Manufacturing Outlook for February 2021 by Manufacturing Outlook

Brought to you by

The Manufacturing & Business Podcast Network

N O I T A M O AUT D E E N F O O U R

P O D C A S T S :

MFGTALKRADIO.COM

L I S T E N TO O U R P O D C A S T S AT:

www.jacketmediaco.com

D E E P S AT THE

PAGE 8

MANUFACTURING OUTLOOK PAGE 6

MANUFACTURING TIDBITS PAGE 12

TEXAMERICAS CENTER OFFERS A LOOK AT THE FUTURE OF MANUFACTURING PAGE 18

WIRELESS NO PLUG POWER FOR AGVS PAGES 22

THE GLOBAL PMI OUTLOOK PAGE 35

THE CREDIT MANAGER’S OUTLOOK PAGE 40

ISSUES OUTLOOK PAGE 48

[

JANUARY ISM PMI: 58.7%

Released February 1st -The Full Executive Summary Report On Business - Page 26

ISO9001:2015 SINCE 1994 AND AS9100D SINCE 1998 NIST SP 800-171

(COMPLIANCE UNDER DEVELOPMENT)

Manufacturing Outlook / February 2021

*Toll free within the U.S.

O U R

P O D C A S T S :

MFGTALKRADIO.COM

L I S T E N

T O

O U R

P O D C A S T S

www.jacketmediaco.com

A T :

Publisher LEWIS A WEISS Editor in Chief TIM GRADY Creative Director CRAIG ROVERE

TABLE OF CONTENTS

5 PUBLISHER’S STATEMENT A word from our publisher

6 MANUFACTURING OUTLOOK A look at manufacturing around the globe

32 SOUTH AMERICA OUTLOOK Brazil in the spotlight

33 ASIA OUTLOOK China, Japan and India

Contributing Writers ROYCE LOWE NORBERT ORE CHRIS KUEHL THOMAS R. CUTLER AMELIA ROY JEANNE-MARIE LOWRIE JOCELYN BRIGHT CHRIS ANDERSON LAWRENCE MAKAGON Production Manager LINDA HOPLER Current Circulation 45,200 Advertising ADVERTISE@MFGTALKRADIO.COM Editorial Office JACKET MEDIA CO. 75 LANE ROAD FAIRFIELD, NJ 07004 (973) 808-8300

8 COVER STORY: AUTOMATION AT THE SPEED OF NEED by A.K Schultz

MANUFACTURING TIDBITS

34 EUROZONE OUTLOOK A look at Europe

Insights from inside manufacturing in action

GLOBAL PMI OUTLOOK

by Norbert Ore

ENGINEER PRICE QUOTE: REPLACING TRADITIONAL CPQ SOLUTIONS by Scott Heide

14 MANUFACTURERS, DISTRIBUTORS, AND RETAILERS: PART OF AN INCREASINGLY HOLISTIC SUPPLY CHAIN

by Cliff Isaacson

18 TEXAMERICAS CENTER OFFERS A LOOK AT THE FUTURE OF MANUFACTURING

by Eric Voyles

22 WIRELESS NO PLUG POWER FOR AGVS

by Julian Seume

36 THE CREDIT MANAGER’S OUTLOOK by Dr. Chris Kuehl

40 METALS OUTLOOK The cost, making and treating of metals

42 AEROSPACE OUTLOOK The aerospace industry

44 ENERGY OUTLOOK Energy and the environment

46 AUTOMOTIVE OUTLOOK Auto industry news

Text “RADIO” to 66866 for comments, suggestions and ideas and guest requests for MFGTALKRADIO.COM podcast. © 2020 Jacket Media Co. No part of this publication 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.

26 ISM MANUFACTURING REPORT ON BUSINESS

48 ISSUES OUTLOOK Issues around the globe

30 NORTH AMERICA OUTLOOK Manufacturing in the US, Canada & Mexico

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.

PUBLISHERS STATEMENT Publisher’s Statement

Smooth 2021 Sailing Ahead? By any measure, 2020 was an exhausting year. I guess a pandemic with uncertain solutions all around and a nasty death toll will do that to the psyche of the individual and the country. It clearly caused significant disruption on the factory floor, from meat processing plants to automakers. It has been tough, tragic, and traumatizing. It appears that 2021 may be better. Manufacturing is rebounding rapidly and with underlying strength in new orders and backlog, low customer inventories, suppliers struggling to meet demand, and consumers still fairly confident that they can manage their spending and their budgets – unless – something like rising gas prices at the pump erodes their spending power or confidence in their budget. Rising gas prices also increases costs in manufacturing with energy being a large expense line item that will likely be recovered through product price increases. The ripple effects of the pandemic will not end tomorrow even if the virus died tomorrow. It is possible that inflation, largely absent for 4 years, could return in 2021 and begin to tip the economic recovery towards stagflation or worse, with the economic strength of 2022 in the balance, since inflation tends to ripple forward. We all want a great 2021. We all need a great 2021, and a good 2022 would be icing on the cake. To achieve that, the current administration will have to be careful not to make too many policy changes that turn ripples into waves. For example, the assumption that displaced Keystone pipeline workers can be retrained and become equally compensated in another industry or sector hasn’t proven out well in the recent past. It is more common that the displaced worker is replaced by a younger worker already prepared for the new industrial jobs to be filled. The displaced worker drifts into something else, usually not as well compensated. Although manufacturing companies may do well in 2021, manufacturing workers who were furloughed or fired so they could apply for unemployment may not fare as well. While the industry was gaining jobs, it may now begin converting work and shed more 20th Century jobs. The Services sector may do the same, automating where it can and using robots when possible. Retraining was an option pre-pandemic; now, it is a requirement – if it can be accomplished fast enough. Even the government apprenticeship initiatives seem to be mostly geared toward younger workers more so than displaced workers. It will be a mixed bag for the skilled but unemployed. Manufacturing is on the front lines of change. Automation and robotics are becoming affordable for the small and mid-sized companies. To remain competitive, manufacturers must evolve into cost-saving automation and robotics. It has become an unavoidable reality. Along with automation and robotics, companies will likely lease less office space, with more workers allowed to work from home throughout 2021. We’ve seen ‘see-thru’ office towers before – it isn’t pretty for commercial real estate. As we publish in 2021, we will be reporting on these trends, the ripples in employment, and whether or not they become significant waves. Lewis A. Weiss, Publisher Contact laweiss@mfgtalkradio.com or text “RADIO” to 66866 for comments, suggestions and ideas and guest requests for MFGTALKRADIO.COM podcast. Manufacturing Outlook / February 2021

MANUFACTURING OUTLOOK

FEBRUARY 2021

MANUFACTURING OUTLOOK GLOBAL MANUFACTURING PMI FALLS JUST A LITTLE IN JANUARY. NORTH AMERICAN STEEL MARKET STILL TIGHT, BUT MAY BE LOOSENING IN ASIA. U.S. MANUFACTURING IN GOOD SHAPE. by ROYCE LOWE The Bureau of Labor Statistics jobs report for January showed a gain of 49,000 non-farm payroll jobs, with the unemployment rate dropping 0.4 percent from January at 6.3 percent. There were gains in professional and business services, and in public and private education, but these were offset by losses in leisure and hospitality, retail trade, health care, and transportation and warehousing. Local and state government, and private education, accounted for 119,000 education job gains. Leisure and hospitality lost 61,000 jobs: health care employment has lost 542,000 jobs since February 2020. Manufacturing lost 10,000 jobs in January, following eight months of job gains, the sector is up 803,000 since April 2020, but down 582,000 since February 2020. The Bureau of Economic Analysis recently released its ‘advance’ estimate for the annual rate of Real GDP growth in the fourth quarter of 2020, putting it at 4.0 percent. The figure for the third quarter of 2020 was 33.4 percent. The Real GDP decreased 3.5 percent in

Manufacturing Outlook / February 2021

2020 (from the 2019 annual level to the 2020 annual level), compared with an increase of 2.2 percent in 2019. The ISM PMI figure for U.S. manufacturing slipped from 60.7 in December to 58.7 in January. The overall economy returned to a ninth month of expansion. IHS Markit’s remarks on U.S. manufacturing for January show their PMI figure at a record high of 59.2, up from December’s 57.1, signaling a very strong improvement in the health of the U.S. manufacturing sector. This was coupled with severe disruptions in supply chains, as witnessed by raw material and transportation (notably trucking) shortages and increased prices. Manufacturers’ selling prices were adjusted accordingly. The PMI figure was pushed to its record by strong expansions in production and new orders, including increased export orders. There was an increase in business confidence.

MANUFACTURING OUTLOOK

GLOBAL STEEL PRODUCTION WAS UP BY 5.8 PERCENT YEAR-OVER-YEAR IN THE MONTH OF DECEMBER for the 64 reporting countries – which represent 99 percent of world crude steel production – to 160,858 MT. PRODUCTION FOR THE YEAR was down 0.9 percent to 1,829,140 MT, of which 57 percent was produced in China, and 73.9 percent produced in Asia as a whole. U.S. crude steel production for December was 6.434 MT, down 11.8 percent year-over-year. U.S. production for 2020, at 72.690 MT, was down 17.2 percent from 2019. Primary Global Aluminum Production in December was reported at 5.670 million tons, with production in China at 3.280 million tons, representing 58 percent of world total. Production was 495,000 tons in GCC; 363,000 tons in the rest of Asia; 281,000 tons in Western Europe; 338,000 tons in North America, and 352,000 tons in Eastern and Central Europe. Canada produced 1.073 MT of crude steel in December, down 2.0 percent year-over-year; Mexico 1.550 MT, up 13.9 percent, and Brazil 2.886 MT, up 17.2 percent. North America produced 110.119 MT in 2020, down 15.5 percent year-over-year. In December, China produced 91.252 MT, up 7.7 percent year-over-year; India 9.796 MT, up 4.4 percent, Japan 7.526 MT, down 3.3 percent; South Korea 5.952 MT, up 1.2 percent and Taiwan 1.700 MT up 0.4 percent. The UK produced 0.710 MT in December, up 29.0 percent year-over-year; Germany 3.137 MT, up 10.6 percent; France 1.115 MT, up 25.7 percent; Italy 1.500 MT, up 6.9; Spain 0.891 MT, up 16.4 percent. For the EU (28 countries), production in 2020 was 138.786 MT, down 11.8 percent year-over-year.

Russia produced 6.110 MT in December, down 0.8 percent; Ukraine 1.906 MT, up 22.1 percent. The JP MORGAN GLOBAL MANUFACTURING PMI – a composite index produced by JPMorgan and IHS Markit in association with ISM and IFPSM (International Federation of Purchasing and Supply Management) – was down slightly from December’s 53.8, to 53.5 in January. There was some slowing of growth in production and new orders, and supply-chain pressures continue. There was a continuing stabilizing of employment. THE ECONOMIST magazine, in its latest weekly report on world economies, 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 necessarily 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 represent the % change on the previous quarter, annual rate. The consumer price increases represent year-over-year changes. The unemployment figures, %, are for the month as noted. Author profile: Royce Lowe, Manufacturing Talk Radio, UK and EU International Correspondent, Contributing Writer, Manufacturing Outlook. Manufacturing Outlook / February 2021

COVER STORY

AUTOMATION AT THE

SPEED OF NEED by A.K. SCHULTZ

Manufacturing Outlook / February 2021

COVER STORY

WHY YOU SHOULD, AND HOW YOU CAN, INTEGRATE AND DEPLOY ROBOTICS AS FAST AS YOUR BUSINESS NEEDS THEM. Resiliency first, efficiency second It turns out our supply chains were broken – we just didn’t know it yet. Empty store shelves and runs on everyday products – thanks to a surge in online shopping – exposed the weakest links in companies’ ability to provide necessities. The supply chain landscape has been changed forever. Even the staunchest Luddites have grown accustomed to e-commerce shopping and speedy delivery. This means that the cost of logistics just increased by an order of magnitude. It also means that even the slightest hiccup in the supply chain is felt immediately by customers. Many supply chain executives are now migrating from highly optimized (but brittle) to resilient (yet still efficient) organizations that can withstand the next Black Swan event. Putting efficiency second behind resiliency is against the managerial DNA in our industry. However, it is not a question of if, but when, the next event triggering extreme supply chain volatility will happen. The result is that supply chain resiliency is the new metric of excellence and is a requisite for any company that wants to avoid the next existential crisis. Ultimately, this new reality intersects with an increasingly unpredictable market, creating a wake-up call for companies and industries that have, up to this point, avoided automation. There’s now a strategic imperative to adopt robotics. Robotics are seen as a critical supporting technology for supply chain resiliency so not only should you implement robotics, but you must do so with incredible speed.

So we need some robots. Can you install them next week? The market need is simple. Once a company decides that robots can solve their problem, they want them made, shipped, installed, and integrated in a few weeks. While this may seem unrealistic to some, there is a reason for these expectations. There is in fact a machine that can support those requirements: humans. In a crunch, most initiatives with unrealistic timelines can be solved by “throwing bodies at the problem.” So why can’t “we just throw some robots at the problem?” Well, we can. Many automation technologies are smaller, more modular, and standardized. These are purpose-built technologies that are point solutions which do one thing very well. This has brought the price point way down and robot companies are keeping robots in inventory. This means the machines can be shipped the moment the PO is cut. However, while a robot can be shipped and installed much faster than it could five years ago, even the great companies who have created super-flexible standardized machines are limited by software integration. To do anything outside of basic tasks, most robots need to be tied into an enterprise system software like Manufacturing Execution Systems or Enterprise Resource Planning Software. Without fast integration, robots are just abstract pieces of art sitting in a warehouse. Manufacturing Outlook / February 2021

COVER STORY

The Jenga Tower of Code Integration is key for adoption of robots. When companies try to leverage IoT systems, software becomes increasingly intertwined. Given that the industry grew up around building interface code that is bespoke, and not productized, you end up with a mess of unsupportable spaghetti code written by people who have since left the company.

This results in software that is super brittle, requires a lot of man hours to code and is challenging to upgrade. Lack of software resources are often the reason robot projects are delayed. Automation at the Speed of Need The companies that are crushing it are the ones that identify a need and implement faster than everyone else. The moment they decide to do it, they make it a reality. This applies to product development, sales, and customer service. Whoever can identify a need, develop a product, sell it, and get it in the hands of customers faster than their competitors wins. Speed is king. This also applies to operations. Operations is always at the end of the whip. Marketing and Sales launch a campaign, while production and supply chains have to scramble to do the work of getting things made and out the door to customers.

When five or more systems need to communicate, the interdependencies create complexities which can lead to performance issues. Furthermore, if one system makes a change, it can create cascading effects resulting in bugs or changes needed to other systems.

Manufacturing Outlook / February 2021

The problem with automation and robotics today is that it takes months or years of planning and execution to deploy. However, rapid, seamless integration of automation into supply chain operations is possible. In fact, it is exactly why Michael Howes and I created

COVER STORY our SOFTBOT™ Platform at SVT Robotics. It’s a fully agnostic, integration software based on a common framework and language that makes robot-to-robot and robot-to-business integrations seamless and transparent. Whether you have a human-driven forklift or an automatic guided vehicle (AGV), the SOFTBOT Platform renders their ability to communicate with each other - and the holistic enterprise system - without any custom code. The connection, and the communication, are nearly instantaneous, so companies can focus on running their business instead of wasting time and resources trying to get robots to talk to each other. The pandemic has forever changed businesses and consumer behavior. The time for companies to assess their supply chains is now. And while the decision to adopt robots is the first step, selecting the right

software platform is the answer needed to being able to deploy and use robots quickly. We’ve dawned on a new day. A day when robotics and automation can integrate in a matter of days, not years. SVT Robotics can assist. Contact T.J. Fanning at sales@svtrobotics.com for more information on our SOFTBOT Platform. About the author: A.K. Schultz, CEO and Co-Founder of SVT Robotics, leads the overall company vision as well as product and go-to-market strategies. His work has primarily been in the Fortune 500 corporate sector leading the design and implementation of high-profile automation projects across multiple industries. To date, he has overseen the successful deployment of over half a billion dollars in automation. SVT Robotics is revolutionizing robotics in warehousing and manufacturing industries, with their SOFTBOT™ Platform, enabling companies to easily integrate and deploy automation in days and weeks instead of months and years.

Manufacturing Outlook / February 2021

MANUFACTURING TIDBITS

ENGINEER PRICE QUOTE: REPLACING TRADITIONAL CPQ SOLUTIONS by SCOTT HEIDE CPQ (Configure Price Quote) software is an unacceptable sales automation tool for companies offering highly configurable products. CPQ fails complex product manufacturers because the required engineering rules, geometry, and calculations far exceed the capabilities of traditional CPQ systems. An inordinate amount of potential profitability is lost reviewing, correcting, and re-engineering inadequate configurations. Companies manufacturing extraordinarily complex products experience these limitations (and the follow-on engineering costs) of CPQ. Engineering-to-order (ETO) manufacturers currently live with the pain of creating a quotation. Quotes frequently demand weeks of unbillable work in complex product configurations, a delay that frequently derails a sale. Hours of expensive engineering time is the antithesis of Lean Manufacturing when a sales close rate rarely reaches fifty percent (50%). The quotation process is the bottleneck Salespeople can rarely increase the volume of quotes to increase the likelihood of winning projects due to the complexity of RFQs. Done manually, there is no way to deliver more quotes without simultaneously increasing risks of costly, inaccurate quotations. Misquoting configurations translates into pricing miscalculations that potentially kill profit. Exacerbating this inefficiency are the multiple internal approvals during quote development – engineering, purchasing, operations, and more have to touch the quote draft. These added layers of approval slow the proposal process even more. By the time the prospective customer receives the proposal, a competitor may have already won the bid. EPQ (Engineer Price Quote) The solution is EPQ, Engineer Price Quote. It is the only workable approach for ETO manufacturers because it is specifically designed for the technical and procedural must-haves in complex manufacturing industries.

Manufacturing Outlook / February 2021

Some of the industries that frequently use EPQ include: Commercial furniture, Commercial vehicles, Cranes, Curtain wall & building facades, Duct Systems, Elevator & elevator components, Home building, HVAC Systems, High pressure seals, Hydraulic pumps & motors, Logistics automation, Oil & gas equipment, Oil & gas facilities, Paint finishing systems, Plastic injection molding equipment, Playground equipment, Power generation & power distribution, Precast concrete, Refrigerated grocery merchandising, Refrigeration systems, Switchgears, Transformers, Turbines, Walk-in coolers, Warehouse rack systems, Windows and doors The “E” in EPQ ensures that prices remain valid in real-time as a custom solution’s design comes together. Because EPQ can link design data to costs, it automatically escapes constant iteration of price-changing as custom configurations change during development. Instead, pricing updates automatically with each change in configuration, material, or process. Expediting approvals and guaranteed margins Too often salespeople offer discounts to win the job. In commodity (mass) manufacturing, margins are known, and acceptable levels of deal-sweetening can be pre-approved. That stable margin is why CPQ is fine for those types of offthe-shelf products. In contrast, a change in an ETO bid often requires supervisory approval. Only an EPQ solution can truncate this approval process by 7 to 10 days by eliminating the delays in back-and-forth approvals, time-savings that frequently translate to winning the sale. EPQ defines the approval process for ETO manufacturers In EPQ, when engineers create valid configurations based on engineering standards, approval is literally built into the result. If the engineering and pricing are correct, supervisory approval should not even be required. This kind of automatic

MANUFACTURING TIDBITS

approval can be risk-free when technical and business rules from engineering, production, costing, and other departments are automatically applied. It is an outcome that ensures rapid, precise quotes buttressed by reliable margins. The quotation process shrinks to hours rather than weeks and the result is improved quote productivity, velocity, and revenue. Closing percentage of sales is driven by EPQ EPQ goes beyond CPQ by applying engineering rules to highly configurable, complex products. CPQs cannot change material composition and designs based on structural calculations around load, temperature, volume, or other requirements – EPQ can. When needed, EPQ can replace standard product assembly structures with fully custom ones in seconds. The result: new configurations that meet non-standard operating conditions. In EPQ, complex engineering calculations drive the selection of product options and geometries. Further, during development, engineering teams appreciate that EPQ allows a drag and drop repositioning of product elements – with every element still constrained by product performance and engineering rules. EPQ allows a new level of automation ETO manufacturers often need to do even more with automation, such as generating customized, dimensioned, detailed drawings that give customers the information needed to make fully informed buying decisions.

ETO RFQs are complex, and prospective customers may ask that two or more configurations be provided, each one fully costed, documented, and detailed. The expectation from the prospect is that this bid will happen within days of the request – an expectation that can be met with EPQ. Unlike CPQ solutions, EPQ is able to calculate the true cost of a proposed product configuration, using dead-on cost rollups that takes every design detail into consideration. Author Profile

Scott Heide, Founder, CEO, Engineering Intent With more than 30 years of experience in knowledge-based engineering software, Heide has long been a key source for industry understanding of and application strategies for engineering and sales automation. Heide drove the development of Knowledge Bridge, a cloudbased comprehensive EPQ (Engineer Price Quote) and visual configuration platform. It offers tools and methods to automate custom engineering, technical sales, and business processes – the “To Order” in “Engineer To Order”. Heide holds a Bachelor of Science in Mechanical Engineering from Wichita State University and a Master of Science in Engineering from the Massachusetts Institute of Technology. Connect on LinkedIn. Manufacturing Outlook / February 2021

MANUFACTURING TIDBITS

MANUFACTURERS, DISTRIBUTORS, AND RETAILERS:

PART OF AN INCREASINGLY HOLISTIC SUPPLY CHAIN by CLIFF ISAACSON Cloud-native supply chain solutions for wholesale distributors, specialty retailers, and discrete manufacturers are critical because each is stuck in the financial quicksand of inventory decisions. Manufacturers, distributors, and retailers: part of an increasingly holistic supply chain. Distributors, in particular, have a unique challenge in that manual or “cost-plus” approaches to pricing lack the flexibility required to compete and are disconnected from customer willingness-to-pay. New pricing optimization platforms leverage advanced science to quickly identify opportunities and simulate pricing strategies for peak margin, profits, revenues, and sales.

rapid, optimized financial outcomes by highlighting which items, at which locations, or on what channels, are best. The analysis must be done in real-time and results are not static. Using machine learning (ML), distributors quickly identify underpriced and overpriced items while setting prices that both maximize profitability and beat the competition. Only with the machine learning algorithms are distributors, manufacturers, and retailers able to simulate different pricing strategies and changes prior to implementation. Pricing hypotheses can be tested comparing forecasted outcomes. Because there is time for “vision and revision” (T.S.

Science-driven results

Elliott attribution acknowledged), distributors are

With 10,000+ SKUs, distributors must access

continually refining pricing strategies to achieve their

science-driven results determining what drives

financial goals.

Manufacturing Outlook / February 2021

MANUFACTURING TIDBITS continually improve financial results. Running “whatif” simulations, reviewing daily recommendations, refining prices, and locking in the best strategies to operationalize are never-ending and ongoing. Accuracy improves over time, as the science learns from price changes and sales impacts, to steadily improve price recommendations, married with forecasting data. Forecasting and simulating price changes Simulating strategic and tactical pricing scenarios inclusive of business constraints allows distribution data analysts to consider the impact of each constraint. Some of the most common constraints include price-type relationships, differing cost models, price groupings, competitive positioning, supplier requirements, and prioritized rules.

Price-setting variables Whether market fluctuation, customer willingness, or geographic pricing tolerance, these sciencedriven results are dynamic by setting multiple price points, including wholesale, retail, volume, and customer segment prices. Other factors in pricesetting may be influenced by the need to maintain supplier requirements, product, location, and channel relationships. There are psychological price points and other business constraints unique to individual distribution and retail businesses. Pricing should also account for inventory levels – dropping price on a critically short product is rarely a good idea. Continuous profit improvement Every CFO, purchasing manager, and data scientist has a seminal mission: continuously improve profits and revenues. The best-of-breed systems identify lower-risk profit opportunities and pricing gaps to

Segmenting prices across product assortment requires unique calculations which examine both fast-selling key items and infrequently sold SKUs. To quickly choose the best pricing approach, infer models use an attribute matrix where needed, calculating price sensitivity by product location, and forecasting the results of recommended and adjusted price changes. These flexible designs support annual, quarterly, monthly, weekly, and daily pricing processes. Managing customer segment prices From warehouses, distribution centers, 3PLs, manufacturing, and global distribution, managing customer-segment prices is vital. This can only be analyzed by examining customer performance, customer discounting, and identification of customer pricing opportunities based on willingness to pay and past performance. This is then implemented using sales guidance in price quotations, setting up contract prices and authorized price lists, and creating customer-level price lists fed into a CRM or ERP. Purpose-built for discrete manufacturers, retailers, and distributors, a robust workflow permits leading organizations to upload data, run optimization Manufacturing Outlook / February 2021

MANUFACTURING TIDBITS price optimization is integrated with supply chain planning (best-of-breed forecasting and replenishment solutions), discrete manufacturers, distributors, and retailers can reduce inventory 10-20% with increased service levels and achieve an immediate profit uplift, typically in less than 90 days. Author Profile: processes, simulate pricing strategy for current/ future price lists, review recommendations, and drill into details to lock in results year after year. Improved supplier negotiations require data knowledge to improve compliance with vendor price requirements – like Minimum Advertised Price (MAP), New Product Introductory Price (NPIP) – and negotiate better margins and costs with suppliers based on data and measured willingness to pay. Price optimization configured to unique environments can drive immediate value. When

Manufacturing Outlook / February 2021

Cliff Isaacson, Executive Vice President, Product Strategy, Blue Ridge EVP Product Strategy is an experienced entrepreneur, strategist, product manager and CTO, including over 20 years of experience in various leadership roles at software growth companies. He joined Blue Ridge with the acquisition of the price optimization company he founded. Cliff has engineering degrees from Northwestern University and Carnegie Mellon University, and started his career as a nuclear submarine officer.

Manufacturing Outlook / February 2021

MANUFACTURING TIDBITS

TEXAMERICAS CENTER OFFERS A LOOK AT THE FUTURE OF MANUFACTURING

By Eric Voyles, Executive Vice President , Chief Economic Development Officer, TexAmericas Center It’s a little-known secret that the key to manufacturing profitability lies in high-production volume, low-overhead and operational costs, and efficient logistics operations. Located in the Texarkana metropolitan area, TexAmericas Center is emerging as a top destination for manufacturers because of its ability to provide all three of those components. TexAmericas Center is nestled in a community dedicated to helping businesses thrive, making it a particularly desirable location for businesses. Between its business-friendly legislature, an abundant labor pool, low utility costs, or simply the fact that TexAmericas Center excels at meeting business needs with customized solutions, this 12,000-acre industrial park is a unicorn for manufacturing wish lists.

Manufacturing Outlook / February 2021

At present, TexAmericas Center offers more than 3.5 million square feet of commercial and industrial space, including a 150,000-square-foot spec building that will be complete in July 2021. In 2020, TexAmericas Center was ranked as the No. 8 industrial park in the country by Business Facilities magazine. It is one of the largest mixeduse industrial parks in the country, a designated US Opportunity Zone, HUBZone, and Foreign Trade Zone. Current tenants include transportation equipment, oil and gas pipe, warehousing, construction, and supplement manufacturing industries. TAC is also equipped to serve a range of industries such as primary and fabricated metals, alternative energy, paper and wood products, chemicals, rubber products, defense, cement, and heavy equipment. Still, there’s a unique twist that sets TexAmericas Center apart: it is run by a special purpose district of the State of Texas – one of the most successful

MANUFACTURING TIDBITS of its kind, at that. That means it operates like a government, controlling its own zoning and permitting processes. At the same time, however, it also thinks like a competitive development company – always at the forefront of industry trends and staying flexible to changing corporate needs. It’s a fascinating combination that has proven to be particularly attractive within the manufacturing community, drawing in companies the likes of Lockheed Martin. The international security and aerospace giant recently chose TexAmericas Center to launch a $77 million, 218,000-square-foot operation to support the Red River Army Depot (RRAD), located adjacent to TexAmericas Center. With that initiative, Lockheed Martin is working with the RRAD to support the Army’s Multiple Launch Rocket System Fleet Expansion program. Like Lockheed Martin, many manufacturers don’t come here and ask, “Why should we open in Texarkana?” Rather, they look at our low operating costs, advanced infrastructure, available labor pool, easy transportation access, and on-site third-party logistics services. Then, they’re quick to say, “How soon can we get up and running?” A small community with big amenities Manufacturers are no stranger to the landscape of rural America, where labor is plentiful, and expenses are low. That’s part and parcel to the attraction TexAmericas Center offers 21st century manufacturers: the Texarkana MSA has a manufacturing participation rate of about 18.6%, has a labor surplus, and delivers dramatically lower operating costs than most other locations in Texas. From utilities and taxes to overhead and labor, business costs at TexAmericas Center average between 20 and 30 percent less than the major Texas MSAs. That doesn’t come through sacrificing quality. TexAmericas Center has a 144-strand fiberoptics line, the ability to deliver over 350MW of electricity, and high-volume natural gas service. It offers a large fresh water supply, more than 30 miles of on-site rail and transload services. Just last year, Riverbend Water Resources District announced plans to build a $200 million

water treatment plant and additional water infrastructure, including offering raw water. This investment will provide TexAmericas Center tenants the ability to expand operations without concern for long-term water needs, as the plant is being designed with future expansion in mind. Recognizing that companies often wish to build quickly, TexAmericas Center has invested millions in preparing sites that are ready for development. These sites are often called Certified or ShovelReady sites. With such infrastructure and its impressive transportation corridors, incoming businesses routinely comment how impressed they are with the Texarkana community – particularly its leadership, development opportunities, and cooperative efforts. Remember that twist on TexAmericas Center’s governmental set-up? It frees up TexAmericas Center’s leaders to eliminate red tape that can hinder growth plans and slow start-up. An example is the Vice President of Operations approves all land uses and building permits, usually within 72 hours of submission. Companies that launch operations at TexAmericas Center report that their revenue streams stabilize, and they realize their return on investment more quickly. Manufacturing Outlook / February 2021

MANUFACTURING TIDBITS

The TexAmericas Center administrative difference also gives them the flexibility to offer a range of business assistance offerings to help organizations reduce startup costs and achieve return on investment objectives sooner. Along with other incentives, TexAmericas Center provides Payment In Lieu of Taxes (PILOT) Agreements, Freeport and Goods-In-Transit Tax Abatements, and access to Texas Enterprise and Texas Reinvestment Zones. The state of Texas formed TexAmericas Center in 1998 to redevelop land once belonging to the Department of Defense in Bowie County, Texas. It began to bring quality jobs to the greater Texarkana area and diversify the tax base, all while redeveloping the property. In total, 33 new companies have set up operations at TexAmericas Center, so it has done just that. TexAmericas Center turned out to be an ideal location for industrial growth: Texarkana’s 500-mile market includes 23 major MSAs, including 10 of the fastest growing MSAs in the United States. Its 500-mile market has 10,000,000 more people in it than the Dallas-Fort Worth market, offering better access at a lower cost. Then there is the available labor pool, which reaches into four states. The Texarkana area does not compete for labor with any other major labor markets. In fact, it is located 190-miles from Fort Smith (AR), 160-miles from both Dallas (TX) and Little Rock (AR), and 90-miles from Shreveport (LA).

Manufacturing Outlook / February 2021

Texarkana’s rural-like location pulls skilled workers from a larger than typical labor market, about 75-miles. Nearly a quarter of the region’s workforce are “stretch commuters” – those who travel between 50 and 75 miles one-way to work. With such longdistance commuting, the region offers a labor shed of more than 1 million residents. The population is projected to grow at 1.8% annually in coming years. Businesses here benefit from a comparably high unemployment and underemployment rate, as well as a large number of new entrants from high schools and institutions of higher education in the region each year. There are seven colleges and universities operating within about 30 miles of TAC, including Texas A&M University-Texarkana and the University of Arkansas at Hope-Texarkana. Texarkana is the only community in the nation with two state universities. In total there are over 10,000 students pursuing certificates and degrees in the area. Meanwhile, TexAmericas Center as a logistics location can’t be beat. The region is served by rail via the Union Pacific (UP) and the Kansas City Southern, and the industrial park by both the UP and a short line, the Texas & Northeastern. I-30 is less than a mile from the property, and with two additional converging interstates in the area, TexAmericas Center brings together transportation systems from Arkansas, Louisiana, Oklahoma and Texas. From there, it’s an easy run between ports in the Gulf of Mexico (10 of the largest volume ports in the USA are located there), to the Midwest, Eastern seaboard, Mexico, and even Canada. TexAmericas Center offers rich rail, river, and air freight options. A winning combination The idea of offering third-party logistics (3PL) at TexAmericas Center wasn’t a new one, but the changing business landscape in 2020 made it clear the time was now.

MANUFACTURING TIDBITS Third-party logistics is a proven game changer for manufacturers who struggle to grow because of warehousing and fulfillment strategies. In 2019, the 3PL market was valued at $1 billion worldwide and projected to hit $1.7 billion in 2027, according to Allied Market Research. Then when the COVID-19 pandemic emerged, the market for robust management of last-mile services increased dramatically. Consumers began ordering more and more goods online, and the companies who responded with nimble delivery systems were rewarded handsomely. Meanwhile, companies trended away from giant regional warehouses and opted instead for multiple, smaller sites. That minimized vulnerability as it lowered the potential for COVID spread, while giving businesses a backup location that could pick up the slack if a secondary location had a forced shutdown. Knowing our tenants had the potential to grow with on-site 3PL services, it became clear that we could be even more instrumental in their success by providing it. So, we added logistics provider John Sesler to our staff, bringing expertise in supply chain and inventory management that our clients were quick to utilize. Sesler has 35 years of experience in logistics program responsibilities for both small businesses and large international companies. Now, not only can companies set up shop here, but they can use our services to help manage it. Our 3PL service is designed to boom and wane with business demand, adjusting slack as needed. Our expertise allows companies to quickly realize operational efficiencies and cost savings. Best of all, our 3PL services are made to help companies of all sizes. Small companies will benefit from Sesler’s experience while avoiding some of the growing pains that can come with increased demand. Large companies can appreciate improved profitability from our professionally run services and quick turnaround. Particularly for companies transitioning away from

just-in-time manufacturing, our expert guidance will help them manage new inventory as they broach business in this new era. For newcomers, partnering with our 3PL service gives them a leg up. We know the best transportation options in our region, and we have business connections that take years to develop. Our investment of time and relationship-building becomes a quick asset for clients as they settle into the Texarkana MSA. And for growth-mode clients, letting us shoulder their logistics needs allows them to focus on big picture items, rather than being bogged down in details. Knowing that time is of the essence for companies looking to set up shop here, TexAmericas Center offers an on-site engineer and spec space that can be built-out-to-suit. That was what attracted supplement manufacturer Rowe Casa Organics to a 4,700-square-foot building. Within two months of signing their lease, Rowe Casa was operational in a space that had been updated to meet FDA guidelines. Our focus on “speed-to-market” was a boon to Rowe Casa, as it is for many of our clients. They were able to get operations running, stabilize, and turn a profit more quickly, thanks to utilizing a move-in ready structure, a build-out-to-suit agreement, and attractive incentives. More and more, manufacturers are finding that TexAmericas Center delivers the winning combination that helps them grow and thrive. Our shovel-ready sites, existing buildings, and industrial quality infrastructure combines with adaptability and experience that make for can’t-miss business solutions. Here in Texarkana, low-cost utilities and salaries combine with an available workforce and streamlined transportation costs. The result is a path leading to the future of American manufacturing. We invite you to explore it. Manufacturing Outlook / February 2021

MANUFACTURING TIDBITS

WIRELESS NO PLUG POWER FOR AGVS

Manufacturing Outlook / February 2021

MANUFACTURING TIDBITS

By Julian Seume The concept of wireless charging is familiar. Effective wireless charging for AGVs (automated guided vehicles) is now a reality. Trends in inductive battery charging technology ensures electric forklifts are most efficient on the floors of distribution centers, warehouses, and manufacturing operations. Whether driverless transport systems (AGVs), electric forklifts, or mobile robots (AMRs), the efficient use of industrial trucks is a decisive factor for competitiveness during ever-increasing cost pressures. The energy systems are being scrutinized and lithium-ion batteries are the preferred technology. The advantages versus lead-acid batteries (including the ability to recharge faster and more often) are obvious. Until now the full potential of storage technology has not been fully realized. Benefits of inductive charging solutions Conventional battery charging concepts with plug-in cables cannot be automated. Contact

sliding chargers are the common but are an unreliable alternative having been designed and developed decades ago. For both, there are often significant investments and maintenance costs required. Inductive charging solutions offer impressive levels of efficiency, flexible integration, and the option of autonomous “inprocess charging.” An added benefit is the high degree of flexibility when relocating the charging stations. Intralogistics and inductive charging The trend towards lithium-ion batteries in intralogistics continues. Almost all large forklift manufacturers now have models with lithiumion drives. In the field of driverless transport systems and mobile robots, powerful lithium-ion technology is already standard. Interim charging enables automated 24/7 operations which is critically important with two or three-shift operations at warehouses, distribution centers, 3PLs (third party logistics), and manufacturing facilities. Manufacturing Outlook / February 2021

MANUFACTURING TIDBITS

The extended service life of the batteries reduces operating and maintenance costs in the long term. Commercial vehicles are still frequently charged with wired plug connections, despite the possibility of battery charging during short stops. The charging cables are only connected during longer breaks or after the end of the shift. Without intermediate charging, the batteries’ energy levels drop continuously. To offset charging depletion, expensive batteries must be significantly larger, since smaller amounts of energy are regularly recharged. The return on investment (ROI) deteriorates. The higher performance prices of peak loads have an impact when the entire fleet is charged after the end of the shift. Ultimately, wired charging concepts are difficult to automate and the industrial trucks and AGVs are not productive during the charging process. This wasteful downtime of equipment is totally antithetical to all Lean Manufacturing principles.

Manufacturing Outlook / February 2021

To realize the true value proposition of autonomous vehicles, autonomous inductive charging is required. Replacing battery trays less than optimal Another approach to energy supply is to replace entire battery trays. Special rooms are required where the exchange takes place. Additional batteries have to be purchased and the replacement process ties up valuable vehicle and personnel capacities. From an occupational health and safety perspective, the battery exchange process is far less optimal. There are automation concepts in which industrial trucks and AGVs are loaded automatically with sliding connections. Stationary sliding contacts are permanently installed in the warehouse environment and mounted on the vehicles. Automatic intermediate charging is possible, but the solutions are relatively expensive, inflexible, prone to failure, and require

MANUFACTURING TIDBITS structural changes to the infrastructure. This is necessitated to install the sliding contacts and power lines. There are safety risks for employees and high maintenance costs; the care and replacement of the mechanical sliding contacts is unacceptable.

repositioned when processes and layouts change).

High vehicle availability through “in-process charging” Wireless battery charging systems and energy management solutions circumvent the limitations of conventional charging technologies. Based on the principle of magnetic induction, these technologies automatically transmit high currents fully to industrial trucks and AGVs during the ongoing logistics process.

Data evaluation for efficient logistics processes Inductive charging also has numerous advantages in terms of data evaluation. The battery and charging system together form an overall solution for energy supply and are connected via a CAN interface. This means that all data on the energy level, operating times, and vehicle status can be recorded in real-time. Industry 4.0 applications such as condition monitoring or predictive maintenance can be executed.

With “in-process charging,” the batteries are charged at critical points in the warehouse. The charging process starts with full power in less than a second, so even the shortest downtimes can be used for charging without any significant loss in power conversion. With an efficiency of 93%, wireless charging systems are as efficient as the most powerful wired charging solutions. Due to the many intermediate charges, the energy level of the batteries remains constant. The same vehicle performance can be maintained with 30% smaller batteries without compromising capacities; the acquisition costs of batteries can be reduced considerably. Since there are often no additional charging breaks, downtime is reduced, and vehicle availability increases by up to 30%. Flexible integration possible with wireless charging technologies The implementation of automation with wireless charging technologies requires no interventions in the warehouse infrastructure. Whether defined parking spaces, on frequently travelled routes or at loading and unloading stations, charging pads can be installed on walls, machines, or on the floor in a few simple steps (and flexibly

Since inductive charging systems such as etaLINK manage without mechanical sliding contacts, the energy solutions are completely maintenancefree and suitable for long-term continuous use.

Current and future state of inductive battery charging The many advantages over conventional charging solutions are obvious. Inductive battery charging systems have the potential of becoming the standard for supplying energy to lithium-ion batteries. They are efficient, flexible, scalable, and can be quickly integrated into any warehouse. “In-process charging” enables completely new automation and logistics processes. Users want to reduce costs sustainably and consistently; inductive charging enables an affordable alternative and clear TCO (total cost of ownership). Author Profile: Julian Seume is the Chief Marketing Officer (CMO) for the German-based inductive wireless power company Wiferion. He holds a Bachelor in Economics and a Master of Sciences in Business Management. After ten years in international executive positions for machine tool companies he joined Wiferion in 2019 and is responsible for the overall go-to market strategy, the brand development, and all aspects of strategic and operative marketing. Seume believes wireless charging will change the way energy is transferred and that Wiferion will help to electrify the economy. Manufacturing Outlook / February 2021

ISM REPORT OUTLOOK

THE INSTITUTE FOR SUPPLY MANAGEMENT’S MANUFACTURING REPORT ON ® BUSINESS

BREAKING NEWS

ISM PMI at 58.7% for January ISM PMI for the past 5 years

JANUARY 2021 58.7%

Manufacturing Outlook / February 2021

ISM REPORT OUTLOOK INSTITUTE FOR SUPPLY MANAGEMENT®

Analysis by

reportonbusiness Economic activity in the manufacturing sector grew in January, with the overall economy notching an eighth consecutive month of growth, say the nation’s supply executives in the latest Manufacturing ISM® Report On Business®. The January Manufacturing PMI® registered 58.7 percent. The New Orders Index registered 61.1 percent, down 6.4 percentage points from the seasonally adjusted December reading of 67.5 percent. The Production Index registered 60.7 percent, a decrease of 4 percentage points compared to the seasonally adjusted December reading of 64.7 percent. The Backlog of Orders Index registered 59.7 percent, 0.6 percentage point above the December reading of 59.1 percent. The Employment Index registered 52.6 percent, 0.9 percentage point higher from the seasonally adjusted December reading of 51.7 percent. The Supplier Deliveries Index registered 68.2 percent, up 0.5 percentage point from the December figure of 67.7 percent. Of the 18 manufacturing industries, 16 reported growth in January, in the following order: Electrical Equipment, Appliances & Components; Machinery; Primary Metals; Chemical Products; Fabricated Metal Products; Plastics & Rubber Products; Transportation Equipment; Apparel, Leather & Allied Products; Paper Products; Wood Products; Food, Beverage & Tobacco Products; Nonmetallic Mineral Products; Furniture & Related Products; Miscellaneous Manufacturing‡; Textile Mills; and Computer & Electronic Products. ISM

‡Miscellaneous Manufacturing (products such as medical equipment and supplies, jewelry, sporting goods, toys and office supplies).

ISMWORLD.ORG

Timothy R. Fiore, CPSM, C.P.M.,

Chair of the Institute for Supply Management® Manufacturing Business Survey Committee

MANUFACTURING

PMI at 58.7% ®

PMI

Manufacturing grew in January, as the Manu2019 2020 2021 facturing PMI® registered 58.7 percent, 1.8 percentage points lower than the seasonally 58.7% adjusted December reading of 60.5 percent. The Manufacturing PMI® continued its expansion signifying growth in economic activity 50% = Manufacturing Economy in January, with all five contributing subinBreakeven Line dexes in growth territory, but at lower rates 43.1% = Overall Economy Breakeven Line compared to December. Five of six of the biggest manufacturing industries — Chemical Products; Fabricated Metal Products; Transportation Equipment; Food, Beverage & Tobacco Products; and Computer & Electronic Products — expanded.

Manufacturing at a Glance INDEX

Jan Index

Dec Index

% Point Change

Manufacturing PMI® New Orders

58.7

60.5

-1.8

61.1

67.5

-6.4

Production

60.7

64.7

-4.0

Rate of Change

Trend* (months)

Growing

Slower

Growing

Slower

Growing

Slower

Direction

Employment

52.6

51.7

+0.9

Growing

Faster

Supplier Deliveries

68.2

67.7

+0.5

Slowing

Faster

Inventories

50.8

51.0

-0.2

Growing

Slower

Customers’ Inventories

33.1

37.9

-4.8

Too Low

Faster

Prices

82.1

77.6

+4.5

Increasing

Faster

Backlog of Orders

59.7

59.1

+0.6

Growing

Faster

New Export Orders

54.9

57.5

-2.6

Growing

Slower

Imports

56.8

54.6

+2.2

Growing

Faster

Overall Economy

Growing

Slower

Manufacturing Sector

Growing

Slower

*Number of months moving in current direction. Manufacturing ISM® Report On Business® data is seasonally adjusted for the New Orders, Production, Employment and Inventories indexes.

Commodities Reported

Note: The number of consecutive months the commodity is listed is indicated after each item.

Commodities Up in Price: Acrylonitrile Butadiene Styrene (ABS) Plastic; Aluminum (8); Ammonia; Brass Products (3); Calcium Carbonate; Copper (8); Corn; Corrugate (4); Corrugated Boxes (3); Crude Oil (2); Diesel; Electrical Components (2); Electronic Components (2); Ethylene; Freight (3); High-Density Polyethylene (HDPE); Isocyanates (2); Liquid-Crystal Display (LCD); Linear Low-Density Polyethylene (LLDPE) Resins; Lumber (7); Memory; Natural Gas; Nylon Fiber; Ocean Freight (2); Oil-Based Lubricants (2); Packaging Supplies (2); Paper Products (2); Personal Protective Equipment (PPE) — Gloves (2); Plastic Resins (5); Plating Services; Precious Metals; Propylene; Polypropylene (7); Polyols; Polyvinyl Chloride (4); Printed Circuit Boards; Soybean Products (4); Steel (6); Steel — Galvanized; Steel — High Carbon (2); Steel — Cold Rolled (5); Steel — Hot Rolled (5); Steel Products (5); Steel — Scrap (2); Steel — Stainless (3); Sulfuric Acid; and Wood — Pallets (2). Commodities Down in Price: Caustic Soda. Commodities in Short Supply: Copper; Corrugate; Corrugated Boxes (3); Electrical Components (4); Electronic Components (2); Freight — Road; Personal Protective Equipment (PPE) — Gloves (11); Semiconductors (2); Steel (2); Steel — Cold Rolled; Steel — Fabricated; and Steel — Hot Rolled (3).

Manufacturing Outlook / February 2021

ISM REPORT OUTLOOK

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) 2019

January 2021

2020

New Orders

2021

ISM’s New Orders Index registered 61.1 percent. Of the 18 manufacturing industries, the 13 that reported growth in new orders in January — in the following order — are: Primary Metals; Electrical Equipment, Appliances & Components; Machinery; Plastics & Rubber Products; Transportation Equipment; Wood Products; Paper Products; Fabricated Metal Products; Chemical Products; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing‡; Furniture & Related Products; and Computer & Electronic Products.

61.1%

52.8% = Census Bureau Mfg. Breakeven Line

Production (Manufacturing) 2019

2020

Production

2021 70

60.7%

52.1% = Federal Reserve Board Industrial Production Breakeven Line

The Production Index registered 60.7 percent. The 12 industries reporting growth in production during the month of January — listed in order — are: Machinery; Primary Metals; Wood Products; Electrical Equipment, Appliances & Components; Chemical Products; Transportation Equipment; Fabricated Metal Products; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing‡; Plastics & Rubber Products; Paper Products; and Computer & Electronic Products.

Employment (Manufacturing) 2019

2020

Employment

2021

ISM’s Employment Index registered 52.6 percent. Of the 18 manufacturing industries, the six industries to report employment growth in January — in the following order — are: Electrical Equipment, Appliances & Components; Wood Products; Primary Metals; Machinery; Nonmetallic Mineral Products; and Chemical Products.

52.6% 50.6% = B.L.S. Mfg. Employment Breakeven Line

Supplier Deliveries (Manufacturing) 53.1% 2019

2020

2021 80

68.2 %

Inventories (Manufacturing) 2019

2020

2021

50.8% 44.5% = B.E.A. Overall Mfg. Inventories Breakeven Line

‡Miscellaneous

Manufacturing (products such as medical equipment and

supplies, jewelry, sporting goods, toys and office supplies).

Manufacturing Outlook / February 2021

Supplier Deliveries The delivery performance of suppliers to manufacturing organizations was slower in January, as the Supplier Deliveries Index registered 68.2 percent. Seventeen industries reported slower supplier deliveries in January, listed in the following order: Apparel, Leather & Allied Products; Paper Products; Textile Mills; Nonmetallic Mineral Products; Fabricated Metal Products; Plastics & Rubber Products; Machinery; Food, Beverage & Tobacco Products; Chemical Products; Transportation Equipment; Furniture & Related Products; Printing & Related Support Activities; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Miscellaneous Manufacturing‡; Petroleum & Coal Products; and Primary Metals.

Inventories The Inventories Index registered 50.8 percent. The seven industries reporting higher inventories in January — listed in order — are: Textile Mills; Furniture & Related Products; Chemical Products; Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco Products; Machinery; and Transportation Equipment.

ISM REPORT OUTLOOK

ISM Report On Business ®

Manufacturing PMI

January 2021 Analysis by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management ® Manufacturing Business Survey Committee

Customer Inventories (Manufacturing) 2019

2020

2021

Customers’ Inventories ISM’s Customers’ Inventories Index registered 33.1 percent. Of the 18 industries, the only one reporting higher customers’ inventories in January is Printing & Related Support Activities.

33.1% Prices (Manufacturing) 2019

2020

82.1%

2021

The ISM Prices Index registered 82.1 percent. All 18 industries reported paying increased prices for raw materials in January, in the following order: Apparel, Leather & Allied Products; Paper Products; Wood Products; Fabricated Metal Products; Furniture & Related Products; Plastics & Rubber Products; Primary Metals; Electrical Equipment, Appliances & Components; Machinery; Textile Mills; Nonmetallic Mineral Products; Chemical Products; Petroleum & Coal Products; Computer & Electronic Products; Miscellaneous Manufacturing‡; Transportation Equipment; Food, Beverage & Tobacco Products; and Printing & Related Support Activities.

52.7% = B.L.S. Producer Prices Index for Intermediate Materials Breakeven Line

Backlog of Orders (Manufacturing) 2019

2020

Prices

2021

59.7%

Backlog of Orders ISM’s Backlog of Orders Index registered 59.7 percent. The 12 industries reporting growth in order backlogs in January, in the following order, are: Transportation Equipment; Primary Metals; Wood Products; Paper Products; Electrical Equipment, Appliances & Components; Machinery; Fabricated Metal Products; Nonmetallic Mineral Products; Miscellaneous Manufacturing‡; Computer & Electronic Products; Chemical Products; and Plastics & Rubber Products.

New Export Orders (Manufacturing) 2019

2020

2021

New Export Orders ISM’s New Export Orders Index registered 54.9 percent. The 10 industries reporting growth in new export orders in January — in the following order — are: Plastics & Rubber Products; Primary Metals; Fabricated Metal Products; Machinery; Electrical Equipment, Appliances & Components; Transportation Equipment; Computer & Electronic Products; Chemical Products; Miscellaneous Manufacturing‡; and Food, Beverage & Tobacco Products.

54.9%

Imports (Manufacturing) 2019

2020

2021

56.8%

‡Miscellaneous

Imports ISM’s Imports Index registered 56.8 percent. The 11 industries reporting growth in imports in January — in the following order — are: Wood Products; Primary Metals; Textile Mills; Machinery; Transportation Equipment; Nonmetallic Mineral Products; Fabricated Metal Products; Chemical Products; Food, Beverage & Tobacco Products; Computer & Electronic Products; and Electrical Equipment, Appliances & Components.

Manufacturing (products such as medical equipment and

supplies, jewelry, sporting goods, toys and office supplies).

Manufacturing Outlook / February 2021

NORTH AMERICAN OUTLOOK

FEBRUARY 2021

NORTH AMERICAN OUTLOOK by AMELIA ROY

The Institute of Supply Management PMI figure slipped from 60.7 in December to 58.7 in January. Anything above 50 represents growth, so 58.7 represents strong growth. New orders, production, and employment are growing; supplier deliveries are slowing at a faster rate; backlogs are growing; raw materials inventories are growing; customer inventories are too low; prices are increasing, and exports and imports are growing. Of the 18 manufacturing industries, 16 reported growth in January, in the following order: Electrical Equipment, Appliances & Components; Machinery; Primary Metals; Chemical Products; Fabricated Metal Products; Plastics & Rubber Products; Transportation Equipment; Apparel, Leather & Allied Products; Paper Products; Wood Products; Food, Beverage & Tobacco Products; Nonmetallic Mineral Products; Furniture & Related Products; Miscellaneous Manufacturing; Textile Mills; and Computer & Electronic Products. The two industries reporting contraction in January are: Printing & Related Support Activities; and Petroleum & Coal Products. Of the six biggest manufacturing industries, five - Chemical Products; Fabricated Metal Products; Transportation Equipment; Food, Beverage & Tobacco Products; and Computer & Electronic

Manufacturing Outlook / February 2021

Products — registered moderate to strong growth in January. Petroleum & Coal Products contracted. Comments from the industry are generally very optimistic, and similar to those of December. There is still concern re: the Covid-19 pandemic, and its effects on labor and the general supply-chain. There are problems moving materials through ports. Commodities Up in Price Acrylonitrile Butadiene Styrene (ABS) Plastic; Aluminum (8); Ammonia; Brass Products (3); Calcium Carbonate; Copper (8); Corn; Corrugate (4); Corrugated Boxes (3); Crude Oil (2); Diesel; Electrical Components (2); Electronic Components (2); Ethylene; Freight (3); High-Density Polyethylene (HDPE); Isocyanates (2); Liquid-Crystal Display (LCD); Linear Low-Density Polyethylene (LLDPE) Resins; Lumber (7); Memory; Natural Gas; Nylon Fiber; Ocean Freight (2); Oil-Based Lubricants (2); Packaging Supplies (2); Paper Products (2); Personal Protective Equipment (PPE) — Gloves (2); Plastic Resins (5); Plating Services; Precious Metals; Propylene; Polypropylene (7); Polyols; Polyvinyl Chloride (4); Printed Circuit Boards; Soybean Products (4); Steel (6); Steel — Galvanized; Steel — High Carbon (2); Steel — Cold Rolled (5); Steel — Hot Rolled (5); Steel Products (5); Steel — Scrap (2); Steel — Stainless (3); Sulfuric Acid; and Wood — Pallets (2).

NORTH AMERICAN OUTLOOK Commodities Down in Price Caustic soda Commodities in Short Supply Copper; Corrugate; Corrugated Boxes (3); Electrical Components (4); Electronic Components (2); Freight — Road; Personal Protective Equipment (PPE) — Gloves (11); Semiconductors (2); Steel (2); Steel — Cold Rolled; Steel — Fabricated; and Steel — Hot Rolled (3). Note: The number of consecutive months the commodity is listed is indicated after each item.

CANADA saw solid expansion overall in manufacturing operating conditions, with growth moderating from that seen in December. Growth was down in employment and purchasing, with stocks of both inputs and finished goods depleted. Higher raw material costs are still an issue, as are worsening vendor performance and border restrictions. There were higher prices for steel and aluminum, and transportation. The PMI for January, at 54.4, was down from December’s 57.9. Canada’s light vehicle sales were down 17.4 percent, year-over-year, in January, from 109,988 to 90,890 units. Light trucks accounted for 84.6 percent of these sales. Canada’s economy showed

surprising strength in the final two months of 2020, even amid a new wave of COVID-19 restrictions. Gross domestic product expanded 0.7 per cent in November from a month earlier, Statistics Canada recently reported in Ottawa, easily beating the 0.4 per cent forecast of economists in a Bloomberg survey. A preliminary estimate from the agency shows GDP grew 0.3 per cent in December, defying expectations for a contraction. A recent report shows unexpected resilience, mostly from a jump in resource production, even in the face of measures taken to contain a second wave of COVID-19. Growth in the fourth-quarter came in at about 8 percent annualized, well above the 4.8 per cent pace projected by the Bank of Canada. Those sectors that are not specifically affected by the virus appear to be faring well, according to bank economists, but it is considered that the economy will only be able to outrun the second wave of the virus for so long.

Amelia Roy, Staff Writer

MEXICO reported no change to its unfortunate circumstances, with sharp reductions in production and new orders, and continuing shedding of jobs. The PMI for January, at 43.0, was slightly up on December’s 42.4.

NEW EPISODES EVERY TUESDAY AT MFGTALKRADIO.COM

Manufacturing Outlook / February 2021

SOUTH AMERICAN OUTLOOK

GLOBAL OUTLOOK

SOUTH AMERICA by JEANNE-MARIE LOWRIE

BRAZIL saw an easing in momentum in both production and new orders, although manufacturing indicators are still strong. There was no growth in export orders in January. The PMI slipped from 61.5 in December to 56.5 in January. There were supply shortages and delivery delays. There is still optimism in Brazil. The economic recovery seen in Brazil in 2020 may slow in the wake of the second virus wave. Companies are optimistic that production levels will increase in 2021, but Covid-19 must ease, there must be approval of government reforms, and material availability must improve.

Manufacturing Outlook / February 2021

Jeanne-Marie Lowrie, Staff Writer

ASIA OUTLOOK

GLOBAL OUTLOOK

ASIA OUTLOOK

by CHRIS ANDERSON

CHINESE manufacturing conditions improved at the slowest rate for seven months in January. The PMI fell back from 53.0 in December to 51.5 in January. There were softer increases in production and new orders, and a renewed reduction in new export orders. There were stock shortages at suppliers and increased delivery times and increased raw material prices, all serving to up operating expenses. Chinese overall vehicle sales, including trucks and buses, were up 5.4 percent year-over-year in December to 2.8 million vehicles. Passenger vehicles were up 5.9 percent; commercial vehicles down 4.4 percent. Auto sales for 2020 were down only 1.9 percent year-over-year, at 25.3 million units. JAPAN’s PMI fell very slightly from 50 in December to 49.8 in January, amid falls in production

New Jersey Manufacturers,

Do You Have... • Jobs that are difficult to fill with the right candidates? • Positions that have high turnover? • Occupations where a highlyskilled workforce is retiring soon?

and employment. There was stabilizing of new orders for the first time in over two years. Some businesses report a recovery in demand in 2021. Thus, firms in the Japanese manufacturing sector remained optimistic of a rise in production over the coming year. Input cost inflation was up in January, as were supply-chain disruptions. Selling prices were increased to partially cover this.

Chris Anderson, Staff Writer

INDIA saw strong growth in January, with production, new orders, and exports up at a faster pace. There was a slower decline in employment, and the largest increase in input stocks in over a decade. There were, of course, supply-chain problems. The PMI rose from 56.4 in December to 57.7 in January.

NJMEP offers Workforce Development Solutions to close the Skills Gap: • Pre-Apprenticeship Programs • USDOL Apprenticeships • ’Project 160’ No-Cost Training • ’Tri50’ Upskilling opportunities discounted with funds from the CARES Act

Building Skills. Building Confidence. Building the Future.

• Challenges in motivating employees?

Workforce challenges are still the number one concern for New Jersey manufacturing businesses. NJMEP is offering manufacturers a suite of workforce programs focused on solving these businesses most disruptive issues.

• Positions requiring skills that can be learned on the job?

New opportunities were developed using funds provided by the CARES Act. These new recruiting and upskilling programs are available for a limited time at a reduced cost.

• Difficulty attracting new and more diverse talent pools?

Contact NJMEP today to learn more about the Pro-Action Education Network™.

Contact NJMEP today and start taking the right steps forward.

2 RIDGEDALE AVE., SUITE 305 • CEDAR KNOLLS, NJ 07927 P: 973.998.9801 | WWW.NJMEP.ORG | INFO@NJMEP.ORG

Manufacturing Outlook / February 2021

EUROZONE OUTLOOK

GLOBAL OUTLOOK

EUROZONE by CHRIS ANDERSON

IHS Markit’s Eurozone Manufacturing Composite Purchasing Managers’ Index (PMI), fell very slightly from 55.2 in December to 54.8 in January, with continuing marked increases in new orders and production. There was a further deterioration in supplier deliveries, and a rapid rise in purchase prices. Consumer goods saw a marginal increase in growth, but there was strong expansion in intermediate and investment goods. Export trade was good, as was confidence for the next twelve months.

Manufacturing Outlook / February 2021

The Western European selling rate for cars increased to 14.4 million units per year in December, with car registrations down 3.8 percent year-over-year. Car sales for 2020 were at 10.8 million, down 24.5 percent from 2019’s results. IHS Markit’s PMI for the UK was down from 57.5 in December to 54.1 in January, as the recent upturn slowed sharply. Supply chains were stretched by Brexit and Covid-19 restrictions. There were increases in input costs and selling price inflation, and marked lengthening of supplier lead times which, apart from April 2020, were the greatest registered in the almost 30-year survey history. Along with Covid-19 restrictions, there were transport delays, especially at ports, following the end of the Chris Anderson, Brexit transition period. Staff Writer

GLOBAL PMI OUTLOOK

by NORBERT ORE, DIRECTOR, HEAD OF INDUSTRIAL SURVEYS, STRATEGAS RESEARCH PARTNERS

NEW ORDERS STRONG – PRICES RISING - JANUARY 2021 BUSINESS SURVEY INSIGHTS The global recovery continues as the major industrial economies have recovered to pre- COVID-19 levels. Eight of the 18 PMIsthat we closely follow printed above 55 percent indicating solid expansion and growth. The carryover from this report should be a good indicator that the first half of 2021 will continue to see positive economic activity. The leaders in January were Taiwan (65.1, +3.8), U.S. Mfg (58.7, -1.8), and U.S. Services (58.7, +1.0). January’s results continue to suggest global manufacturers are poised for growth well into 2021. Mexico (43.0, +0.7) is the only manufacturing economy in contraction as it has weak consumer demand, fewer employment opportunities, and the virus which has resulted in 14 consecutive months of PMI decline. Businesses, and particularly manufacturers, would base their performance on a 12-month calendar. That was the case until Covid-19 came along. Now the focus has changed to the pre-COVID-19 era versus the post-COVID-19 era. Global manufacturing has survived the collapse in demand during the Great Lockdown. Regrettably, many businesses have failed as the eradication of the virus is still in the future. The sector continues above average growth stimulated by new orders and production which have both remained above the 60-mark monthly for the July to December period. The January PMI®(58.7, -1.8) supports a rapidly growing U.S. manufacturing sector. The past relationship between the PMI®and the overall economy indicates that the PMI®for corresponds to 4.4-percent annualized GDP growth, according to the press release.

Norbert Ore, Director, Head Of Industrial Surveys, Strategas Research Partners

Manufacturing Outlook / February 2021

CREDIT MANAGER’S OUTLOOK

CREDIT MANAGERS’ OUTLOOK by DR. CHRISTOPHER KUEHL MANAGING DIRECTOR OF ARMADA CORPORATE INTELLIGENCE THIS REPORT REPRINTED COURTESY OF THE NATIONAL ASSOCIATION OF CREDIT MANAGERS (NACM.ORG) WHERE MORE IN-DEPTH INFORMATION CAN BE FOUND.

Combined Sectors Astounding as it may appear, the economy may have reached a stage of some stability. At least that is what the December Credit Managers’ Index (CMI) is suggesting. This has been a spectacularly difficult year to forecast and anticipate as the data has been swinging wildly. The utter collapse that followed the pandemic-inspired shutdown led to several months of artificial rebound. The economy behaved like a spring that was pushed down and then released. Neither the down state nor the rebound was accurate. “It now appears that the movement has slowed, and what we are seeing now could be considered normal or at least some version of normal,” said NACM Economist Chris Kuehl, Ph.D. “This is not to say that there has been an end to the economic crisis. Unemployment remains very high; thousands of businesses have been forced to shut down and many others are hanging on by a thread. The data from the latest CMI makes that abundantly clear, but for the first time in almost a year, there is some reason to expect the future to look a little brighter.” The combined score for the CMI changed very little from its position last month, going from 57.9 to 57.8. This is just slightly off from the 58.4 reached in October. The last three months have been the high points for the past couple of years. The index of favorable factors improved over November’s reading with a 65.7 as compared to 64.4. Again, the peak was in October when the reading stood at 68. The index of unfavorable factors went the other

Manufacturing Outlook / February 2021

direction with a slight decline from 53.5 to 52.5. “This is really the story of the economy at the end of 2020 in a nutshell. There was a definite surge in activity at the start of the holiday spending season, but the arrival of the second wave of the virus prompted more shutdowns and a receding pace of economic expansion,” Kuehl said. The sub-sector readings told that story even more clearly. The sales numbers have been climbing, and at 70.2 they have almost returned to the levels seen in October. The consumer responded to the sales and discounts on offer, and the business community also found a reason to invest and spend. The new credit applications data also improved over last month, moving from 63.9 to 64.4. The dollar collections data stayed very stable at 62.8, just slightly above the 62.6 in November. The last of the favorable readings also trended back toward the level seen in October with a reading of 65.3 compared to 64.8 in November. There was more activity and more of a retreat in the unfavorable categories. The rejections of credit applications remained very similar to the month prior with a reading of 51.3 as compared to 51.5. There was a much more pronounced change as far as accounts placed for collection as this reading had been 56.2 in November and has fallen back to 51.6. This is a reversal to be sure, but the data remains above the 50 line and therefore in expansion territory. There are more than a few indications that businesses remain fragile and the

CREDIT MANAGER’S OUTLOOK

imposition of new restrictions pushed more over the edge. The disputes reading actually improved from November as it went from 50.6 to 51.2. There was a slight dip as far as the dollar amount beyond terms reading is concerned, moving from 58.1 to 57, but these are still very solid numbers and well into the expansion zone. The dollar amount of customer deductions showed very little change at all, moving from 51.7 to 51.5. The data regarding filings for

bankruptcies showed a decline from 53 to 52.5, but these numbers are still firmly in the expansion zone. “Despite some weakening of the data in the unfavorable category all the readings are in expansion territory and that makes two months in a row for this kind of positive data. The favorables are all at least in the 60s this month as well, and that points in a positive direction going into the first quarter.” Manufacturing Outlook / February 2021

CREDIT MANAGER’S OUTLOOK Manufacturing Sector Manufacturing has been all over the place as one would expect. There have been sectors that have done quite well through this economic crisis while others have been damaged—it has all depended on what sector of the market has been the focus. Automotive has done pretty well while the aerospace sector has suffered an abrupt drop in demand. Export centric manufacturing has taken a hit while domestic focus has paid off with consumers buying everything from appliances to lawn equipment. In general, the data has been promising and fairly consistent. The combined score for the sector is very close to what was noted in November, moving from 58.6 to 58.4. The index of favorable factors shifted up to levels beyond October’s reading. It now stands at 68.5 compared to 64.3 in November and 67.9 in October. The index of unfavorable factors slipped a bit with a reading of 51.7 compared to the 54.8 noted in November. The variety in the sub-sectors has been illustrative. The sales numbers nearly recovered to where they were in October with a reading of 71.1. The new credit applications data jumped into the 70s with a reading of 70.2 after hitting 62.4 in November.

Manufacturing Outlook / February 2021

This surge in credit applications seems to match some of the data regarding capital investment and capacity utilization. It has been a year of restrained investment and now some of that money may be shaking loose. The dollar collections data also improved with a reading of 65.9 compared to 62.3 in November. There was also positive movement as far as the amount of credit extended. It was at 62.6 and shifted to 66.8 this month—another sign that credit is being sought by some pretty large companies. The movement in the unfavorable categories showed a little more stress. The rejections of credit applications slipped a bit from 52.5 to 51.3 but remained in expansion territory, and that is a good sign given the increase in applications. The accounts placed for collection dropped drastically, and that is a more distressing sign. It was reading at 63 in November, but this month it fell back to 51.4. “There is a deep split between the businesses that have been weathering all this and those that have been affected by the shutdowns, and that shows up in terms of collection.” The disputes numbers climbed out of the contraction zone with a reading of 50.7 as contrasted with the 49.8 registered last

CREDIT MANAGER’S OUTLOOK

month. The dollar amount beyond terms fell a little from 58.9 to 53.5, but is still in the expansion zone. “The companies that starting to fall behind in their obligations will need to be watched carefully going forward.” The dollar amount of customer deductions also fell, and that reading is very close to the 50 line with a reading that moved from 51 to 50.6. The filings for bankruptcies data also slipped a bit from 53.7 to 52.8. All of these reductions merit some further examination, but the good news for the moment is all of the categories are in the expansion zone again after seeing a little decline in November. October’s numbers are still better overall, but December bounced back a bit. The real drag on the month has been accounts placed for collection. Author profile Dr. Christopher Kuehl (PhD) is a Managing Director of Armada Corporate Intelligence and one of the co-founders of the company in 1999. He has been Armada’s economic analyst and has worked with a wide variety of private clients and professional associations in the last ten years. He is the Chief Economist for the National Association for Credit Management and is on the Board of Advisors for their global division – Finance,

Credit and International Business. He prepares NACM’s monthly Credit Managers Index. He is the Economic Analyst for the Fabricators and Manufacturers Association and writes their biweekly publication, Fabrinomics, which details the impact of economic trends on the manufacturer. Chris is the chief editor for the Business Intelligence Briefs, distributed all over the world by business organizations and he is one of the primary writers (with Keith Prather) for the Executive Intelligence Briefs. He also makes close to a hundred presentations each year to business and industry associations in the US and overseas. He is on the Board of the Business Information Industry Association in Hong Kong and serves as a resource for the media and for many trade publications. Chris has a doctorate in Political Economics and advanced degrees in Soviet Studies and Asian Studies and was a professor of international economics and finance for over 15 years prior to starting Armada.

TO READ THE COMPLETE REPORT CLICK HERE OR VISIT MFGTALKRADIO.COM Manufacturing Outlook / February 2021

METALS OUTLOOK

FEBRUARY 2021

METALS OUTLOOK by ROYCE LOWE

THE PRESIDENT AND ALUMINUM The U.S. Aluminum Association recently released a series of policy documents wherein it laid out its priorities to support the U.S. aluminum industry. The President’s (of the Association) Policy Brief for a strong U.S. aluminum industry includes several recommendations for the incoming Biden administration and Congress to support the aluminum sector in the U.S. The brief contains key policy goals in the areas of Energy, Environment, Infrastructure, Recycling and Trade. The Aluminum Association says that a strong and growing domestic aluminum industry can help strengthen America’s manufacturing base. During the presidential campaign, Joe Biden noted how aluminum is a key part of future infrastructure development and the addressing of climate change, saying that American aluminum will play its part throughout the manufacturing spectrum, and that in addition to infrastructure and renewable energy, will be an important ingredient in the electric vehicles that are scheduled to replace cars in the federal fleet. This is in addition to the 166,000 directly-employed workers, a figure that rises to over 660,000 when the direct, indirect and induced jobs are included.

Manufacturing Outlook / February 2021

Aluminum is a lightweight, recyclable metal, with fairly good corrosion resistance. As such, its use in vehicles for both public and private transportation can help in energy conservation. Its use in aircraft manufacture is, for the time being at least, mandatory. Electric power, lots of it, is essential for its production, which is why most of America’s primary aluminum comes from Canada, where hydro-electric power is infinite. There is research afoot to greatly reduce the carbon footprint from aluminum in Canada, and Alcoa, the largest aluminum producer in the U.S., is a part of this effort. The primary aluminum industry in the U.S. is not in great shape. Smelters have closed down over the past couple of decades, due in some measure to a lasting drop at the time in the price of the metal. The industry struggles to produce a million tons of primary aluminum per year. Donald Trump, on the last day of his presidency, removed the 10 percent aluminum tariff on material from the UAE - the world’s fifth largest primary aluminum producer to add to Australia, Argentina, Canada and Mexico, countries that pay no tariff.

METALS OUTLOOK U.S. aluminum could use a shot of Research and Development. Since Alcoa, its number one aluminum company, has smelters in Canada, and is involved in a pilot plant to produce the metal with no greenhousegas emissions, why not just join in with all that? Why not cooperate within the USMCA grouping? Aluminum is an integral, very important part of America’s manufacturing industry, and is found in major manufacturing and energy sectors, plus a broad range of consumer products. It is easily recycled, using only 15 percent of the energy required for primary extraction. Collection of aluminum-containing consumer products should be improved to allow greater control and efficiency of the recycling process. The U.S. aluminum industry can be better. It requires a concerted effort on the part of industry and government to make this happen. Ongoing complaints about China’s “unfairly subsidized overcapacity” are totally counter-productive. Let Joe Biden have the last word, when he talks about using aluminum for the chassis of EVs, and when he talks about the world’s biggest car fleet - his - moving to EVs, obviously with aluminum chassis. There are ways to improve the industry through combined effort.

With hot-rolled steel coil in the U.S. at over $1150 per ton, cold-rolled and hot-dip galvanised at $1360 per ton in early February, iron ore and steel scrap inventories up in China, infrastructure activity in China dropping, steel scrap prices down in Turkey an important player - there is some concern about the short-to-medium term future of steel demand, hence prices. The price-demand equation in North America looks good for at least two more quarters. The mills in both the U.S. and Canada are still holding out on price increases, and deliveries are out to May/June at the moment. As usual, steel demand is difficult to read from quarter to quarter, year to year. There may even be an upturn in China following the New Year holiday in February. There will be many sleepless nights for those in the business. Non-ferrous metal data show aluminum unchanged over the past month at $0.90 per pound in late January; copper also unchanged at $3.55 per pound in late January; nickel up from $7.40 to $8.00 over the past month, and zinc down from $1.26 to $1.15 over the past month. Author profile: Royce Lowe, Manufacturing Talk Radio, UK and EU International Correspondent, Contributing Writer, Manufacturing Outlook.

200” Max O.D. 6” Min O.D. To 80,000 lbs.

ISO9001:2015 SINCE 1994 AND AS9100D SINCE 1998 - NIST SP 800-171 (COMPLIANCE UNDER DEVELOPMENT)

TOLL FREE IN THE U.S. 800.600.9290 - 973.276.5000 - CANADA: 416.363.2244 - INFO@STEELFORGE.COM - STEELFORGE.COM

Manufacturing Outlook / February 2021

AEROSPACE OUTLOOK

FEBRUARY 2021

AEROSPACE OUTLOOK by ROYCE LOWE

VIRGIN FLIGHT Last May, the Virgin Orbit project, Richard Branson’s baby, tried to launch a rocket from the wing of a converted Boeing 747. It failed due to a hydraulic problem. Not what Branson wanted last May with his leisure and travel businesses sinking due to COVID-19. January 17th this year brought him better luck, when the project flew a rocket into space from that wing of that converted 747, paving the way for a new method of launching low-cost satellites. The plane took off from Mogave Air and Space Port in the desert north of Los Angeles and launched over the Pacific. Virgin Orbit was founded by Richard Branson in 2012. It wants to offer a quick and flexible service for operators of small satellites weighing between 300 and 500 kilos (660 and 1100 lbs) - this is a

Manufacturing Outlook / February 2021

booming market. The 70 feet (21 meter) Virgin Orbit rocket, named Launcher One, is strapped to the underside of a wing on a converted Boeing 747. At the required altitude, the plane releases

AEROSPACE OUTLOOK the rocket, whose own engine fires up to push it into Earth’s orbit and places its payload in space. Launching a rocket from a plane is more flexible than a vertical blast off because theoretically all a company needs is an airstrip rather than a launchpad. Branson has founded another space company, Virgin Galactic, which uses a similar concept, with the goal of taking tourists into space to experience weightlessness some 80 kms (50 miles) above the Earth’s surface. If all goes according to plan, we’ll see two or three companies offering minivacations for the well-to-do, just circling in space. There may subsequently be trips to the moon? Boeing Is it possible that we might soon see the resolution of the Boeing 737 Max saga, as saga it is? Is it possible that this company, that had such a reputation, will once more be able to hold up its head? In the past couple of years, since two fatal accidents killed 346 people, so much came to light regarding Boeing’s misdeeds and deception, that at one point no-one was sure if this plane would ever fly again. It did, and it will, and Boeing will fill orders for many more, but hopefully the procedures, and communication within and without the company, will reach the desired levels of skill and honesty.

Boeing recently reached a $2.5 billion agreement to settle a criminal charge that it defrauded the U.S. government by withholding information about the 737 Max involved in two fatal crashes. The charge will be dismissed after three years if the company cooperates with the government, by making current and former officials available to testify before a federal grand jury or in trials. The settlement is the culmination of a twoyear investigation into the Max, which crashed twice in a five-month span and ruined Boeing’s engineering reputation. They company’s admissions in this case differ from the evidence brought forward in many other accident investigations. While aircraft designs have often been cited as contributing to accidents, it is extremely rare for company deception to be linked to them. “This case sends a clear message,” said the U.S. attorney for the Northern District of Texas, where the case was tried. “The Department of Justice will hold manufacturers like Boeing accountable for defrauding regulators - especially where the stakes are high.” For Boeing, it will be a long road back. Author profile: Royce Lowe, Manufacturing Talk Radio, UK and EU International Correspondent, Contributing Writer, Manufacturing Outlook. Manufacturing Outlook / February 2021

ENERGY OUTLOOK

FEBRUARY 2021

ENERGY OUTLOOK by JOCELYN BRIGHT

WHAT HYDROGEN? It’s looking as though the next big thing in energy’s future might well be green hydrogen. This is hydrogen created using renewable energy instead of fossil fuels. It has the potential to provide clean power for manufacturing, transportation, and more. Its only by-product is water. Green hydrogen is produced using renewable energy and electrolysis to split H20 and it differs from grey hydrogen which is produced from methane and releases greenhouse gases into the atmosphere, and blue hydrogen, which captures those emissions and stores them underground out of harm’s way. Wind and solar energy power homes and electric cars. Green hydrogen is an ideal power source for energy - intensive industries such as concrete and steel manufacturing, as well as parts of the transportation sector that are more difficult to electrify.

Manufacturing Outlook / February 2021

A large U.S. gas company, Air Products and Chemicals, has been building a green hydrogen plant in Saudi Arabia for the past four years. It is claimed to be the world’s largest green hydrogen project; there are more Saudi plants on the drawing board. Saudi Arabia is building a futuristic city called Neom, which is intended as home to one million people and will effectively be powered by green hydrogen. This is a brave move on Saudi Arabia’s part, but the project is a long way from reality. Nearer to home, Thyssenkrupp will install an 88 MW water electrolysis plant for province-owned Hydro-Québec. The plant will be built some 30-40 miles east of Montréal, and will produce 11,100 Tons (12,200 tons) of green hydrogen annually. Both the hydrogen and the oxygen - a by-product of electrolysis, will be used in a biofuel plant to produce biofuels from residual waste for the transportation sector. Commissioning of this plant

ENERGY OUTLOOK

is scheduled for 2023. Thyssenkrupp considers that Québec, and Hydro-Québec as a customer, offers ideal conditions for the firsttime installation of their electrolysis technology on a multi-megawatt scale. Japan’s Mitsubishi Heavy Industries has almost finished the world’s largest net-zero carbon emissions steel plant in Austria. This pilot project will be part of Austrian Steelmaker Voestalpine’s complex and will be run by a British unit of MHI. The trial will begin this year. The plant will use hydrogen instead of coke in the reduction process, and hence there will be no carbon dioxide emissions from the process. Most of the CO2 emissions in the steelmaking process are generated during iron ore reduction.

The Manufacturing & Business Podcast Network

O U R

P O D C A S T S :

MFGTALKRADIO.COM

L I S T E N TO O U R P O D C A S T S AT:

www.jacketmediaco.com

Germany’s SMS and Italy’s Danieli, the world’s two largest steelmaking equipment manufacturers, are looking at hydrogenfueled steelmaking processes. ArcelorMittal will build a pilot hydrogen steel plant this year. The major problem with hydrogen, as with some other alternate energy sources, is the cost. But the commitment is there on a large scale, and it is forecast that in less than a decade, the costs of hydrogen production will come down to a workable level. Again, we are not talking tomorrow, but there is no doubt that the Jocelyn Bright, production of green hydrogen is here to stay. Staff Writer Manufacturing Outlook / February 2021

AUTOMOTIVE OUTLOOK

FEBRUARY 2021

AUTOMOTIVE OUTLOOK EVS; THE INDUSTRY IS COMMITTED.

Most of the automotive news these days is about how many EV models the auto manufacturers are about to unveil, how and when they’re going to clean up the atmosphere, and how delivery vans, and pallets, are going electric. Ford’s recent contribution to the news is closing its three assembly plants in Brazil, two right away, one in the fourth quarter of this year. This is all due to greater persistent idle capacity on the back of COVID-19, coupled with slow sales over a number of years. South American Headquarters, Product Development and Proving Grounds will stay. South American vehicle sales will be serviced from plants in Argentina and Uruguay. GM’s CAMI plant, in Ingersoll, Ontario, is the site of an $800 million conversion from assembling SUVs to producing a new line of battery-powered delivery vans, with 500 to be delivered to FedEx late this year. The conversion will be from SUVs to electric vehicle production, following Canadian autoworkers’ union Unifor’s agreement on a new three-year labor contract. The plant currently builds the Chevrolet Equinox SUV, but the contract commits the automaker to begin large-scale production of the EV600 commercial delivery vehicles at CAMI later in 2021.

Manufacturing Outlook / February 2021

by LAWRENCE MAKAGON

GM has a new lowercase logo, and a new business to go with it. BrightDrop will manufacture the EV600 delivery van, which will be accompanied by the EV1 electric pallet delivery unit for plants and warehouses. The van will have a fully-charged range of 250 miles. FORD MOTOR CO. OF CANADA LTD. has promoted executive Bev Goodman, a 25-year veteran of the Oakville, Ontario automaker, to the job of president and CEO, effective immediately. During her career at Ford, she has worked her way through various positions in finance and sales and marketing. She has a proven track record of working collaboratively with dealer partners and a commitment to innovation as Ford accelerates its efforts to deliver high-quality, high-value vehicles and services. Goodman said she looks forward to “embracing new ways to serve our customers across the country” as the company introduces vehicles like the Mustang Mach-E, Bronco and F-150 hybrid. Goodman further said that the company will focus on delivering the benefits of electrification and connectivity to consumers, including plans for

AUTOMOTIVE OUTLOOK the C$1.8-billion transformation of the Oakville, Ontario Assembly Complex to a battery electric vehicle manufacturing facility.

version of the R5, or what he calls an electric car everyone can afford. It will be interesting to see his idea of the price everyone can afford.

Ford employs 7,000 people in Canada, while an additional 18,000 work in more than 400 Ford and Ford-Lincoln dealerships. In September, Unifor members working at Ford of Canada voted 81 per cent in favour of a new three-year collective agreement.

Lordstown Motors Corp., which bought the GM Lordstown, Ohio plant from GM following the UAW strike near the end of 2019, has 100,000 nonbinding production reservations from commercial fleets for its Endurance all-electric pickup truck, with an average order of 600 vehicles per fleet. The Endurance is a full-size, all-electric pickup, with a range of 250 miles, that can tow up to 7,500 lbs. The plant is on track to start production in September 2021. The price will be $45,000 after a federal rebate.

GM vows no more internal combustion engines after 2035 and 30 new EVs by 2025. It is looking to hire 3,000 technically-inclined employees to help in this quest. The Detroit giant has Tesla in its sights. In the seventies and eighties, the Renault 5 was buzzing around the Montreal area like so many flies. This small, not-very-sexy automobile, caught the eye of Canada’s Francophones and Francophiles alike at the time. Renault, partnered with Nissan and Mitsubishi, has a new boss, the Italian Luca de Meo, who has promised to streamline operations at what is the world’s third largest automobile manufacturer, behind VW and Toyota. One of his first moves was the announcement of an electric

Lawrence Makagon, Staff Writer

Cars, buses, trucks, and vans are all going electric, hybrid, and fuel cell. The big question is still how many people will want to buy them, but possibly more to the point how many people will be able to afford them. Not everybody will want to drive a Renault 5.

Manufacturing Outlook / February 2021

ISSUES OUTLOOK

FEBRUARY 2021

ISSUES OUTLOOK by ROYCE LOWE

Manufacturing Outlook / February 2021

ISSUES OUTLOOK HAS QUALITY BEEN SIDELINED? There’s been more than enough said and written of late about the Boeing Company, about the deception and (mostly) lack of contrition on the part of company executives. There has been feedback from a number of employees regarding the engineering errors that would not have occurred in earlier times, before the almighty pull of shareholders’ benefits outweighed all.

Consultant, found himself in Japan, and involved in planning for the 1951 census. His expertise in quality management brought him to the attention of many of his Japanese counterparts. He worked with Japanese manufacturers, and made a significant contribution to Japan’s reputation for innovative, high-quality products, and for its economic power. He is regarded as having had more impact on Japanese manufacturing and business than any other individual not of Japanese ancestry. He was honored in Japan in 1951 with the

There is an ethic in manufacturing that might be

establishment of the Deming Prize, but was not

described as quality consciousness, the desire to

called upon by the U.S. until the eighties, when

see that the product that any company puts out its

he helped Ford bring out the Taurus-Sable line

door is worthy of that company’s name. Sure, we

in 1986. Ford had been losing money; their

all make mistakes and yes, sub-standard products

cooperation with Deming and his methods

might well get out the door, but some products are

resulted in a financial turnaround. Deming always

more critical than others.

maintained that 85 percent of the quality equation was management’s responsibility. Without

Back in the late 1940’s, an American named

management backing, quality and efficiency could

W. Edwards Deming, a Quality Management

not work, still does not work.

Manufacturing Outlook / February 2021

ISSUES OUTLOOK We are referring to Lockheed Martin Corp. and the F35, the fighter jet already being flown by the U.S. and eight allies, that remains marred by 871 software and hardware deficiencies that could undercut readiness, missions or maintenance, according to the Pentagon’s testing office. The office states that although the F-35 is showing increased reliability, it is still taking maintenance personnel too much time to repair aircraft and that cybersecurity vulnerabilities identified during earlier testing “have not been resolved.” Lockheed has no choice but to admit to these failings, while not offering any detailed explanation nor, again, expressing any contrition. In the early 1980’s, the Honda Accord was the best-

At last count there were 871 flaws in the F35,

selling automobile in the U.S. three years in a row.

down by two from a year earlier.

Japan’s overall success in the automotive field is legendary. Before commencing Lexus production

Quality is a management problem. It is not

in the U.S. some years ago, the company sent

an inspection function, rather it is a carefully

workers from the U.S. to Japan to learn the

controlled step in every process carried out in

techniques, and sent Japanese trainers to the U.S.

manufacturing. The personnel that assemble

Japan has left a large imprint on manufacturing

aircraft need to be assured that they have 100

quality.

percent backing from those higher up the chain.

It is certain that Boeing’s experiences with

Edwards Deming knew this better than anyone.

the 737 Max will serve to improve its overall

When asked, toward the end of his life, how he

manufacturing quality techniques.

would wish to be remembered in the U.S., he replied, “I probably won’t even be remembered.”

Another large U.S. aeronautics company is

After a pause, he added, “Well, maybe ... as

mired in defective work. Although not presently

someone who spent his life trying to keep America

the direct cause of tragedies, the Defense

from committing suicide.” Manufacturing without

Department’s costliest weapons system “continues

quality is like the proverbial ship without its

to carry a large number of deficiencies, many of

proverbial rudder.

which were identified prior to” the development and demonstration phase, which ended in April 2018 with 941 flaws, Robert Behler, the director of operational testing, said in a new assessment obtained by Bloomberg News in advance of its publication.

Manufacturing Outlook / February 2021

Author profile: Royce Lowe, Manufacturing Talk Radio, UK and EU International Correspondent, Contributing Writer, Manufacturing Outlook.

U.S. TOLL FREE 800.600.9290 - IN CANADA: 416.363.2244

ISO9001:2015 SINCE 1994 AND AS9100D SINCE 1998 NIST SP 800-171

(COMPLIANCE UNDER DEVELOPMENT)

*Toll free within the U.S.