Management ® Manufacturing Business Survey Committee New Orders (Manufacturing) 52.9% = Census Bureau Mfg. Breakeven Line 2022 20 20212020 48% New Orders
ISM’s New Orders Index registered 48 percent. Of the 18 manufacturing industries, four reported growth in new orders in July: Nonmetallic Mineral Products; Printing & Related Support Activities; Primary Metals; and Computer & Electronic Products. (Manufacturing) B.L.S. Mfg. 202220212020 49.9% 20212020 (Manufacturing) 44.4% = B.E.A. Overall Mfg. Inventories Breakeven Line 202220212020 57.3% Production (Manufacturing) Reserve Production Breakeven Line 202220212020 53.5% 70 Production The Production Index registered 53.5 percent. Five industries reported growth in pro duction during the month of July: Apparel, Leather & Allied Products; Petroleum & Coal Products; Computer & Electronic Products; Transportation Equipment; and Plastics & Rubber Products.
Board Industrial
July
50.5% =
Employment
BreakevenEmploymentLine
20 Supplier Deliveries (Manufacturing) 2022 80
ISM’s Customers’ Inventories Index registered 39.5 percent. Three industries (Wood Products; Food, Beverage & Tobacco Products; and Chemical Products) reported customers’ inventories as too high in July. The 12 industries reporting customers’ inventories as too low during July — listed in order — are: Nonmetallic Mineral Products; Transportation Equipment; Miscellaneous Manufacturing‡; Petroleum & Coal Products; Furniture & Related Products; Primary Metals; Plastics & Rubber Products; Computer & Electronic Products; Machinery; Paper Products; Fabricated Metal Products; and Electrical Equipment, Appliances & Components.
ISM REPORT OUTLOOK
‡Miscellaneous Manufacturing (products such as medical equipment and supplies, jewelry, sporting goods, toys and office supplies). 2022
July
27Manufacturing Outlook / August 2022 ISM® Report On Business® Manufacturing PMI® Analysis by Timothy R. Fiore, CPSM, C.P.M. , Chair of the Institute for Supply Management ® Manufacturing Business Survey Committee Customer Inventories (Manufacturing) 202220212020 39.5% Backlog of Orders (Manufacturing) 202220212020 51.3% New Export Orders (Manufacturing) 202220212020 52.6% Imports (Manufacturing) 202220212020 54.4% Customers’ Inventories
ISM’s Backlog of Orders Index registered 51.3 percent. Five industries reported growth in order backlogs in July: Nonmetallic Mineral Products; Petroleum & Coal Products; Printing & Related Support Activities; Machinery; and Transportation Equipment.
Prices (Manufacturing) 52.6% = B.L.S. Producer Prices Index for Intermediate Materials Breakeven Line 202220212020 60% Prices The ISM Prices Index registered 60 percent. In July, 12 of 18 industries reported paying increased prices for raw materials, in the following order: Nonmetallic Mineral Products; Printing & Related Support Activities; Paper Products; Plastics & Rubber Products; Textile Mills; Computer & Electronic Products; Food, Beverage & Tobacco Products; Chemical Products; Miscellaneous Manufacturing‡; Machinery; Furniture & Related Products; and Transportation Equipment.
New Export Orders
Backlog of Orders
ISM’s New Export Orders Index registered 52.6 percent. The four industries reporting growth in new export orders in July are: Petroleum & Coal Products; Food, Beverage & Tobacco Products; Transportation Equipment; and Computer & Electronic Products.
Imports ISM’s Imports Index registered 54.4 percent. The 10 industries reporting growth in imports in July — in the following order — are: Textile Mills; Printing & Related Support Activities; Petroleum & Coal Products; Primary Metals; Electrical Equipment, Appliances & Components; Transportation Equipment; Computer & Electronic Products; Fabricated Metal Products; Plastics & Rubber Products; and Machinery.
REO (rare-earth oxide) production is projected to average 2,313 tons per year in total, including approximately 180 tons per year of Neodymium, and 67 tons per year of praseodymium. The lithium resource is estimated at 9,800 tons per year of lithium carbonate production. Smith says that USA Rare Earth is developing a fully domestic mine-to-magnet supply chain for use in defense, medicine, green energy, and EV production. U.S. companies presently purchase the vast majority of their materials and magnets from China.
Australia’s Lynas Rare Earths Ltd. was established as an ethical and environmentally responsible producer of rare earth materials. It is the world’s only significant producer of separated rare earth materials outside of China. The Lynas MT Weld mine in Western Australia is acknowledged as one of the world’s premier rare earths deposits.
USA Rare Earth’s President, Thayer Smith, says the company will bring into domestic production nearly half of the critical minerals identified by the USGS, including gallium, which tops the new Critical Minerals List. Smith says that in early 2021, the USGS identified Round Top as the largest gallium deposit in the United States. Gallium is a critical semiconductor chip material for which there are currently no U.S. producers. Round Top should become operational in 2023, with a mining rate that has been estimated at 20,000 tons per day. All mineral processing is expected to take place on-site.
Lynas also operates the world’s largest
A California company, M.P. Metals Corp., owns Mountain Pass mine, which in 2021 produced some 15% of the world’s rare earths. This is the only rare-earth mining and processing facility in the U.S. This mine had seen better days, but a series of bankruptcies and changes of ownership resulted in its closure. MP Metals Corp. reopened it. A Texas-based company, USA Rare Earth, recently announced that it expects to produce nearly half of the critical minerals listed in the U.S. Geological Survey’s (USGS) revised list of raw materials deemed “crucial for national security and the economy.”
28 Manufacturing Outlook / August 2022 COVER STORY: MATERIALS OUTLOOK
Rare Earth Wars by Royce Lowe
continued
The company said that together with partner Texas Mineral Resources, it is committed to developing the Round Top heavy rare earth, lithium, and critical minerals project in Hudspeth County, thus making it a strategic part of supply chains essential to the U.S. economy.
We’ve heard of rare earth metals in a number of contexts. For example, they’re not that rare. They’re used to make specialized magnets for motors in EVs, generators in wind turbines, and missile-guidance systems. According to the White House, China has 55% of the world’s mining capacity for rare earths, and 85% of its refining capacity. The U.S. Department of Defense is a customer of China, which supplies a goodly portion of the U.S. requirements. In short, these are strategic materials, and the U.S. doesn’t make enough of them.
It was recently announced that an English-language social media propaganda effort that previously criticized Hong Kong protesters and other foes of the Chinese government, and has been linked to China, has taken the rare step of going after private companies in a strategic industry. This strategic industry is, of course, the rare earth metals industry. In a recent Facebook post cited by Mandiant, a user named “Cox Teri” commented in an existing group as a concerned environmentalist. “LYNAS dumps toxic and radioactive waste, radioactive waste that affects lives, livelihoods, the environment, and health of future generations.”
Through all this, Turkey claims to have discovered the world’s second-largest rare earth element reserve, containing 17 elements - after China’s 800 million ton reserve. The goal of this project is an annual production of 10,000 tons of rare earth oxides, followed by export and the production of magnets.
The Washington Post picked up on this, stating that accounts on Twitter and Facebook have been posing as Texans to attack a rare earth processing facility in that state being built by Lynas Rare Earths Ltd., according to Mandiant, a cybersecurity firm. Other accounts in the network recently criticized Canadian rare earths miner Appia Rare Earths & Uranium Corp., which had just announced a new mining find in that country, and American firm USA Rare Earth, which had said it would build a processing plant in Oklahoma.
29Manufacturing Outlook / August 2022 COVER STORY: MATERIALS OUTLOOK
China is no doubt looking to stay at the top of the heap in the rare earths race, and undermine U.S. efforts with fake reporting to stir up environmental issues to slow down U.S. mining efforts. It knows that the West needs its products, but it surely knows that the West, particularly the U.S., uses these products to build critical parts that the Chinese buy for their aerospace and defense industries. Among the more mundane metals, aluminum, nickel, and zinc made good price gains during July; copper took a slight dip. As for steel, well early August saw the price of hot-rolled coil in the U.S. at around $840 per ton. Far from the over-$1900 per ton we saw last September.
Author profile: Royce Lowe, Manufacturing Talk Radio, UK and EU International Correspondent, Contributing Writer, Manufacturing Outlook
continued single rare earths processing plant in Malaysia, where it produces high-quality separated rare earth materials for export to manufacturing markets in Asia, Europe, and the United States. The company aims to add new expansion projects to meet surging demand and has signed a $120 million follow-on contract with the U.S. Department of Defense to build a commercial heavy-rare-earth separation facility in Texas.
. n
The Fed Funds rate is the rate that banks charge each other in the overnight lending market. It is an indirect tool to control inflation at best. It means that banks are less prone to loan and that these loans are more expensive. That slows things down but not quickly – it takes 18 to 24 months for these moves to have much impact. A rate of 2.5% is not even close to historic highs – in fact, it is back to what we saw in 2008 (in 2007 the rate was over 3.5%). The statement accompanying the hike suggests the Fed will take a breather to determine what the data says. A slumping economy will not encourage another hike. Now – about that GDP number. Are continued we in a recession already? Usually it is defined as two straight quarters of negative GDP, and we have now seen that. The reality is that a recession is declared by the National Bureau for Economic Research (NBER), and they have a far more complex set of determinants. There are parts of the economy that are still growing fast. There are parts that are in significant decline and that is normal – the US rarely sees a full-blown universal recession. We get sector recessions. Even the collapse in 2020 was not universal – service sector business was crushed, but manufacturing actually grew. In the next month, there will be a couple of GDP revisions, and they by Chris Kuehl Recession, Automation, and Robotics
OUTLOOKNORTHOUTLOOKAMERICA
30 Manufacturing Outlook / August 2022 NORTH AMERICA
AUGUST 2022 This issue is a bit of a combination of an update and a deeper discussion of major topics in manufacturing –automation, technology, and robotics. First, the review of the last few weeks as they have been busy. The headline-grabbing events include the decision by the Federal Reserve to hike interest rates by another .75% and the release of the Q2 GDP numbers. The Fed hike brings the rate to between 2.25% and 2.50% and that is a far cry from the 0.0% to 0.25% that was in place for almost ten years. Is this really enough to send the US into a recession, and given the fact that Q2 GDP came in at -0.9% after hitting a -1.6% in Q1 - are we already in a recession?
31Manufacturing Outlook / August 2022 continued NORTH AMERICA OUTLOOK may tell a different story. For now, the conclusion is that growth has slowed and perhaps enough that the Fed will think twice about another rate hike. Beyond the performance of the GDP, the key determinant of a recession is employment, and the level of job growth remains very high. As long as there are some 11 million job openings and only some 6 million potential applicants, there is little sign of a decline in the employment Canadanumbers.is experiencing a very different quarter. The Bank of Canada expected to see growth slightly above the 3.1% that had been seen in the first quarter but not higher than 4.0%. The number was significantly above estimate at 4.6%, and that will have some policy implications for the bank. The expectation is that interest rates will rise sharply by September as the economy is not showing signs of cooling. The inflation rate in Canada has not been as high as seen in the US or Europe, but it is higher than a year Whenago. looking at the various sectors, there have been some sharp differences. Transportation was up by over 14% on the strength of air travel as well as freight movement. Meanwhile, manufacturing fell off by 1.7% as the supply chain woes have also affected Canadian production. The prime driver for the economy has predictably been commodities, as both oil and food have been seeing major price hikes. The Bank of Canada is trying to be preemptive as far as inflation is concerned, and that likely means a half-point hike in
Over the last couple of years, an already hot topic has become a blazingly hot topic. It has been evident that technology has come to dominate industry over the last few decades. The advantages have been clear – higher levels of productivity, more precise manufacturing, less dependence on distant supply chains, and higher levels of reliability. On
Automation, Robotics, and the Economy
TheSeptember.Mexican economy also grew in the second quarter but not by as much as Canada. The rate was at 1.0% after a growth rate of 0.9% in Q1. Thus far this year, the growth rate in Mexico has been at 1.9%. Much of this has been commodity-based as it has been in Canada. Oil revenues have been up and there has been an increase in food exports. The troublesome data comes in manufacturing as the sector is tightly bound to the US and has been feeling the same supply chain
Givenpressures.the relationship between the U.S. and Mexico, the Fed’s rate policy has an impact on the Bank of Mexico. The central bank wants to address future inflation more aggressively, but the President has been pressuring to keep interest rates down so that growth in the country is not affected. This has become a struggle in the legislature as well. The relationship between AMLO and Biden has not warmed, but as Latin America shifts to the left politically, it has elevated AMLO’s profile and influence. At this time, the majority of Latin nations have left-leaning governments (Mexico, Colombia, Venezuela, Peru, Chile, Argentina, Bolivia, and likely Brazil before long). Tourism has not yet rebounded, and remittances have been constrained as well. There are fewer Mexican workers in the US as immigration has tightened, and those that are in the US are facing higher living costs and can’t send as much home as they once did.
32 Manufacturing Outlook / August 2022 the other hand, there have been downsides. Tech is expensive and out of reach for some companies. Robots replace people in many situations, and those workers struggle to find alternative careers. The expansion of technology and automation is inevitable, and the real question becomes what this means to the overall economy. Is it a net good or a net bad? In the last decade, the drive to automate has been accelerated by the chronic labor shortage. The number of available jobs is still over 10 million, and there are perhaps 6 million ostensibly looking for work. That is an enormous gap. Unemployment rates have been around 3.4% for months, and many states are seeing rates as low as 2.0%. The people still seeking work are those that lack the skills that employers are in search of, and that is especially true in sectors such as manufacturing, construction, and transportation. As these companies struggle to find qualified workers, they are forced to turn to alternatives such as automation and robotics. The advances in machine capability come at a time when business needs them more than ever. The worry has been that automation would eliminate jobs, and in fact, that We want your participation. Now interviewing for additional podcast hosts Now interviewing for regular and contributing writers for Manufacturing Outlook ezine New ideas wanted for monthly Manufacturing Talk Radio topics Contact Jacket Media Co. at 973-808-8300 info@jacketmediaco.comor continued
The Flagship Reports with Dr. Chris Kuehl is both an “Officer of the Watch” briefing of economic conditions and an Executive Briefing on specific situations impacting those conditions. Written and presented by the officers of Armada Corporate Intelligence, Dr. Kuehl lightens up the mood of sometimes distressful geoeconomic news with a bit of humor. This monthly podcast includes informa tion from the Flagship Reports issued 3 times and week, and AISI, the Armada Strategic Intelligence System, a tool for durable goods manufacturers that dives deep into the sector each month to pro vide more than 95% accurate near-term forecasts.
Chris Kuehl was the case some twenty years ago when these innovations first started to become common. Today, these machines are not replacing workers as much as they are substituting for the workforce that has become increasingly hard to find. The machines also need trained people to operate them and maintain them, and that has contributed to job growth despite the fact these workers are also hard to find. One of the somewhat unanticipated benefits of automation is the impact it has had on reshoring and onshoring. The collapse of the supply chain has been front page news for the last three years, and there is little sign of relief. China is mired in a “zerotolerance” policy that has dragged its growth numbers down to 0.4% in the last quarter. The relationship between the U.S. and China has deteriorated to the point that 95% of CEOs operating in China have stated they intend to shift production out of China. Much of that will go to other Asian platforms such as Vietnam, Thailand, Malaysia, etc., but there have been a trillion dollars of investment back to the US. Many foreign operations are also relocating to the U.S. Taiwan Semiconductor is building a plant in Arizona, Panasonic is building batteries in Kansas, and so on. As these operations seek to move to the U.S. to develop a reliable supply chain, they face three challenges. Will there be sufficient transportation infrastructure, will there be sufficient energy reliability, and most important – will there be labor? Given the labor shortage, that last question has been hard to answer, and that has driven these reshoring operations to become extremely focused on robotics and Theautomation.advantages of automation have generally been described in terms of a company’s level of productivity, and there have been clear gains in the last few decades. The role of robotics and technology has gone beyond the individual firm and now impacts the overall economy. Given that building an adequate industrial workforce could take many years and require extensive cooperationgovernment,between the education system, and business, it is likely expandautomationthatwilleven faster to fill that employment gap.n
THE FLAGSHIP REPORTS
33Manufacturing Outlook / August 2022
Lengthy Shipping Times - When
SOUTH AMERICA
The time was when this continent was an economic powerhouse. It is graced with natural resources and was home to millions of young, educated people. But it has suffered political upheaval over the last several decades, putting it in a situation where such young people are leaving for greener pastures. The continent is by no means dormant and has for some decades been an economic partner of the U.S., and more recently of China. Needless to say, there’s a lot to write about South America. About its politics, its business, those who invest in it, and why. What natural resources they have there, and who’s mining them? It’s a continent with problems that will look for and accept help from whoever fairly offers it. We will cover South America monthly, and from all these aspects. [Editor] Nearshoring from Colombia versus Asia The Nearshore Company CoCEO Jorge Gonzales argued that the advantages of manufacturing in Asia — traditionally compensating for its disadvantages — are now diminishing. He suggested that executives must reconsider the longterm manufacturing competitiveness of China, an historically low-cost country currently under pressure as costs rise quickly. China’s manufacturing output fell to its lowest level in three years. These data were the latest sign of economic pain. Dozens of cities, including Shenzhen and Shanghai, were partially or fully sealed off in recent months and these restrictions have disrupted global supply chains while goods pile up at the world’s busiest container ports. No longer are Asian countries that previously offered enormous cost advantages able to compete. China is increasingly expensive; Vietnam is equally prohibitive. Costs coupled with the recent Russian invasion of Ukraine forced business executives to consider whether the era of globalization must be reevaluated. According to financial intelligence firm Sentieo, mentions of nearshoring, onshoring, and reshoring during corporate earnings calls and investor conferences have increased 500% since the beginning of the pandemic.
AUGUST
Gonzales argued that the promise that Asian manufacturing held for American businesses since the 1980s has turned into a proverbial nightmare for the following reasons.
34 Manufacturing Outlook / August 2022
OUTLOOKSOUTHOUTLOOKAMERICA 2022 by TR Cutler
Shanghai shut down, shipping from China to the West Coast was taking more than a hundred days; forty days more than before COVID. Even when ports reopened, all shippers and recipients were dealing with long shipping queues, massive congestion, and labor shortages. The result: Asian shipping schedules are increasingly unreliable.
Atehortua reviewed the report, including the following key companies: CLM Cargo, Consignaciones Transitos y Transportes Internacionales SA, Coordinadora, Deutsche Post AG, DSV Panalpina AS, Logistics Plus Inc., OPL Carga SAS, TCC Inversiones SA, Transportes Sanchez Polo, and Transportes Vigia SAS among others. Colombia is fragmented and the vendors are deploying growth strategies such as expanding geographical reach and realigning product offerings to compete in the market.
35Manufacturing Outlook / August 2022
Colombia is rich in natural resources and has a prosperous agricultural and manufacturing sector. Free trade agreements with developed nations have allowed it to diversify its foreign trade and earn handsome foreign exchange revenue. The government has invested significantly in expanding port facilities, free trade zones, and infrastructure development to attract businesses and foreign direct investment. Tourism has also boosted economic growth by generating employment opportunities. Colombia has major trade relations with the United States, which will grow even stronger. n
CLM Cargo offers road freight transport solutions for logistics, ocean freight, air freight, ground transportation, customs broker, warehousing and storage, and courier services.
Consignaciones Transitos y Transportes Internacionales SA offers road freight transport that provides air transport, marine transport, ground transportation, customs services, logistics and distribution, and special Coordinadoratransport. offers road freight transport that provides services such as request free pickup, delivery times, merchandise shipping service, sending documents, messaging and stationery filing, international deliveries, bulk load, chemical and chemical dangerous goods, and online service. The transcontinental country of Colombia covers South America and a small portion of North America. Bordered by the Caribbean sea and the Pacific Ocean on its northern and western coastline, Colombia has five major ports (Colombian Buenaventura Port, pictured) and around 15 river ports. Atehortua suggested, “As more North American companies turn to nearshoring, Colombia is poised for even greater growth. The wait time from Asia is both untenable and prohibitively expensive. Products from Colombia to any United States port are less than a week away.”
Costly Shipping - Worldwide, rates for shipping a 40-foot container skyrocketed from $1,600 in early 2020 to $7,800 this year, a five-fold jump. But the Asia-Pacific region has suffered most with $15,000 costs increasingly common to keep up with demand. Despite prognostications of worldwide inflationary pressures, there is some indication these high prices from Asia are softening. Part of the cost equation is the added price pressure on bunker fuel coming from the war in Ukraine. Fuel prices were already high due to the pandemic, but have increased almost 40%.
Expensive Business TravelBusinesses that manufacture in Asia need their executives to regularly inspect production and meet with suppliers and partners. Air travel comes at a cost, which is expected to continue rising due to increasing fuel costs and pilot shortages. According to Hopper Price Tracker, in June 2022, the average international airline ticket cost $836, an increase of 28% from June 2020. Analysts expect prices to rise 3.4% in 2023.
Pricey Labor - Inexpensive labor was the carrot that got businesses to move production to Asian countries forty years ago. Now the average labor wage per hour in China is consistently higher than other manufacturingfocused countries, including Mexico. Mexico has the cost advantage now and will likely have it for some time according to Statista in 2020. Chinese workers earned $6.50 an hour (an increase of 13% from 2019). Meanwhile, Mexican workers earned $4.82 (an increase of 4% over the previous year).
Colombia Most Likely Nearshoring Prediction - According to Rafael Atehortua, LATAM Manager for the Manufacturing Media Consortium, The Road Freight Transport Market Share in Colombia is expected to increase by USD 1.30 billion from 2021 to 2026 with an accelerated CAGR of 4.58%, according to the recent market study by Technavio.
The continent’s industrialization is geographically limited though, with around two-thirds of value-added manufacturing taking place in just five nations: South Africa, Egypt, Morocco, Algeria, and Nigeria. Almost all African countries have industrialization as a goal in their respective National Development Plans. Kato opined that with the pandemic, a recession, and the war in Ukraine, there is concern that the window of opportunity for Africa to become a manufacturing hub is closing fast. This glower prognosis is not universally shared. Burundi, for example, is actively pursuing industrial jobs to achieve growth opportunities. Per its development blueprint known as Vision 2025, Burundi aims to build a competitive and diversified economy. Agricultural processing and value addition to coffee, cotton, and minerals are key features of the country’s plan to move into light manufacturing. The Oil Opportunity for Africa due to Ukrainian War
36 Manufacturing Outlook / August 2022 AFRICA OUTLOOK continued by TR Cutler African Economic Predictions Vary
AFRICA OUTLOOK AUGUST 2022
Greatly Ronald Lwere Kato reported for Business Africa that despite efforts made by countries over the years to industrialize, Africa’s share of global manufacturing remains negligible. Manufacturing has been touted as the key to unlocking productive jobs, more significant export revenues, and sustainable development. In 2019, Africa’s industrial GDP expanded by 17% to $731 billion, with the valueadded of manufacturing surging by 39%, according to the African Development Bank.
At present, Algeria is by far the largest African supplier of natural gas to the EU, providing 12.6% of its imports in 2021 (45 bcm), according to the Commission’s statistics.
African Continental Free Trade Game Changer
The report, titled Africa’s 2022 Growth Prospects: Poise under Post-Pandemic and Heightening Geopolitical Pressures, insisted the AfCFTA agreement would usher in a period of renaissance in the African manufacturing sector and become a critical driver of African economic growth in the near term.
Egypt’s figure was, notably, quadrupling over the year before.
Nigeria is a distant second with 3.5% (12.6 bcm, according to S&P Global Platts Analytics), with Egypt just behind with 2.5% (9 bcm, according to the country’s Minister of Petroleum) in 2021.
The African Export and Import Bank (Afreximbank) has affirmed that the African Continental Free Trade Area (AfCFTA) agreement would be the continent’s industrial accelerator. It stated unequivocally that, “AfCFTA will accelerate the growth of laborintensive manufacturing industries.”
Timing to market will be key. Africa needs to move fast if it wants to be a key supplier to Europe as it tries to diversify away from Russia. Supply from African nations would replace around 4% of the EU’s total gas imports this year, with higher volumes in prospect over the coming decade. This still leaves a significant gap to fill.
The AfCFTA as the Industrialization Accelerator projected that AfCFTA would increase the value of the African automotive market from $30.44 billion in 2021 to $40.06 billion in 2027. AfCFTA will awaken the revival of industrialization of African economies and deepen increasingly competitive regional value chains. Africa’s industrial and manufacturing output went through a long period of sustained decline towards the end of the last century. The premature deindustrialization argument reversed course a decade ago, and the African continent will surpass India’s population by 2040 and GDP by 2050.
Cutler authors more than 1000 feature articles annually regarding the manufacturing sector. Cutler has established special divisions including African manufacturing, Colombian manufacturing, Gen Z workforce, and Food & Beverage. Cutler was recently named the Global Supply Chain journalist of the year for the second time in a row. Over 5200 industry leaders follow Cutler on Twitter daily at @ThomasRCutler. Contact Cutler at trcutler@trcutlerinc.com. n
The African Import and Export Bank, in its recent report, argued that the African Continental Free Trade Area would be the game changer in driving Africa’s industrialization suggested by Dike Onwuamaeze.
37Manufacturing Outlook / August 2022 AFRICA OUTLOOK
Timing To Market Will Be Key Massimo Di Odoardo, Vice-President of global gas and LNG research at Wood Mackenzie, said African producers will face stiff competition. He suggested Africa is well-positioned given its proximity. But European demand might not be there forever, and others are trying to seize the opportunity, including producers in the U.S. and the Middle East.
Author Profile:Thomas R. Cutler is the President and CEO of Fort Lauderdale, Florida-based, TR Cutler, Inc., celebrating its 24th year. Cutler is the founder of the Manufacturing Media Consortium including more than 9000 journalists, editors, and economists writing about trends in manufacturing, industry, material handling, and process improvement.
The report identified East and West Africa as the regions manufacturing would play a critical role in sustaining economic growth. The sustained injection of patient capital and the rise of East Africa’s automotive industry are helping to expand opportunities for labor-intensive employment under a proven manufacturing-led growth model and will expand the fiscal space to gradually strengthen the foundation of macroeconomic stability. The sub-region will be supported by the usual assortment of strong performers (Benin, Cote d’Ivoire, Ghana, Guinea, and Senegal), and by Nigeria, where the purchasing managers’ index (PMI) rose sharply to 57.3 in February 2022, the largest expansion since November 2019. The telecommunications and financial services sectors, as well as extensive investment in strategic industries, are enhancing growth resilience in Nigeria. The oil sector, too, will benefit from a gradual easing of OPEC production cuts and higher prices, which have received another boost from the Ukraine crisis.
38 Manufacturing Outlook / August 2022 EUROZONE OUTLOOK by Chris Anderson S&P Global Eurozone Manufacturing Composite Purchasing Managers’ Index (PMI) fell back from 52.1 in June to 49.8 in July, a 25-month low. The manufacturing production index slipped further into contraction from June’s 49.3 to July’s 46.3 - a 26-month low. The year-ahead outlook for manufacturing production went pessimistic for the first time since May 2020 due to supply chain concerns, the war in Ukraine, and the EU economy.Western European car sales are still projected at under 10 million for the year, or around twothirds of those of 2019. n Chris Anderson, Staff Writer EUROZONEGLOBALOUTLOOK Contraction Making Its Appearance
GLOBAL
continued Two things appear to be certain for the mid to long term. We will be living with Inflation, and lack of Trust/ Confidence (note italics and bold added for emphasis). Relationships in the supply chains for goods and services that bind our great nation have been significantly compromised in that companies and government agencies have lost a tremendous amount of credibility throughout this ordeal. Who would have thought the supply lines for baby formula could fail to meet demand. And, of course, there are the production issues around energy, and the myriad of components in the technology world. Vehicles are still held in inventory with manufacturers and dealers waiting for chips from manufacturers. Yes, there is still much to be done on these supply lines along with major concerns about food supply globally. Help wanted signs still dominate in cities and in rural areas. Restaurants open with “drive-through only” for lunch time because they are unable to staff the lunch business. Yes, there are opportunities for improvement, but there is no smooth sailing. With energy prices bouncing up and down and availability in question, we still have a long way to go to re-supply basic industries such as food, energy,
OUTLOOK
GLOBAL OUTLOOKPMI
39Manufacturing Outlook / August 2022
GLOBAL GROWTH WANES AS RECESSION FEARS GROW JULY 2022 BUSINESS SURVEY According to our scatterplot of 18 surveys, two economies recorded Expanding-Strengthening; an additional ten reported ExpandingWeakening; zero reported Contracting-Strengthening and six saw Contracting-Weakening. In July, six surveys fell into contraction territory, the Eurozone, Germany, Mexico, Taiwan, South Korea, and CLFP China. by NORBERT ORE, DIRECTOR, HEAD OF INDUSTRIAL SURVEYS, STRATEGAS RESEARCH PARTNERS PMI Norbert Ore, Director, Head Of Industrial Surveys, Strategas Research Partners
INSIGHTS
Customers’ Inventories: The index (39.5, +4.3) for raw materials, components, and finished goods. This is “too low” for the 70th consecutive month and the index has been under 40 percent for the past 24 months. This is an indication that buyers are still struggling to keep plants synchronized with their supply chains. It appears that priorities for 2022 will continue to be unraveling inventory issues in many supply chains.
ISM U.S. Manufacturing PMI™ The U.S. Manufacturing sector, despite a multitude of challenges, internationally and domestically, has managed to remain just below or above the 260-month average of 53.3. But, these trends seem ominous in light of the “slow growth-no growth trends.” Ominous in that every situation seems to be decided at the intersection of politics and economics, with economics the persistent loser. Manufacturing supply chains are still struggling with factory closures. Help Wanted signs persist in most industries. Particular attention must be paid in: metals, chemicals, agricultural, energy, and electronics.
Drivers: While the overall PMI is still indicating growth however, it is revealing an overall trend which is –soft expansion. New Orders Minus Inventories: This key spread fell into negative territory (-9.3), signaling Inventories are accumulating faster than New Orders. We like to see New Orders typically outpace Inventories by an average of +6-8 points. The complexity of the survey results makes it difficult to forecast with limiting factors such as oil prices, Ukraine war, lack of border control, rolling Chinese lockdowns, rising crime, and supply shortages that directly affect the consumer.
40 Manufacturing Outlook / August 2022 GLOBAL PMI OUTLOOK continued and chemicals. Given the current PMI readings from around the globe, we see a soft global economy with a number of countries hitting 24/25 month lows. We have been here before and we still have the knowhow to move things in the right direction. One last thought that we have found always applies to economic crises: Look for the winners! In every economic scenario there are winners and losers! Not every industry or business is going to go through deep Europerecession.is teetering on the edge of manufacturing recession with these most recent readings. We will continue to watch MFG readings for future signs of an impending European recession.
The table below highlights the 12-month performance from August 2021 to July 2022. These five PMI components plus the remaining indexes in the series are trending lower, and we expect that will continue during the balance of the year. According to the press release, “The past relationship between the Manufacturing PMI® and the overall economy indicates that the Manufacturing PMI® for July (52.8 percent) corresponds to a 1.4-percent increase in real gross domestic product (GDP) on an annualized basis.” Further deterioration will expose areas of weakness in the sector.
41Manufacturing Outlook / August 2022 GLOBAL PMI OUTLOOK n
Approach to Innovation and Collaboration Through partnerships with industry, federal scientists and regulators, and research institutions, NIIMBL creates the ecosystem needed to tackle the manufacturing challenges associated with biopharmaceutical production while ensuring product quality and consistency. This is done through: Technology roadmapping for emerging products, such as gene therapies, and prioritization of needed innovation for existing products, along with the associated standards, regulatory science, and workforce develop ment needs to successfully deploy innovation
Balanced portfolio of projects to move innovative manufacturing tech nology out of the laboratory into industrial environments with real-world applications Engaging regulatory scientists through its Regulatory Considerations Committee to increase awareness of new manufacturing technologies Network of shared facilities across the nation to enable members, especially small companies, to innovate and test their concepts in industrially relevant settings; facilities will include a state-of-the art national headquarters at the University of Delaware
Biopharmaceutical manufacturing uses the power of biological systems to create medicines that treat many debilitating illnesses such as cancer, diabetes, and autoimmune disorders. Biopharmaceutical products include vac cines, monoclonal antibodies, and therapeutic proteins, as well as emerging types of products, such as gene and cell therapies. The industry develops and manufactures life-changing therapies for patients and contributes significantly to the US economy. However, developing a new therapy typically requires large investments in time and money, and the highly regulated nature of the manufacturing processes increases the risk for companies to innovate. Through a broad investment ecosystem, NIIMBL facilitates the development and commercialization of rapid, flexible, and cost-effi cient manufacturing technologies.
LEARN niimbl.orginfo@niimbl.orgNewark,WITHCONNECTMORENIIMBLDelaware+ManufacturingUSA,apublic-private
REVOLUTIONIZING BIOPHARMACEUTICAL MANUFACTURING FOR THE NATION
42 Manufacturing Outlook / August 2022 INNOVATION OUTLOOK continued Advanced Manufacturing National Program Office, NIST | www.ManufacturingUSA.com | 301-975-2830 | amnpo@nist.gov
NIIMBL (National Institute for Innovation in Manufacturing Biopharmaceuticals), a Manufacturing USA® institute, will stimulate leadership in advanced biopharmaceutical manufacturing research, innovation, and technology, support the development of standards, and train a world-leadingTechnologyworkforce.FocusArea
partnership with 14 manufacturing institutes across the nation, connects companies, academic institutes, non-profits, and local, state, and federal entities to solve industry-relevant advanced manufacturing challenges in new technology areas with the goals of enhancing industrial competitiveness and economic growth and strengthening national security.
– Dana Anderson, Vice President, Technical Development Project & Portfolio Management, Genetech
3. PROCESS CONTROL: analytics for process and product characterization and regulatory science to assess safety, efficacy, and quality.
NIIMBL projects address key advancement opportunities for existing and emerging product types. These projects focus on workforce as well as three manufacturing process
DIGITAL DESIGN of the NIIMBL Headquarters building to be completed in 2020 (funded by University of Delaware and private philanthropy) which will offer shared laboratories, platform process facilities, a showcase laboratory, and access to a workforce training facility.
“NIIMBL represents a unique opportunity to collaborate on innovative manufacturing technologies that will advance the industry.” – Greg Russotti, Vice President, Cell Therapy Process & Analytical Development, Celgene
“Continued innovation is critical for developing new biopharmaceutical therapies to address key medical needs. NIIMBL provides a unique opportunity to accelerate efforts to address manufacturing challenges so that novel approaches and treatments reach and benefit patients in the future.”
CREDIT: BTEC@North Carolina State University
43Manufacturing Outlook / August 2022 Advanced Manufacturing National Program Office, NIST | www.ManufacturingUSA.com | 301-975-2830 | amnpo@nist.gov
2. DRUG PRODUCT: formulation and packaging of the active ingredient into final dosage form; and
1.themes:DRUG SUBSTANCE: manufacturing and purification of the active biotherapeutic ingredient;
COLLABORATIVE PROJECT EXAMPLES
INNOVATION OUTLOOK
Credit: SmithGroupJJR
44 Manufacturing Outlook / August 2022 AEROSPACE OUTLOOK continued by Royce Lowe The Plane Market We recently went through the Farnborough International Air Show, not too far outside London, the first in three years. There’s an awful lot of business done here, business that will decide the health, hence wealth, of the world’s major aircraft manufacturerssome say plane makers - for the coming years. Since Boeing is America’s biggest exporter, its performance affects the country’s economy to a significant extent. Plus it keeps a good number of people in work. This year’s show, and the accompanying return to travel following the pandemic, was thus doubly important for the world’s two major aircraft manufacturers. Delta Air Lines gave Boeing an order for 100 737 Max 10s, with an option for 30 more. The order, worth some $13.5 billion, before the usual discounts, is the first major order Delta has given to Boeing in over a decade. Delivery is to start in 2025. With this recent deal, Delta is endorsing the current cockpit design of the Max 10, at a time when Boeing has come under pressure for alterations that would give pilots an electronic system to monitor warning signals. If the Max isn’t certified by late December, Boeing would be required to make the costly change unless Congress intercedes. But the Max 10 is in Congress, and if Congress doesn’t extend the deadline requiring an update to the plane’s cockpit systems to allow regulatory approval by December, Boeing’s CEO, Calhoun has signaled an openness to cancel the Max 10. So the 737 saga will continue until at least December. There again, we have to wonder how Congress could put Boeing in the position of scrapping the Max 10, when Boeing has so much riding on it, and it would take years to replace it. Boeing is talking about a “new plane” but doesn’t seem to be making a priority of it. Air India, purchased earlier this year by the Tata Group, is looking to buy 50 A350 wide-body jets, and 150 narrow-bodies. It’s more than likely that Boeing will get the narrow-body order. Airbus already has some 70% of the narrow-body market, and the A320 family is sold out until 2027. China recently placed orders with Airbus for 292 planes worth $37 billion. All Nippon Airways has signed for 20 7378s and for two 777-8Fs. VietJet Aviation JSC recently confirmed, at the Air Show, a deal for 200 737 Max jets. The carrier said, in a separate statement, that the order is worth around $35 billion, including associated engine engineering services, and would bring around 200,000 jobs to the US. (Prices for jets are generally significantly reduced in large deals.) VietJet further said, “The order is also expected to attract investment into Vietnam’s aviation industry, creating hundreds of thousands of jobs for the country’s aviation industry, including airports, air traffic control, technical services, training centers, technology transfer, component research, and manufacturing.” The airline agreed in AEROSPACE OUTLOOK AUGUST 2022
TPS specialists from Toyota Brazil will be in place at Ozires Silva to evaluate and suggest improvements for operations. Starting in 2022, the company’s goal is to improve its carbon neutrality, and by 2024 to have 100% of its energy in Brazilian operations coming from renewable sources. Among the main TPS concepts that will be worked on in partnership with Embraer are just in time - which aims to create a continuous flow of manufacturing, and greater partnership with suppliers for the efficient use of parts and resources, avoiding excess in inventories and waste - and the jidoka – which aims to improve the quality and added-value of work executed in a Infactory.thisperiod of relative uncertainty, it is encouraging to see occasional bursts of enthusiasm, as is the case with airlines and aircraft manufacturers.
Author profile:Royce Lowe, Manufacturing Talk Radio, UK and EU International Correspondent, Contributing Writer, Manufacturing Outlook.n
45Manufacturing Outlook / August 2022 AEROSPACE OUTLOOK
Taiichi Ohno, the inventor of TPSLean Manufacturing’s predecessor - considers waste to be anything that is above and beyond the absolute minimum requirements of a company’s manufacturing process. Waste may involve parts, materials, tools, equipment, and labor. TPS is a management approach that emphasizes workplace safety, logistics, and process management as principles for achieving product quality and low production costs. Embraer stated that the main TPS concepts to be implemented will be “just in time” to create better supplier partnerships and continuousflow manufacturing; and “jidoka” - a Lean manufacturing technique whereby machines automatically stop working once an abnormal condition is detected - “which aims to improve the quality and added value of work executed in a factory.”
2018 to double its order for Max jets to 200 after it signed an initial deal in 2016 during a visit to Vietnam by then-US President Barack Obama. The carrier’s recent announcement reaffirms that agreement. The agreement will help to reduce the inventory that Boeing has built up following the long grounding of the 737 Max. Embraer, the Brazilian aircraft manufacturer, itself grabbed a couple of good orders at Farnborough from Porter, and Alaska Air. Embraer has established an agreement with Toyota do Brasil that will see it adopt the Toyota Production System (TPS) principles and concepts in its industrial operations, initially at Ozires Silva Unit, the primary aircraft assembly operation at Embraer’s headquarters in São José dos Campos, São Paulo state. Embraer states that its goal is “to eliminate waste, obtain operational efficiency, and increase value generation for stakeholders.”
46 Manufacturing Outlook / August 2022 ENERGY OUTLOOK
Natural Gas; King of the Hill. by Royce Lowe One morning in early June, a fire broke out at the Freeport facility in Texas that collects natural gas from U.S. shale basins, liquefies it, and ships it overseas. The fire was extinguished in 40 minutes or so, and no one was injured. This incident might normally have passed unnoticed, but in fact, it turned out to be part of a scenario that cast natural gas in the leading role. This is because natural gas is the world’s number one commodity these days and is the major reason for global continued inflation, showing price increases that are extreme even by today’s markets’ standards. The price shot up some 700% since the beginning of last year. The situation is such that in Western capitals, climate change has been pushed down the agenda list. The bottom line is that there isn’t enough natural gas production to go around. Germany, and the rest of the E.U., have been dependent on Russian fossil fuels for years, and there has been a serious attempt to reverse this following Moscow’s invasion of Ukraine. Since March, the E.U. has negotiated new gas deals with the United States and Azerbaijan, and has held talks with Israel and Qatar. Since the start of the war in Ukraine, a crucial supply has been taken out. Russia cuts back on deliveries to Europe - which says it wants to stop buying from Moscow anyway - and there’s a supply gap that countries are rushing to fill by confirming cargoes of LNG before winter comes. German businesses and customers, the most dependent on Russian gas of the E.U. countries, have seen serious power shortages. Nord Stream, the
ENERGY OUTLOOK AUGUST 2022
There are huge infrastructure requirements for the export, import, and distribution of natural gas. In June, Cheniere Energy Inc., the first company to export LNG from the U.S., gave the go-ahead for a terminal expansion in Texas. In April, a Canadian LNG project backed by an Indonesian tycoon got the go-ahead to begin construction. In Qatar, Exxon Mobil Corp. and Shell Plc are among energy giants with stakes in a $29 billion project to boost LNG exports. With gas prices as high as they are, further project announcements are anticipated. Plans for about 20 import terminals in Europe have been announced or speeded up since the Ukraine war began. Germany, which has no LNG terminals, has allocated about $3 billion to charter four floating ones and connect them to the country’s network. The first one is scheduled to go online around the end of this year.
Author profile: Royce ManufacturingLowe,Talk Radio, UK and EU Writer,Correspondent,InternationalContributingManufacturingOutlook.
The importance of natural gas as an energy source is illustrated by the percentage of imported natural gas in total energy consumption in such major countries as Italy, 39%; Germany, 24%; Japan, 21%; France, 16% and China, 4%. Gas prices in Europe and Asia surged more than 60% in the weeks since Freeport was forced to temporarily shut down, a period that’s also seen further supply cuts by Russia. The cost of electricity just about doubled in Germany, France, and Italy in the three months from March 30. But in the U.S., prices for the fuel dropped almost 40% since the outage, which means more of the gas will remain available for domestic use. With key political allies from Germany to Ukraine lining up to buy American gas, U.S. manufacturers warn that more sales abroad will mean higher costs at home. The market reaction to the Freeport fire illustrates a “clear connection between LNG exports and the inflationary impacts to domestic prices for natural gas and electricity,” says Paul Cicio, president of the Industrial Energy Consumers of America. Natural gas means cleaner energy and the phasing out of dirtier fossil fuels. Major producers like the U.S., which quickly rose up the ranks of LNG exporters to rival Qatar as the world’s biggest, are looking at muchincreased demand for the commodity. Last year saw 44 countries importing LNG, about twice that of a decade ago. Natural gas is much harder to move around the globe than oil because it needs to be liquefied at places like Freeport. There are seven terminals sending LNG from American shores. The Group of 7 leaders is trying to curb Russia’s gas earnings, which help finance the invasion of Ukraine.
China, the world’s top LNG buyer last year, is in the midst of one of the industry’s largest ever construction projects. Ten new import terminals are slated to come online in 2023 alone, and capacity will roughly double in the five years through 2025, according to BloombergNEF. Even with more capacity to receive shipments of LNG and to re-gasify them, Europe lacks the infrastructure to move the gas where it might be needed. Spain, for example, has Europe’s biggest re-gasification facilities, but it only has two
ENERGY OUTLOOK major pipeline feed from Russia to Germany, was closed in early July for maintenance purposes. It has since been restarted, but there were fears of a total shutdown. Russia won’t want to help Europe get through the winter.
n
47Manufacturing Outlook / August 2022 pipeline connections to France via the Pyrenees. These are capable of carrying little more than onetenth of those volumes, according to Bloomberg Intelligence. Shipyards in South Korea, where most of the world’s LNG tankers are built, are seeing a surge in orders that are leaving them short of skilled labor. They’ve been forced to look outside the country to places like Thailand for welders, electricians, and painters, raising their quotas for migrant Butworkers.allof Europe’s efforts won’t be enough, according to Bloomberg Intelligence, which calculates that LNG imports could meet 40% of the region’s gas needs by 2026. This is double last year’s figure but still far short of the volumes that Russia has been supplying. The war in Ukraine has been largely responsible for moving a world intent on climate “repair” to one looking to survive in its quest for greater supplies of natural gas of late and of oil to go along with it. The outlook is uncertain, as it has been for some little while, and it will remain as such until countries start talking to each other “Whereagain. once natural gas markets were largely regionally siloed, we now have a globalized spot market that has connected the world’s exposure to the fuel that has become critical to many economies,” said James Whistler, Singapore-based managing director at Vanir Global Markets, energy and environmental brokerage. “This has never been more evident than in the past few months.”
The Group is backing new LNG investments, including in poorer countries that built energy systems around cheap gas and are now struggling to afford it.
continued AUTOMOTIVE
48 Manufacturing Outlook / August 2022 AUTOMOTIVE OUTLOOK
not likely to spend too much on powertrains, apart from reasons of efficiency and to meet tougher emissions rules, not to make cars faster or smoother. At some point in the near future, they’ll see the day when they’ll be phasing them out completely.
Martin Daum, Daimler Truck’s CEO, said, “It is crucial that we are now taking the initiative for building up the much-needed charging network. Still, we call on the entire industry to join in our effort. The number of charge points has to increase significantly as fast as possible to make long-haul electric trucking a viable solution for our customers.”
by Lawrence Makagnon Of ICEs, EVs and Other Things Bloomberg, and a couple of analysts, have recently come up with a figure of $526 billion, referring to the collective investment of automakers in EVs through 2026, a figure that is about twice that put forth just a couple of years ago. GM says it will go all-electric by 2035, and other companies are looking at 2040 or later. So the internal combustion engine (ICE) looks like it’ll be around for another 15 or 20 years. If models running on fuel will be available that far into the future, with most of the investment going into EVs, auto dealers will probably be selling some very ordinary-looking ICE vehicles in the coming Automakersyears.are
Even though it hasn’t been the first headline material for a while, there is still a shortage of semiconductors that are adversely affecting the auto industry. Samsung is considering building 10 semiconductor plants in and around Austin, Texas, as supplies of the critical products remain exceedingly tight worldwide. According to tax abatement applications recently released, which stipulate a minimum spend on Samsung’s part of $80 million, the amount of investment is still to be OUTLOOK
AUGUST 2022
BofA Global Research recently forecasted that by 2026, the U.S. market would have about 135 different EVs for sale and an equal number of internal combustion vehicles. If automakers spend less on their traditional (ICE) models, such cars could eventually attract bargain hunters who can’t afford EVs, or don’t have sufficient access to charging infrastructure. This could also cause problems for both automakers and their suppliers, who will start to struggle as sales volumes drop. AlixPartners, a global consulting firm, estimates it could cost the big manufacturers and their Tier 1 suppliers $70 billion between now and 2030 to either fund new sources of internal combustion vehicle parts or help vendors survive the transition.
The profit picture, too, will get cloudy. As EV volumes rise, margins should get better. Tesla has undoubtedly proven EVs can be profitable when sold in large numbers. ICE margins could get worse with lower volumes, but BofA analysis sees lower investment helping preserve profits. These possible scenarios could accelerate consumer interest in EVs. While ICE vehicles see less investment and get fewer styling changes, they’ll be less attractive. Consumers will look at new EVs with fresh styling, faster acceleration, and smoother ride and act Overaccordingly.inEurope, there’s talk of electric trucks. Competitors Daimler Truck, Volvo Group and Volkswagen subsidiary Traton Group have jointly agreed to build infrastructure to support electric trucking in the European Union. The three commercial truck giants are collaborating to meet the European Union’s Green Deal, aimed at carbonneutral freight transport by 2050. The $500.6 million joint venture will lead to the installation of at least 1,700 high-performance green energy charging stations across Europe.
Volkswagen’s CEO, Herbert Diess, will leave the company on September 1st this year, three years before the end of his contract. He will be succeeded by Oliver Blume, the current head of Porsche. Diess clashed with the work council and board at VW. Although it presently has 25% of the EV market in Europe, compared to Tesla’s 13%, VW takes three times longer than Tesla to build an EV, and its electric-only factory is not expected to open until 2026. It seems that Mr. Diess’s demise was being plotted while he was on a visit to the United States. He had spoken out about the necessity of huge job cuts to keep up in the EV race, something that didn’t go down well with VW’s upper echelons. The EV scene seems confused. There are many, many models, quite a few new companies, and a sort of feeling that the whole thing straighteningneeds out, needs some order. We’ll see. n Lawrence Makagon, Staff Writer
49Manufacturing Outlook / August 2022 AUTOMOTIVE OUTLOOK announced. Samsung announced plans for a $17 billion investment in Austin last year (Fab 1) and is now working on Fabs 2 through 10. In addition to Samsung, Intel is expanding capacity in Arizona and plans to build s $20 billion fab near Columbus, Ohio. Taiwan’s TSMC is in the process of building $35 billion in fabs in Phoenix, Arizona. Chip makers have been critical of lawmakers recently as legislation in Washington that would provide up to $52 billion in support for microchip production appeared stalled. The popular bill had been inserted into larger pieces of legislation in the hope that the same lawmakers would pass bigger spending bills to get the semiconductor investments. The obstacle may have cleared as the U.S. Senate moves forward on a bill that only includes the semiconductor legislation. Senate leaders hope to pass that bill in the near future. When Jeep first went into China, as one of the very first international auto brands to enter the country, it was widely recognized by consumers and thought by its owners to have huge potential. But it’s closing its only plant in the world’s largest market. Stellantis, its owner, plans to terminate its local joint venture with state-owned Guangzhou Automobile Group. Maybe all the details aren’t out, but this almost sure thing went awry. What does this mean for the future of foreign manufacturers in China? For some 40 years or so the Chinese government has been developing its auto industry by pairing local companies with experienced international ones. One of the earliest of these was former Jeep owner American Motors. President Xi is looking for China to be more self-reliant; in other words there is less need for outside help. Even though the end of these joint venture relationships isn’t for tomorrow, there is little doubt that many automotive giants will be taking a hard look at their particular situation.
AUGUST 2022
Why It Pays to Weaponize Relaxation In Your Cybersecurity Approach
continued
If you have ever entered the realm of cybersecurity, then you might have encountered messaging that is clearly intended to make you scared: “They’re going to steal your data.” “They’re going to shut down your “They’recompany.”going to ruin your life.”
While cyber hackers are definitely capable of scary things, approaching any issue from the standpoint of fear only puts you at a disadvantage. Panic causes you to react instead of just act, meaning the choices you then make will not necessarily be in your best interest. Hackers leverage a fight-or-flight mindset of their targets to achieve their means: you either pay them money or have your important information exposed. In a way, cybersecurity com panies do the same thing. It is well known in the industry that keeping a heightened sense of fear can get people to spend more money. If you make them afraid, then they are more likely to turn to you for help. But fear only goes so far in keeping your data and your pocketbook safe; learning to relax and actually understand the tools that you need to protect your company and your life is much more valuable. Cybersecurity is the antithesis of everything small business: complicat ed, when we are looking for simple; a burden, when all we want is one less thing to take care of; and expensive, when everything else needs money.
CYBER SECURITY
OUTLOOKCYBEROUTLOOKSECURITY
50 Manufacturing Outlook / August 2022
By Ken Fanger, MBA, CMMC-RP, President, On Technology Partners
Often, cybersecurity feels wrong when the difficulties of business make us crave for something to go right. As a small business owner, I under stand these feelings well. Neverthe less, the reality is that cybersecurity is one of those things that is inevitable, and tackling the issue in a calm, ration al way is the best way to protect your business. Fear can be your weakness, so use relaxation as your strength. Let me share an experience I had early in my career to show you why relaxing is the best cybersecurity policy you can have. I was a young professional, writing programs that moved inventory from one place to another. It was at this job that I learned my first lesson in disaster recovery. I was still a youngster at 22 when I successfully (and unintentionally) de stroyed the entire inventory records for one of the largest trucking and travel centers in the United States. Yes, you heard me right: Their. Entire. Inven tory. Records. What’s even crazier? I managed to make such a massive error within my first week on the job! It was a heart-stopping experience that I was sure I would never recover from. Here I was, newly hired and still settling in, and I typed in a delete command that just whisked away $5 million dollars in inventory. To this day, I still remember the sight of that green cursor, blinking almost as if it was laughing at me. Flash, flash, flash. I sat there nearly paralyzed, expecting the file names to return, but nothing
51Manufacturing Outlook / August 2022 CYBER SECURITY OUTLOOK
Withhappened.great remorse, I got up and slowly marched to the network administra tor’s office, expecting to be fired as soon as I opened that door. To my great surprise, I did not get fired. In fact, my boss just laughed and told me everything was fine because we had backups that would restore all the erased data within an hour. While I was panicked and distraught, he simply relaxed, faced the problem calmly, and solved it. On top of developing a deep apprecia tion for backups, I learned a very im portant lesson that day that hopefully, I can impart to you as well: cybersecuri ty, even to professionals, can feel dev astating, confusing, and overwhelming, but when you learn to be prepared and, most importantly, relax, you overcome the very first barrier when it comes to any issue. If it were left up to me on that day, I might still be in front of that flashing green cursor to this day, pan icking and letting the data disappear into the void.
Author profile:Ken Fanger, MBA has 30 years of industry experience in the fields of technology and cyber security, and is a sought-after CMMC Registered Professional, helping manufacturers and contractors to meet DoD requirements for CMMC compliance. He is passionate about technology deployment, and his MBA in Operations & Logistics has helped him to be an asset in the designing and deployment of networks to enhance the manufacturing experience. Over the past 5 years, he has focused on com pliance and security, including work ing on the SCADA control system for the Cleveland Power Grid. Mr. Fanger works with each client to identify their unique needs, and develops a custom ized approach to meeting those needs in the most efficient and cost-effective ways, ensuring client success. n
The scare tactics that cybersecurity companies and hackers employ may hold a kernel of truth (that the safety of your data is a vital concern), and they may certainly get you to react, but as we have seen, fear is not an effective solution. Turn your apprehension or indifference into strength, and face your cybersecurity journey wielding your relaxation as a weapon instead. You and your data will be much better off for it. If you would like to explore the con cept of relaxing instead of panicking further, check out my latest book, RELAX: A Guide to True Cyber Secu rity: relax/.https://ontechnologypartners.com/
continued ISSUES OUTLOOK AUGUST 2022
by Royce Lowe
The Skilled Labor Problem; Solutions? As a follow-up to last month’s article on skilled labor requirements in U.S. manufacturing, it is thought that some salient points from systems and procedures that are being used and will be used at Mercedes-Benz and Toyota might serve to illustrate how things might be improved in the U.S. It has long been known that the workforce in German industry, in general, is represented on the board. At Mercedes, there exists what is called a General Works Council, a body that pulls a lot of weight. The Council is consulted on a host of issues relating to production, but particularly on the welfare, education, and training of the workforce. The move toward electric vehicles in the global auto industry has prompted Mercedes to modify and improve its present training systems. Mercedes-Benz describes its enlarged education mission as: “Electrification and digitalization are fundamentally changing the world of work. The transformation will lead to further development of all job profiles at Mercedes-Benz. The company is therefore putting lifelong learning and continuing education for employees at the center of sustainable personnel development.” In Germany alone, the company will invest more than 1.3 billion euros in the qualification, training, and continuing education of its employees through 2030. The program, Turn2Learn, is designed to raise qualification at the company to a new level. It combines e-learning platforms and customized learning paths, plus previously available continuing education programs. These elements offer employees education opportunities in both production and administration, both digitally and face-to-face. The aim is that under this scheme, each employee can continue their education across all units and levels. The stress is on digitalization and electrification. The Turn2Learn program will allow employees to educate themselves in line with their personal interests. This will promote a willingness for lifelong Corporatelearning. management and the General Works Council will introduce a broad range of further training and retraining for employees, via e-learning platforms, for both company and private use. Employees will have many opportunities to study and learn for their present job or some job they may aspire to. The entire platform range is available to employees, allowing them the opportunity to pursue further training relevant to their personal interests. The company bears costs here. In 2021, there were around 75,000 participants in training courses on software and IT worldwide. Since 2020, some 57,500 employees have successfully completed further training on electrification topics at Technical Academies in Germany. MercedesBenz is always looking for people. Accordingly, future employees of the company have access to education and training that will ultimately lead them to a job of their choosing.
52 Manufacturing Outlook / August 2022 ISSUES OUTLOOK
Remember VW’s “Dieselgate?” And Toyota recently recalled a fleet of 2,700 EVs because of faulty wheels, less than two months after launching its first batch of battery-powered SUVs. There again, nobody’s perfect n
In 2010, Toyota created the Federation for Advanced Manufacturing Education Program (FAME). The thought behind this was the development of skilled workers. The program consists of a two-year industrial degree known as the Advanced Manufacturing Technician program.
Author profile: Royce Lowe, Manufacturing Talk Radio, UK and EU International Correspondent, Contributing Writer, Manufacturing Outlook.
53Manufacturing Outlook / August 2022 ISSUES OUTLOOK
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AMT trains students of all ages and backgrounds—from recent high school graduates to those interested in going into manufacturing to longtime manufacturing employees wanting to advance their careers. The Advanced Manufacturing Technician program is a 7-week online program designed to help students gain the skills and knowledge required for work as entry-level advanced manufacturing technicians. Advanced manufacturing technicians play a valuable role in the manufacturing industry. Little was heard of the program for a good number of years, but it was given a boost in 2019 by a visit from advisor to the president, Ivana Trump. At this time, the Manufacturing Institute, the workforce, and education partner of the National Association of Manufacturers, and Toyota North America, announced
Education of the workforce at German and Japanese companies is a cultural thing. In both cases, the whole country is behind the idea, and regions do not bicker over which one will take up the idea, and which one will drop it. Apprenticeships are part of Germany’s dual education system and as such, form an integral part of many people’s working life. Both Germany and Japan have spread the philosophy through their companies around the globe. Their manufacturing excellence speaks for itself. There are many similar success stories in the U.S., but not enough. More people at higher levels need to get on board. The money invested will doubtless be returned through the efficiency and skills of the employees.
a partnership to transfer operation and stewardship of the FAME program to the Manufacturing Institute. As such, the program was there to be offered as a model for other companies. Today the FAME website lists 32 chapters of the program in twelve states - mostly in the midwest - with over 400 supporting employers and over 32 college partners. Most of the support came during the pandemic, particularly in 2021. Is this program going fast enough? The consensus is no. Many companies are not willing to put out the dollars to educate their workforce. Executive orders from the White House, of which there have been many, have mostly fallen flat. Meanwhile, Toyota is offering a Project management Degree program in the UK, enabling students to work for the company while studying for a degree. The four-year apprenticeship is being offered in partnership with a university and is designed so that apprentices can divide their time between office, work, and virtual academic studies.
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