Manufacturing Outlook July 2022

Brought to you by

The Manufacturing & Business Podcast Network

O U R

MFGTALKRADIO.COM

P O D C A S T S :

Where Do U.S. Manufacturers Go From China?

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

www.jacketmediaco.com

FEATURE STORY: MANUFACTURING GROWTH PREDICTIONS FOR 2023 BASED ON NEW PLANT ANNOUNCEMENTS PAGE 10

THE TIME FOR INDUSTRIAL LEADERSHIP COACHING IS NOW

NORTH AMERICA OUTLOOK PAGE 28

MATERIALS OUTLOOK PAGE 34

CYBER SECURITY OUTLOOK PAGE 46

ISSUES OUTLOOK PAGE 48

PAGE 12 PAGE 18

[

THE CASS INDEX REPORT JUNE ISM PMI: 53.0%

Released July 1st -The Full Executive Summary Report On Business - Page 20

MANUFACTURING TALK RADIO (MFGTALKRADIO.COM)

Listen To The Experts And Their Guests

Host Tim Grady

Host Lew Weiss

Streaming New Shows Every Week (700 Shows Since 2013)

2

Manufacturing Outlook / July 2022

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

(COMPLIANCE UNDER DEVELOPMENT)

*

*Toll free within the U.S.

TABLE OF CONTENTS Publisher LEWIS A WEISS Editor in Chief TIM GRADY Creative Director CRAIG ROVERE Contributing Writers ROYCE LOWE NORBERT ORE CHRIS KUEHL THOMAS R. CUTLER AMELIA ROY JEANNE-MARIE LOWRIE JOCELYN BRIGHT CHRIS ANDERSON LAWRENCE MAKAGON CHRISTINE CASATI LYDIA DI LIELLO KEN FANGER Production Manager LINDA HOPLER Advertising ADVERTISE@MFGTALKRADIO.COM Editorial Office JACKET MEDIA CO. 75 LANE ROAD FAIRFIELD, NJ 07004 (973) 808-8300

24

5 PUBLISHER’S STATEMENT

Some Things Improve, Some Not So Much

by Christine Casati

6 LETTER TO THE EDITOR

A Few Words From TR Cutler

7 MANUFACTURING OUTLOOK Global Steel Prices “Unstable”

by Royce Lowe

MANUFACTURING TIDBITS

Insights from inside manufacturing in action

10 FEATURE STORY: MANUFACTURING GROWTH PREDICTIONS FOR 2023 BASED ON NEW PLANT ANNOUNCEMENTS

by TR Cutler

12 THE TIME FOR INDUSTRIAL LEADERSHIP COACHING IS NOW

by Lydia Di Liello and TR Cutler

14 NORTH AMERICAN MANUFACTURING INDUSTRY STATEMENT ON THE TWO-YEAR ANNIVERSARY OF THE UNITED STATES–MEXICO–CANADA AGREEMENT

28 NORTH AMERICA OUTLOOK

No Normalcy With Black Swans

by Chris Kuehl

30 EUROZONE OUTLOOK Expansion Softening in Europe

by Chris Anderson

31 GLOBAL PMI OUTLOOK Manufacturing Expanding but Careening To Contraction

by Norbert Ore

34 MATERIALS OUTLOOK Graphene, the Next Wonder Material?

by Royce Lowe

36 INNOVATION OUTLOOK Building The Next Great Thing In Flexible Hybrid Electronics

38

by The North American Manufacturing Industry

E-COMMERCE OUTLOOK

16

Post-pandemic Manufacturers’ eCommerce Surge in Africa and Latin America

by TR Cutler

US CUTTING TOOL ORDERS TOTALLED $175.5 MILLION IN APRIL 2022, BRINGING YTD TOTAL 9.1% OVER 2021

The Cutting Tool Market Report

18 CASS INDEX LOGISTICS REPORT Cass Transportation Systems

20 © 2022 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.

COVER STORY: PART 1- WHERE DO U.S. MANUFACTURERS GO FROM CHINA?

ISM MANUFACTURING REPORT ON BUSINESS The Manufacturing PMI is 53%

40 AEROSPACE OUTLOOK The State of Play in the Air

by Royce Lowe

42 ENERGY OUTLOOK Big Oil On Board The Green Hydrogen Train

by Jocelyn Bright

44 AUTOMOTIVE OUTLOOK Prancing Horses, and Big Rigs, going Electric

by Lawrence Makagnon

46 CYBER SECURITY OUTLOOK

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.

Now, a Warning – Know What is Important

by Ken Fanger

48 ISSUES OUTLOOK The Skilled Labor Problem, Again

by Royce Lowe

PUBLISHERS STATEMENT

It May Be a ‘Technical Recession’ or a Soft Landing As we await the July 28th publishing of the initial estimate of the U.S. third-quarter GDP, estimates range from +1.0 to -1.0. If the number is negative, it would be a technical recession – two consecutive quarters of negative GDP. However, Tim Fiore, Chair of the ISM’s Manufacturing Report on Business® on Manufacturing Talk Radio (Episode 686 found here), discusses the positive subindexes that do not support a recession conclusion. Overall, his comment is, “Calm down.”

As we reported in other issues of Manufacturing Outlook, the key components to watch are New Orders, which remain in expansion; Employment, where the comments from survey respondents are that they cannot find employees to fill the skills required; Production, which has held steady; Customer Inventories, that are still too low – indicating that purchasing is being held back as Prices soften; and Backlog, which continues to expand. Consumer confidence has softened slightly, so there are no alarm bells at the moment.

Fed interest rates do not dramatically impact any of these components. The dragging anchors are found in the supply chains and prices, and as those conditions improve, the economy could gain more forward momentum. There are improvements in both, with supplier deliveries improving and prices softening – unless the longshoremen who are currently working without a new contract go on strike. Cold rolled steel sheet and strip prices appear to have crested and are now receding. Oil is around $100 a barrel, and dramatically higher per barrel prices are not foreseen unless Russia does something even more egregious that exacerbates sanctions. That means gas prices at the pump should decline, particularly after the summer driving season.

Overall, the economy is sound – at the moment. The subindexes in the next two Purchasing Manager’s Index reports will provide more clarity if this is a technical recession. Otherwise, it is a cooling off of an economic cycle that has been experiencing dramatic expansion. The average expansion cycle is 34-36 months, and this cycle is around 25 months, so it is a bit early for a serious adjustment.

In this issue, you will learn more about the Indo-Pacific region in a special two-part series. Covid unsettled the globe and revealed rather flimsy supply chains that are now being strengthened by reducing the links and locations. U.S. manufacturers are looking at producing parts, assemblies, or finished goods in Vietnam, Thailand, Malaysia, Mexico, Canada, and the USA. The bloom may be off of China’s rose.

After interviewing Tim Fiore, ISM Committee Chair for the Manufacturing Report on Business® and Anthony Nieves, ISM Committee Chair for the Services Report on Business®, it seems that underlying solid fundamentals still support economic expansion. Tim’s comment was, “Calm down.” The GDP could be negative for the first half of 2022, but recessionary conditions are still not present. If the supply chain and transportation get straightened out and gas prices decline, it would boost the economy. You can hear both reports on Manufacturing Talk Radio at www. jacketmediaco.com.

If you want some economic reassurance and insights into the manufacturing outlook, spend some time reading this issue of Manufacturing Outlook. n Lewis A. Weiss, Publisher Contact laweiss@mfgtalkradio.com for comments, suggestions and ideas and guest requests for MFGTALKRADIO.COM podcast or any of our podcasts.

SUBSCRIBE

FOLLOW US:

Manufacturing Outlook / July 2022

5

LETTER TO THE EDITOR Letter to the Editor: For the past several years, each month it has been an honor to contribute several feature articles to Manufacturing Outlook.

Want to take a moment and express why this publication is so critical and distinct from other industrial media outlets. Since founding the Manufacturing Media Consortium in 1999 we now have more than 9000 members from editors, freelancers, economics, and content creators.

What is most exciting about this publication is its forward-looking approach. So many media outlets are looking in the rearview mirror at what happened last month, last quarter, or last year. It does not necessarily provide any insight, anticipation, or prognostication of what’s next. Manufacturing Outlook is different. The emphasis is the outlook for the next big thing, whether geographic trends (covering Africa, for example) or technology trends (such as B2C eCommerce for manufacturers).

As a journalist who authors more than 1000 feature articles every year for publications globally, it is such a joy to connect the dots of what is happening now and how it portends what is coming in the near and distant future.

It would be easy to write about all the bad news, from labor shortages to supply chain disruption. In fairness, I do write those articles as well. The problems today represent an opportunity to reimagine, reconsider, and reinvent how the industrial sector can best address and answer the riddle of what’s next.

To the readers, sponsors, and team at Jacket Media, it is a privilege and I look forward to sharing insights, perspectives, and thought leadership for many more years.

Thomas R. Cutler Industrial Journalist/Content Influencer. Founder of the Manufacturing Media Consortium. TR Cutler, Inc. Twitter: @ThomasRCutler - www.trcutlerinc.com - 954-682-6200. n

6

Manufacturing Outlook / July 2022

MANUFACTURING OUTLOOK

JULY 2022

MANUFACTURING OUTLOOK GLOBAL MANUFACTURING LOOKING SHAKY, BUT CHINA MAY BE ON THE UP. STEEL AND NON-FERROUS METALS’ DEMAND ON SLIDE, NO END IN SIGHT.

By: Royce Lowe The Bureau of Economic Analysis says the U.S. Real Gross Domestic Product decreased at an annual rate of 1.6% in the first quarter of 2022, according to the “third” estimate. In the fourth quarter of 2021, GDP increased 6.9%. Meanwhile, J.P. Morgan notes that consumer spending is slowing, and as such has revised its estimate for second-quarter growth from 2.5% to 1.0% ; third quarter growth to 1.0% down from 2.0%. Growth will increase to 1.5% in the year’s final quarter helped by stronger car production and lower inflation.

Global crude steel production was down by 3.5 percent year-over-year in the month of May for the 64 reporting countries – which represent 98 percent of world crude steel production – to 169.5 million tons (MT).

China is back up to producing almost 100 million tons per month, and will likely continue to do so.

The JP Morgan Global Manufacturing PMI – a composite index produced by JPMorgan and S & P Global in association with ISM and IFPSM (International Federation of

Purchasing and Supply Management) – softened slightly from 52.3 in May to 52.2 in June. The present outlook for global manufacturing is tending to the pessimistic, with the Global PMI at a 22-month low, in spite of a rebound in China. June figures and business sentiment point to upcoming slowdowns in North America (a present exception being Mexico) and the Eurozone. Business confidence in the Eurozone and in the UK is at its lowest in over two years. The U.S. shows business confidence at its lowest since October 2020, and Canada’s degree of optimism settled to a 17-month low.

Asia is looking more optimistic at the moment, with Japan showing more robust business confidence, and China’s at a four-month high. In India, only some four percent of companies are forecasting production growth in the year ahead.

THE ECONOMIST magazine, in its latest weekly report on world economies, highlights changes in Gross Domestic Product (GDP), Consumer continued

Manufacturing Outlook / July 2022

7

MANUFACTURING OUTLOOK 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 percent change on the previous quarter, or annual rate. The consumer price increases represent year-over-year changes. The unemployment figure percentages are for the month as noted. n Author profile: Royce Lowe, Manufacturing Talk Radio, UK and EU International Correspondent, Contributing Writer, Manufacturing Outlook.

8

Manufacturing Outlook / July 2022

JO

AU

SE

JOIN

E CAUSE H T

IN T HE

C

Help change the perception of Manufacturing in the USA! www.championnow.org

terry@championnow.org

847-299-2461

ChampionNOW! Individual Annual Corporate Membership For companies of 200 or less employees — $995 For companies over 200 employees — $1,995 With your ChampionNOW!membership you receive: l Applicant Advantage Annual Membership (student video resume portal) l Annual membership certificate l Finding America's Greatest Champion Book (signed by Terry Iverson) l CNC Rocks Virtual Manufacturing Camp (annual subscription) l Access to networking community/mentoring focused on MFG workforce development l A promotional video produced by your company posted to the ChampionNOW ROKU Channel

Finding America’s Greatest Champion

➧

Audio Book $24.99 l eBook $9.97 Paperback $21.99 l Hard Cover $27.99

Training CNC Mill and Lathe Package ➧ Table Top Champ CNC Lathe $7,795 l Table Top Champ CNC Mill $7,795 (requires laptop or PC for each ) Package with laptop $16,995

CNC Rocks Virtual Manufacturing Camp ➧

22 videos 4.5 hours in length Schools: $500 annual subscription Industry: $750 annual subscription

OUR FUTURE DEPENDS ON YOU. www.championnow.org Manufacturing Outlook / July 2022

9

FEATURE STORY

Manufacturing Growth Predictions for 2023 Based on New Plant Announcements By: Thomas R. Cutler

Hundreds of new manufacturing plants in the United States are scheduled to open in 2023. Many of these plants represent European, Asian, and South American companies that recognize the value and importance of having a US-based facility. The manufacturing sectors with the greatest number of new or expanding manufacturing plants in the US are discussed below.

Food and Food Service Manufacturing Plant Expansion By mid-2023, Dot Foods, Inc. plans to construct a food distribution facility at the Manchester Industrial Park in Manchester, Tennessee.

The $50.5 million project scope includes the construction of a 177,000 square foot building.

10

At the end of Q3 2022, Huhtamaki North America is planning to expand its food service products manufacturing plant in Hammond, Indiana. The estimated $100 million project includes the construction of a 250,000 square foot building expansion. The project will increase production capacity for drink carriers, egg filler trays, and other molded fiber products.

Busseto Foods, Inc. plans to construct a new dried meats processing and distribution facility on an 18.9-acre site in Fresno, California. The project includes construction of a 477,000 square foot two-story building. The facility will have the capacity to produce

500,000 to 600,000 pounds per week of salami, pancetta, coppa, and prosciutto. Operations will be consolidated from other Fresno facilities.

Automotive Plant Expansion Plans In 2023, Ford Motor Company is planning to retool its Michigan Assembly Plant in Wayne and its Flat Rock Assembly Plant in Flat Rock, Michigan.

Hyundai Motor Company plans to construct an electric vehicle assembly and battery manufacturing plant at a 2,923-acre site in Bryan County, Georgia. The project scope includes the construction of building space with cleanrooms. The plant continued

Manufacturing Outlook / July 2022

FEATURE STORY will have the capacity to produce 300,000 electric vehicles per year.

Construction is expected to begin in the first quarter of 2023. Hyundai will use the plant to assemble electric vehicles and batteries. The company is also expanding and retooling its vehicle assembly plant in Montgomery, Alabama.

Summit Polymers Inc. is planning to construct an automotive components manufacturing plant on a 40-acre site in Lawrenceburg, Kentucky. The $37.5 million project scope includes construction of a 140,000 square foot building. Construction is expected to begin in the third quarter of 2022. Summit Polymers will use the plant to manufacture complete consoles, console components, IP and console trim, door panels, and other automotive interior systems.

Canoo plans to construct a mega microfactory for electric vehicle assembly on a 400-acre site at the MidAmerica Industrial Park in Pryor, Oklahoma. The project scope includes construction of building space, installation of robotic assembly modules, purchase and installation of compressed air systems, painting and parts storage equipment, and purchase of autonomous mobile robots (AMRs). The plant will have the capacity to produce 150,000 electric vehicles per year.

A construction schedule is being developed. The plant is expected to be operational in 2024.

Packaging and Plastics Manufacturing Plants Late in Q1 2023, Springfield Plastics, Inc. intends to expand its plastic pipe manufacturing plant in Auburn, Illinois. The project scope includes construction of a 63,000 square foot building expansion.

Klöckner Pentaplast of America, Inc. is planning to construct a new recycled polyethylene terephthalate (rPET) packaging manufacturing facility in Beaver, West Virginia. Construction is expected to begin in Q3 2022. The plant will have the capacity to produce 15,000 metric tons of rPET film per year for the consumer, health, pharmaceutical, and food industries.

East Jordan Plastics, Inc. plans to establish a plastic horticulture container manufacturing and distribution facility at the Toombs Corporate Center in Lyons, Georgia. The estimated $44 million phased project scope includes purchase and installation of raw material storage silos, conveyors, racking, chillers, and thermoforming, injection molding, and packaging equipment and systems.

Equipment will be installed in a newly-constructed 255,500 square foot building. Based in East Jordan, Michigan, EJP manufactures grow pots and plant containers for greenhouses and nurseries.

Pharmaceutical Manufacturing Plants Late in 2022, Catalent Pharma Solutions is planning to expand its 190,000 square foot pharmaceutical manufacturing plant in Winchester, Kentucky. The estimated $175 million project scope includes design and construction of a 90,000 square foot manufacturing building expansion with cleanrooms.

Breaking ground in mid-2023, Eli Lilly and Company is planning to construct an active pharmaceutical ingredients and pharmaceutical production campus on a 600-acre site at the LEAP Lebanon Innovation and Research District in the Lebanon area of Boone County, Indiana. The

estimated $2.1 billion project scope includes construction of multiple buildings totaling 700,000-800,000 square feet.

Going live in 2025, Vertex Pharmaceuticals plans to expand its biopharmaceutical manufacturing plant at Related Beal’s Innovation Square campus in Boston, Massachusetts. The estimated $400 million project scope includes a 344,000 square foot, seven-story building with cleanrooms.

These are a few examples of the rapid trajectory in manufacturing growth and expansion next year.

This report will be updated regularly in Manufacturing Outlook.

Author Profile:

Thomas R. Cutler is the President and CEO of Fort Lauderdale, Florida-based, TR Cutler, Inc., celebrating its 24th year. Cutler is the founder of the Manufacturing Media Consortium including more than 9000 journalists, editors, and economists writing about trends in manufacturing, industry, material handling, and process improvement.

Cutler authors more than 1000 feature articles annually regarding the manufacturing sector. Cutler has established special divisions including African manufacturing, Colombian manufacturing, Gen Z workforce, and Food & Beverage manufacturing/logistics. Cutler was recently named the Global Supply Chain journalist of the year for the second time in a row. Over 5200 industry leaders follow Cutler on Twitter daily at @ThomasRCutler.

Contact Cutler at trcutler@trcutlerinc.com. n

Manufacturing Outlook / July 2022

11

MANUFACTURING TIDBITS

The Time for Industrial Leadership Coaching is Now By: Lydia Di Liello and Thomas R. Cutler

This article is based in part on the The WAM Podcast (Women And Manufacturing), produced by Jacket Media Co. The host, Lydia Di Liello, recently interviewed Suzen Fiskin, who is heading the newest division of TR Cutler, Inc Industrial Leadership Coaching.

Suzen Fiskin is a professional speaker and a pioneer in the world of industrial leadership Suzen Fiskin, Industrial Leadership Coach coaching. Fiskin utilizes her extensive education in Neuro-Linguistic Programming (NLP) transforming industrial leaders to become happier and exponentially more successful.

12

Mindset Coaching is based on proven brain science in which clients rewire their thinking on both the conscious and subconscious levels, generating breakthroughs.

Having served on the boards of The Professional Coaches and Mentors Association, Women In Technology, and Women In Business, her affiliation with TR Cutler, Inc. is an extension of a 30-year plus professional relationship with manufacturing journalist, Thomas R. Cutler.

According to Fiskin, over 95% of what goes on in our brains is beneath our conscious level of awareness. When we want to make changes, it’s the 5% which triggers powerful results.

Fiskin suggested that internal dialogue is so important. Industrial leaders have powerful transformations when they own the voice in their head that stops them from enjoying success, and appreciating it. Coaching accelerates that awareness and clients, even for their first time, begin to relax.

More Than Self-Talk Self-talk is one manifestation of beliefs that we hold about ourselves in the world. Industrial leadership coaching is not merely a list of goals. Leaving out the personal component, what is going on inside of the person, means accomplishing goals will fail to produce happiness, productivity, and creativity.

Learning From Younger Workers Younger people in the industrial continued

Manufacturing Outlook / July 2022

MANUFACTURING TIDBITS replies, these best practices are completely causal to the bottom-line.

There are no rival plausible hypotheses.

Coaching will become normative in the industrial complex over the next five years and the 9000+ member Manufacturing Media Consortium will be writing about this trend extensively for the rest of the decade.

Author Profiles: Lydia Di Liello is a host for Women and Manufacturing (WAM) podcast and CEO of Capital Pricing Consultants; she has more than 25 years of business leadership, supply chain, and global pricing expertise.

workforce are far more focused on quality of life, specifically that of being appreciated and respected.

They, and the companies they want to work for, must both be conscious and deliberate about individual appreciation and respect. This awareness may be about diversity, inclusion, and the environment. While compensation is important, it is no longer most important. Being aware of this way of thinking requires a different mindset and leadership.

Efficacy Of Coaching Di Liello added, “Coaching reframes ones’ perspective and is highly effective at changing behaviors as a result. When old events or feelings are perceived from another viewpoint, insight and freedom are gained. Utilizing what we ‘know,’ coaching transforms these knowns to questions. By examining these questions and giving ourselves permission to challenge old held beliefs, coaching quickly breaks through destructive mental patterns. The result is effective new behaviors supporting reframed beliefs.”

Rationale For Urgent And Immediate Industrial Leadership Coaching TR Cutler, Inc. recently launched the Industrial Coaching Leadership division because all the tools and skillsets needed seemed to have ignored all the basic principles of Continuous Process Improvement, Lean Six Sigma, Lean Manufacturing, and Theory of Constraints. All the plant floor operational methodology did not, sadly, transfer into leadership methodologies and practices. So, the issues of the Great Resignation, employee engagement, leadership satisfaction for owners and workers, coping with supply chain disruptions, mental health, remote work, and more have created an inflection point. Add to this, the political climate, social media, and a work/life balance, the need for awareness, guidance, and direction has never been greater.

Managers must create mutually beneficial coaching conversations that will improve overall team performance.

Whether asking guiding questions, recognizing what is going well, active listening, and learning empathetic

Di Liello is a well-known and widely respected speaker leading executive forums, conferences, and workshops worldwide; she is published frequently in trade and professional journals. With an MBA from Youngstown State University.

Di Liello is repeatedly requested at corporate retreats and is a member of the Professional Pricing Society Board of Advisors.

Thomas R. Cutler is the President and CEO of Fort Lauderdale, Floridabased, TR Cutler, Inc., celebrating its 24th year. Cutler is the founder of the Manufacturing Media Consortium including more than 9000 journalists, editors, and economists writing about trends in manufacturing, industry, material handling, and process improvement.

Cutler authors more than 1000 feature articles annually regarding the manufacturing sector. Cutler has established special divisions including Colombian manufacturing and Food & Beverage manufacturing/logistics.

Cutler was recently named the Global Supply Chain journalist of the year for the second time in a row. Over 5200 industry leaders follow Cutler on Twitter daily at @ThomasRCutler. Contact Cutler at trcutler@trcutlerinc.com. n

Manufacturing Outlook / July 2022

13

MANUFACTURING TIDBITS

North American Manufacturing Industry Statement on the Two-Year Anniversary of the United States– Mexico–Canada Agreement Washington, D.C. – The leading organizations representing manufacturers and millions of manufacturing workers in the United States, Mexico, and Canada released the following statement on the twoyear anniversary of the United States– Mexico–Canada Agreement (USMCA/ T-MEC/CUSMA): “On this two-year anniversary, we recognize the substantial value that this agreement and the North American Free Trade Agreement have represented for our industry’s competitiveness, our economies, and North American workers. Manufacturing is critical for the entire North American economy.

Our closely integrated supply chains contribute more than $3 trillion

14

Manufacturing Outlook / July 2022

annually to the North American economy, and more than $2 billion worth of manufactured goods cross our borders each day.”

“The USMCA can only reach its full potential if it is fully implemented in a manner that upholds its letter and spirit. That is why manufacturers across North America continue to strongly and respectfully urge political leaders to work together to live up to the commitments of the agreement, which garnered broad support in all three countries. Full compliance with the agreement will provide certainty for the more than 23 million manufacturing workers in the United States, Mexico and Canada and boost our region’s ability to compete with the rest of the world.”

“The Canadian Manufacturers & Exporters (CME), the Confederation of Industrial Chambers of Mexico (CONCAMIN) and the National Association of Manufacturers (NAM) reiterate our longstanding commitment to engage with the Canadian, Mexican and U.S. governments to ensure that the USMCA/T-MEC/CUSMA is fully implemented and that it supports our industry’s competitiveness and our workers at this critical time for our economies.”

Background: Earlier this week NAM President and CEO Jay Timmons wrote to President Biden about certain challenges in U.S.-Mexico trade relations.

MANUFACTURING TIDBITS NAM

CME

CONCAMIN

The National Association of Manufacturers is the largest manufacturing association in the United States, representing small and large manufacturers in every industrial sector and in all 50 states.

Manufacturing employs more than 12.7 million men and women, contributes $2.71 trillion to the U.S. economy annually and accounts for 58% of private-sector research and development. The NAM is the powerful voice of the manufacturing community and the leading advocate for a policy agenda that helps manufacturers compete in the global economy and create jobs across the United States. For more information about the NAM or to follow us on Twitter and Facebook, please visit www.nam.org.

Canadian Manufacturers & Exporters (CME) is Canada’s largest trade and industry association, and the voice of manufacturing and global business in Canada. CME directly represents more than 10,000 leading companies nationwide.

The Confederation of Industrial Chambers of the United Mexican States, CONCAMIN, established in 1918, is the main organization representing the different industrial sectors and activities of high importance for the economic development of Mexico.

The National Confederation of Industrial Chambers, is by law a mandatory consultative body of the State since its creation 104 years ago, it represents 118 Chambers and Associations.

As Canada’s leading business network, CME – through various initiatives, including the establishment of the Canadian Manufacturing Coalition – touches more than 100,000 companies from coast to coast, engaged in manufacturing, global business, and service-related industries.

It generates 48 out of every 100 formal jobs in the country. Through 1.2 million Economic Units, we contribute 40% of the GDP and 90% of the country’s exports.

CONTACT: NAM Media Relations n

Manufacturing Outlook / July 2022

15

MANUFACTURING TIDBITS

US Cutting Tool Orders Totalled $175.5 Million in April 2022, Bringing YTD Total 9.1% Over 2021 McLean, Va. (June 3, 2022) – April 2022 U.S. cutting tool consumption totaled $175.5 million, according to the U.S. Cutting Tool Institute (USCTI) and AMT – The Association For Manufacturing Technology. This total, as reported by companies participating in the Cutting Tool Market Report collaboration, was down 10.1% from March’s $196.4 million and up 3.8% when compared with the $170 million reported for April 2021. With a year-todate total of $700.4 million, 2022 is up 9.1% when compared to the same time period in 2021.

These numbers and all data in this report are based on the totals reported by the companies participating in the CTMR program. The totals here represent the majority of the U.S. market for cutting tools. “Data from AMT and USCTI show April sales declined slightly from March, but the

16

Manufacturing Outlook / July 2022

year-to-date sales are still outpacing 2021,” said Jeff Major, president of USCTI. “Supply chain issues and rising costs of manufacturing continued to hinder our business. The hope is that these factors will ease later this year.

Our industry outlook continues to remain positive.”

Eli Lustgarten, president at ESL Consultants, echoed Major’s nearterm optimism but warned of possible challenges further over the horizon,

saying, “Orders should continue to track the increase in durable goods output as supply chain issues somewhat ease, helped by below-normal industrial goods inventories and the upcoming IMTS in September. However, a growth slowdown for the U.S. economy is a near certainty, driven by the high level of inflation, global financial tightening, and economic weakness in Europe and China. The impact on the cutting tool sector will likely be more volatility

MANUFACTURING TIDBITS in monthly orders and possibly a flattening of demand with dollar sales growth likely to be driven by inflationary pressures.”

The Cutting Tool Market Report is jointly compiled by AMT and USCTI, two trade associations representing the development, production, and distribution of cutting tool technology and products. It provides a monthly statement on U.S. manufacturers’ consumption of the primary consumable in the manufacturing process – the cutting tool. Analysis of cutting tool consumption is a leading indicator of both upturns and downturns in U.S. manufacturing activity, as it is a true measure of actual production levels.

This collaboration of AMT and USCTI is the first step in the two associations working together to promote and support U.S.-based manufacturers of cutting tool technology. The graph on the previous page includes the

12-month moving average for the durable goods shipments and cutting tool orders. These values are calculated by taking the average of the most recent 12 months and plotting them over time. n

Historical data for the Cutting Tool Market Report is available dating back to January 2012.

Manufacturing Outlook / July 2022

17

CASS INDEX OUTLOOK

Cass Transportation Index Report

by CASS INFORMATION SYSTEMS, INC.

Cass Freight Index - Shipments The shipments component of the Cass Freight Index® declined 2.3% on a y/y basis in June, similar to the 2.7% y/y decline in May. After the May result was slightly ahead of ACT Research’s estimate, the June result was slightly behind, but no big surprises.

On a seasonally adjusted (SA) basis, shipments fell 4.1% m/m in June, reversing the 4.0% increase in May. Effects from China lockdowns were likely slight in June.

The shipments component has now been down 4 of 6 months this year

on a y/y basis. That includes January, which was impacted significantly

by Omicron, but there has not been much follow through on the rebound.

Inventory has shifted from a major tailwind for freight demand to more of a neutral factor currently, with potential to become a considerable headwind if goods demand continues to decline.

Normal seasonality from this index level would imply shipments down 1% y/y in Q3 and down 5% y/y in Q4, as the current soft patch is becoming increasingly clear in the data.

Freight Expenditures The expenditures component of the Cass Freight Index, which measures the total amount spent on freight, rose 8.8% m/m in June to a new record, with shipments down 2.6% and rates up 11.7%. The m/m noise on rates is largely mix, and reversed a 9.8% decline last month, and just means there was more truckload in the mix in June and more less-thantruckload (LTL) in May. The Expenditures portion of the Cass Freight Index was still 25% higher than year-ago levels in June, continuing to decelerate from 28% in May. continued

18

Manufacturing Outlook / July 2022

This CASS INDEX has been posted with the permission of Cass Information Systems, Inc.

CASS INDEX OUTLOOK On a seasonally adjusted basis, expenditures rose 8.3% m/m in June, with shipments down 4.1% m/m and rates up 12.9%, largely a reversal of May. We estimate roughly 10 percentage points of the y/y increase are currently due to fuel prices alone.

As a reminder, this index includes changes in fuel, modal mix, intramodal mix (which affects length of haul), and accessorial charges.

Simply using normal seasonality from here, this index will still be rising y/y through 2022, ending with a 2% y/y increase in December, against a 32% y/y increase in 1H’22.

Inferred Freight Rates Cass Inferred Freight Rates, which measure the change in cost per shipment, still rose 28% y/y in June, decelerated from 31% y/y increase in May. Month to month, they rose 11.7% (12.9% SA), more than reversing the 9.8% decline in May (-9.5% SA).

The sequential increase was largely due to modal mix, as truckload moves (a higher cost per shipment) increased compared to LTL (lower cost per shipment), reversing the increase in LTL mix in May. Fuel prices also pushed rates up in June.

And while underlying truckload rates started to pull back in June (see the Cass Truckload Linehaul Index, below), LTL rates continued to rise m/m.

The May decline in cost per shipment was also largely due to mix, as noted last month, and June freight rates were just 0.8% above April. We still see this as a leveling off of industry rates, with ongoing upward pressure from fuel even as

the market balance has loosened this year and should begin to provide modest relief. This is subject in no small part to diesel prices, which have begun to drop, now down 24c over the past three weeks to a recent $5.57 per gallon according to the U.S. Energy Information Administration (EIA). The price of diesel remains well above where our simple regression with crude would suggest, reflecting a considerable war premium.

So, the familiar refrain is true, shippers aren’t feeling the savings from declining spot rates. Yet. At this point, it is increasingly oil prices in the way, but such relief is increasingly likely, which is welcome news for the broader inflation picture.

Freight Expectations You may find a chart of inventories, one of the most lagged (toughest to calculate) monthly economic data series (with the latest numbers as of April), odd in the section about the outlook. But even from a few months ago, inventories provide key information about the future of the cycle. And we can say clearly that the current inventory levels do not bode well for freight demand.

Total U.S. inventories were up 17% y/y in nominal terms in April to $2.35 trillion, with retail inventories up 20% y/y ex-autos.

Cass Inferred Freight Rates are a simple calculation of the Cass Freight Index data, expenditures divided by shipments, producing a data set that explains the overall movement in cost per shipment.

The data set is diversified among all modes, with truckload representing more than half of the dollars, followed by LTL, rail, parcel, and so on.

Truckload Linehaul Index The Cass Truckload Linehaul Index® which measures market fluctuations in per-mile truckload linehaul rates, independent of additional cost components such as fuel and accessorials, rose 11.6% y/y in June to 165.7 after rising 13.2% y/y in May. After an extraordinary truckload rate cycle, the market balance has shifted, with capacity now growing briskly and demand falling, which will limit further upside in the Cass Truckload Linehaul Index and likely press it lower in the coming months.

Similar to what has occurred in the spot market, the surge in fuel costs to shippers, which are excluded from this index, will also likely act as a brake on linehaul rates.

In real terms, total inventories were up 10% y/y in April, a record growth rate in this data set going back to the early 1990s. Inventories seemed to rise further in May, based on major retailers’ reports.

The April retail inventory/sales ratio, ex-autos, rose to 1.15 from a low of 1.05 last September, and is quickly closing in on its 10-year average of 1.21. Inventory building may have slowed some, but continued upward since, and will soon be above average, as the cost of capital is rising.

Now that the pendulum has begun to swing, “how bad?” and “how long?” have become some of the most crucial questions. The ACT Freight Forecast report provides monthly, quarterly, and annual predictions for the TL, LTL, and intermodal markets, including capacity, volumes, and rates. The report provides monthly updates of forecasts for the shipments component of the Cass Freight Index® and the Cass Truckload Linehaul Index® through 2024, as well as DAT spot rates by trailer type, including and excluding fuel surcharges. n

Manufacturing Outlook / July 2022

19

ISM REPORT OUTLOOK

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

ISM PMI at 53.0% for June 2022 Released July 1st ISM PMI for the past 5 years

JUNE 2022 53.0%

Expanding Contracting

20

Manufacturing Outlook / July 2022

ISM REPORT OUTLOOK INSTITUTE FOR SUPPLY MANAGEMENT®

Analysis by

reportonbusiness Economic activity in the manufacturing sector grew in June, with the overall economy achieving a 25th consecutive month of growth, say the nation’s supply executives in the latest Manufacturing ISM® Report On Business®.

The June Manufacturing PMI® registered 53 percent. The New Orders Index reading of 49.2 percent is 5.9 percentage points lower than the 55.1 percent recorded in May. The Production Index reading of 54.9 percent is a 0.7-percentage point increase compared to May’s figure of 54.2 percent. The Prices Index registered 78.5 percent, down 3.7 percentage points compared to the May figure of 82.2 percent. Manufacturing performed well for the 25th straight month. There are signs of new order rate softening — cited in 17 percent of general comments, compared to 10 percent in May — but the root cause is difficult to determine: (1) demand reduction, (2) adjustment for excessive lead times, causing order rate adjustments or (3) a combination of both.

Fifteen manufacturing industries reported growth in June, in the following order: Apparel, Leather & Allied Products; Textile Mills; Printing & Related Support Activities; Computer & Electronic Products; Machinery; Electrical Equipment, Appliances & Components; Primary Metals; Nonmetallic Mineral Products; Plastics & Rubber Products; Transportation Equipment; Fabricated Metal Products; Miscellaneous Manufacturing‡; Petroleum & Coal Products; Food, Beverage & Tobacco Products; and Chemical Products. ISM ‡Miscellaneous Manufacturing (products such as medical

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

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

MANUFACTURING

PMI at 53% ®

PMI

Manufacturing grew in June, as the Manu2020 2021 2022 facturing PMI® registered 53 percent, 3.1 percentage points lower than the May reading 50% = Manufacturing Economy Breakeven 53% of 56.1 percent. Three of the five subindexes Line that directly factor into the Manufacturing PMI® were in growth territory. All of the six 48.7% = Overall biggest manufacturing industries registered Economy Breakeven Line moderate-to-strong growth in June, in this order: Computer & Electronic Products; Machinery; Transportation Equipment; Petroleum & Coal Products; Food, Beverage & Tobacco Products; and Chemical Products.

Manufacturing at a Glance INDEX

Jun Index

May Index

% Point Change

Direction

Rate of Change

Trend* (months)

Manufacturing PMI®

53.0

56.1

-3.1

Growing

Slower

25

New Orders

49.2

55.1

-5.9

Contracting

From Growing

1

Production

54.9

54.2

+0.7

Growing

Faster

25

Employment

47.3

49.6

-2.3

Contracting

Faster

2

Supplier Deliveries

57.3

65.7

-8.4

Slowing

Slower

76

Inventories

56.0

55.9

+0.1

Growing

Faster

11

Customers’ Inventories

35.2

32.7

+2.5

Too Low

Slower

69

Prices

78.5

82.2

-3.7

Increasing

Slower

25

Backlog of Orders

53.2

58.7

-5.5

Growing

Slower

24

New Export Orders

50.7

52.9

-2.2

Growing

Slower

24

Imports

50.7

48.7

+2.0

Growing

From Contracting

1

Overall Economy

Growing

Slower

25

Manufacturing Sector

Growing

Slower

25

*Number of months moving in current direction.

Manufacturing ISM® Report On Business® data has been seasonally adjusted for the New Orders, Production, Employment and Inventories indexes.

Commodities Reported Commodities Up in Price: Adhesives and Paint (7); Aluminum* (25); Caustic Soda (4); Corrugate (5); Corrugated Packaging (20); Crude Oil (2); Diesel Fuel (18); Electrical Components (19); Electricity; Electronic Components (19); Energy (4); Freight (20); High-Density Polyethylene (HDPE) Resin; Labor — Temporary (14); Lumber* (7); Natural Gas (12); Packaging Supplies (19); Paper (4); Petroleum Based Products (2); Pigments and Dyes; Resin Based Products (3); Plastic Resins* (6); Rubber Based Products (11); Steel* (23); Steel — Fabricated & Machined Components (2); Steel — Stainless (20); Steel Castings; Steel Products (22); and Synthetic Rubber.

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

Note: To view the full report, visit the ISM ® Report On Business ® website at ismrob.org

The number of consecutive months the commodity has been listed is indicated after each item. *Reported as both up and down in price.

12

ISMWORLD.ORG

Manufacturing Outlook / July 2022

continued

21

ISM REPORT OUTLOOK

ISM Report On Business ®

®

Manufacturing PMI® New Orders (Manufacturing) 2020

June 2022 Analysis by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management ® Manufacturing Business Survey Committee

20

2021

New Orders

2022

ISM’s New Orders Index dropped to 49.2 percent. Of the 18 manufacturing industries, eight reported growth in new orders in June, in the following order: Textile Mills; Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Petroleum & Coal Products; Primary Metals; Plastics & Rubber Products; Computer & Electronic Products; and Miscellaneous Manufacturing‡.

49.2%

52.9% = Census Bureau Mfg. Breakeven Line

Production (Manufacturing) 2020

2021

Production

2022 70

54.9% 52.4% = Federal Reserve Board Industrial Production Breakeven Line

The Production Index registered 54.9 percent. Ten industries reported growth in production during the month of June, in the following order: Apparel, Leather & Allied Products; Printing & Related Support Activities; Petroleum & Coal Products; Nonmetallic Mineral Products; Computer & Electronic Products; Transportation Equipment; Electrical Equipment, Appliances & Components; Chemical Products; Plastics & Rubber Products; and Fabricated Metal Products.

Employment (Manufacturing) 2020

2021

Employment

2022

47.3% 50.5% = B.L.S. Mfg. Employment Breakeven Line

20

Supplier Deliveries (Manufacturing) 53.1% 2020

2021

2022 80

57.3%

ISM’s Employment Index registered 47.3 percent. Nine of 18 manufacturing industries reported employment growth in June, in the following order: Nonmetallic Mineral Products; Apparel, Leather & Allied Products; Printing & Related Support Activities; Textile Mills; Plastics & Rubber Products; Computer & Electronic Products; Fabricated Metal Products; Electrical Equipment, Appliances & Components; and Food, Beverage & Tobacco Products.

Supplier Deliveries The delivery performance of suppliers to manufacturing organizations was slower in June, as the Supplier Deliveries Index registered 57.3 percent. Fourteen of 18 manufacturing industries reported slower supplier deliveries in June, in the following order: Textile Mills; Furniture & Related Products; Apparel, Leather & Allied Products; Machinery; Printing & Related Support Activities; Primary Metals; Computer & Electronic Products; Paper Products; Miscellaneous Manufacturing‡; Food, Beverage & Tobacco Products; Transportation Equipment; Electrical Equipment, Appliances & Components; Fabricated Metal Products; and Chemical Products.

Inventories (Manufacturing) 2020

2021

2022

56%

44.4% = B.E.A. Overall Mfg. Inventories Breakeven Line

‡Miscellaneous

Manufacturing (products such as medical equipment and

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

22

Manufacturing Outlook / July 2022

Inventories The Inventories Index registered 56 percent. Of 18 manufacturing industries, the eight reporting higher inventories in June — in the following order — are: Textile Mills; Apparel, Leather & Allied Products; Computer & Electronic Products; Machinery; Electrical Equipment, Appliances & Components; Chemical Products; Transportation Equipment; and Miscellaneous Manufacturing‡.

ISM REPORT OUTLOOK

ISM Report On Business ®

®

Manufacturing PMI®

June 2022 Analysis by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management ® Manufacturing Business Survey Committee

Customer Inventories (Manufacturing) 2020

2021

2022

35.2%

Customers’ Inventories ISM’s Customers’ Inventories Index registered 35.2 percent. Two industries (Apparel, Leather & Allied Products; and Wood Products) reported customers’ inventories as too high in June. The 14 industries reporting customers’ inventories as too low during June — listed in order — are: Textile Mills; Nonmetallic Mineral Products; Primary Metals; Machinery; Computer & Electronic Products; Electrical Equipment, Appliances & Components; Transportation Equipment; Miscellaneous Manufacturing‡; Plastics & Rubber Products; Petroleum & Coal Products; Furniture & Related Products; Food, Beverage & Tobacco Products; Fabricated Metal Products; and Chemical Products.

Prices (Manufacturing) 2020

2021

2022

78.5%

52.6% = B.L.S. Producer Prices Index for Intermediate Materials Breakeven Line

Backlog of Orders (Manufacturing) 2020

2021

2022

53.2%

Prices The ISM Prices Index registered 78.5 percent. In June, 17 of 18 industries reported paying increased prices for raw materials, in the following order: Petroleum & Coal Products; Textile Mills; Paper Products; Plastics & Rubber Products; Miscellaneous Manufacturing; Nonmetallic Mineral Products; Chemical Products; Electrical Equipment, Appliances & Components; Furniture & Related Products; Apparel, Leather & Allied Products; Printing & Related Support Activities; Machinery; Computer & Electronic Products; Food, Beverage & Tobacco Products; Transportation Equipment; Primary Metals; and Fabricated Metal Products.

Backlog of Orders ISM’s Backlog of Orders Index registered 53.2 percent. Nine industries reported growth in order backlogs in June, in the following order: Apparel, Leather & Allied Products; Printing & Related Support Activities; Petroleum & Coal Products; Textile Mills; Electrical Equipment, Appliances & Components; Machinery; Primary Metals; Computer & Electronic Products; and Miscellaneous Manufacturing‡.

New Export Orders (Manufacturing) 2020

2021

2022

50.7%

New Export Orders ISM’s New Export Orders Index registered 50.7 percent. The five industries reporting growth in new export orders in June are: Paper Products; Food, Beverage & Tobacco Products; Computer & Electronic Products; Electrical Equipment, Appliances & Components; and Fabricated Metal Products. The five industries reporting a decrease in new export orders in June are: Wood Products; Primary Metals; Machinery; Transportation Equipment; and Miscellaneous Manufacturing‡.

Imports (Manufacturing) 2020

2021

2022

50.7%

‡Miscellaneous

Imports ISM’s Imports Index registered 50.7 percent. The 12 industries reporting growth in imports in June — in the following order — are: Apparel, Leather & Allied Products; Printing & Related Support Activities; Furniture & Related Products; Primary Metals; Plastics & Rubber Products; Food, Beverage & Tobacco Products; Transportation Equipment; Computer & Electronic Products; Machinery; Miscellaneous Manufacturing‡; Electrical Equipment, Appliances & Components; and Fabricated Metal Products. n

Manufacturing (products such as medical equipment and

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

Manufacturing Outlook / July 2022

23

COVER STORY: ASIA OUTLOOK

Where Do U.S. Manufacturers Go From China?

by Christine Casati

24

continued Manufacturing Outlook / July 2022

COVER STORY: ASIA OUTLOOK Southeast Asia (This is Part One of a two-part series. Part Two will be published in the August issue) Is Southeast Asia a more reliable, less expensive place than China to develop long-term manufacturing operations amid geopolitical disruptions? Or is reshoring the answer? Will the ASEAN region become the new home of “factories of the world”? It has already benefited greatly from the increasing presence of global manufacturers who have moved or plan to move their operations from China to lower-cost countries such as Vietnam, Cambodia, Indonesia, Malaysia, and Thailand. The primary drivers of this decade-long trend have been the rising cost of skilled and unskilled labor in China, the negative impact of U.S. tariffs on the competitiveness of U.S. companies in China, the rising middleclass purchasing power in the region, and the strategic desire to be closer to target markets and supply chains.

Another factor has been the search for ways to avoid shipping bottlenecks and enhance lower cost consolidation, especially at year-end and during the nearly month-long logistic disruptions caused by the annual Chinese Spring Festival holiday entitlements. These drivers all existed before the Covid-19 pandemic outbreak, which only worsened the lack of predictability of China suppliers. Yet foreign investment keeps flowing into the world’s most important developed manufacturing supply chain base.

United Nations Charter. ASEAN has grown to include ten member nations: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, The Philippines, Singapore, Thailand, and Vietnam.

The US-China Security Review Commission considers ASEAN to be “a pillar of the postwar order in East Asia.” China’s relationship with these countries is complex. China has invested heavily in the region through its state-owned enterprises and Belt & Road infrastructure initiatives. But it has also caused tension through its aggressive military posturing in the South China Sea, impacting industries such as fisheries in the Philippines and Vietnam. Bilateral trade between China and ASEAN was $878.2 billion in 2021 (IMF), increasing 28.1% from 2020. Vietnam, Malaysia, and Thailand are China’s top three trading partners in the region.

The most pronounced changes in Asia’s evolving business environment are occurring in Southeast Asia. A survey by the American Chamber

of Commerce in China in mid-2019 revealed the negative impacts of U.S. tariffs on American companies in China. As a result, nearly 40 percent of its respondents were considering or had already relocated manufacturing facilities outside China. Of those, over 50 percent had already chosen Southeast Asia. The top two destinations of all respondents were Southeast Asia (24.7 %) and Mexico (10.5%). UBS Bank suggests that 20%30% of China’s total manufacturing capacity could relocate, with ASEAN countries as the prime destination.

McKinsey & Company established The McKinsey Innovation Campus (MIC) in Singapore in 2012, its first-ever in the world. They currently predict that the “regionalization of supply chains could shift up to 25% of global trade flows,” with Southeast Asian countries having a tariff advantage of 12% 19% over China. Therefore, we must understand this region. It is vital to U.S. global commercial interests.

The total population of the region is over twice that of the USA, exceeding 670 million. In 2020 its combined

ASEAN refers to the Association of South East Asian Nations established in 1967 in Bangkok by five founding members: Indonesia, Malaysia, The Philippines, Singapore, and Thailand. Their simple goal was to establish more regional cooperation, including economic and logistics integration while respecting cultural and religious diversity, and promoting peace through justice and the rule of law under the principles of the continued Manufacturing Outlook / July 2022

25

COVER STORY: ASIA OUTLOOK gross domestic product (GDP) exceeded three trillion U.S. dollars (IMF).

Annual GDP is expected to increase to nearly five trillion U.S. dollars by 2026. (ASEAN Statistical Yearbook 2021; Focus Economics). Economic sourcing and investment activity in Southeast Asia is skyrocketing.

Manufacturing has developed around different clusters in different ASEAN countries, depending on each one’s stage of development and sectors of interest. For example, Thailand is known as “the Detroit of Asia” for automotive components and assembly for its relatively low-cost base, quality of life, and education. But Vietnam is on the rise in that sector. Historically most of Southeast Asia has been viewed as a location for low-wage assembly work, with other Asian manufacturing economies evolving into leaders in advanced industries (e.g., Japan, China, Taiwan, South Korea). For decades, Vietnam has been a lower cost alternative than China for shoemaking, textiles, and the garment industry. But that is changing as its labor force develops with a new focus on automotive components.

It is a very dynamic region. Another example is Singapore. With its highly educated, skilled workforce, it is the world’s 6th largest financial center, largest oil-rig producer, and largest logistics hub in the world. It is also a leader in oil refining, ship repair, electronics and chemicals manufacturing, mechanical engineering, and biomedical sciences. It has 4 official languages and the third-highest population density in the world. It is considered to be a developed country.

Ongoing Initiatives in Southeast Asia APEC – The Asia-Pacific Economic Cooperation is a regional economic forum of 21 countries formed to facilitate trade and investment across borders in the Asia-Pacific Region. The U.S., China, and Russia are among its members. A major initiative has been to harmonize regulatory systems. All of

26

the ASEAN nations except Cambodia, Laos, and Myanmar are members.

initially belonged. India has opted out but is invited to join RCEP at any time.

ASEAN AEC: The AEC (Asia Economic Community) integration plan was designed to be carried out from 2007 – 2015 but is still ongoing.

The goals have been to create a single regional market and integrated production base for the free flow of locally-produced and economically competitive goods, services, labor, and investment. Another goal is intraASEAN defense trade based on a strong defense industry that relies on the local strengths of each member and limits purchases from external OEMs.

WHAT IS THE CURRENT APPROACH OF THE UNITED STATES IN THE REGION? WHAT ARE THE ALTERNATIVES TO CPTPP AND RCEP TO WHICH WE DO NOT BELONG? HOW CAN WE BENEFIT?

TPP -Trans-Pacific Partnership: The TPP was initially designed as a free trade agreement among 12 countries: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam, and the USA, which together produced 40% of the world’s total GDP of nearly $108 trillion. After signing in October 2015, subject to the approval of each country’s legislature, the USA withdrew under President Trump.

The remaining 11 signed a modified comprehensive agreement (CPTPP) on December 30, 2018, which is now in full force, removing 99% of tariffs on goods and services, representing 13.5% of global GDP. RCEP -The Regional Comprehensive Economic Partnership is a free trade agreement among 15 nations in the Asia-Pacific region and includes the largest economies in Asia: China, Indonesia, Japan, and South Korea, as well as Australia, New Zealand, and 9 of the 10 ASEAN nations (excludes the Philippines). Signed in November 2020, it makes up the largest trade bloc in history, accounting for approximately 30% of the world’s population (2.37 billion) and 30% of global GDP ($30 trillion+). China pushed hard for this agreement to counter the original TPP, to which it was not invited and to which the USA

The U.S. Indo-Pacific Strategy President Biden released the White House approach in his speech at the QUAD Leaders’ Summit (refers to Quadrilateral Security Dialogue among the USA, Australia, Japan, and India) on September 24, 2021.

The Administration uses the term “Indo-Pacific” to include Northeast Asia, Southeast Asia, South Asia, and Oceania, including the Pacific Islands.

By the numbers, it covers over half of the world’s population, including 58% of its youth, over 60% of global GDP, 2/3rds of global economic growth, 65% of the world’s oceans, and 25% of its land. The Administration is committed to strengthening the role of the U.S. in the region to ensure “an Indo-Pacific that is free and open, connected, prosperous, secure and resilient.”

To that end, the Indo-Pacific Economic Framework (IPEF) was launched by President Biden in person in Tokyo on May 23, 2022. It has four pillars: 1) trade, 2) supply chains, 3) decarbonization, clean energy, and infrastructure, and 4) tax and anticorruption. Other Southeast Asian nations are a part of the IPEF, except Cambodia, Laos, and Myanmar. It is fortunate that most ASEAN countries were virtually represented in Tokyo.

The IPEF allows 13 Asian countries to sign on to individual initiatives without fully participating in all of them, as some fear that specific QUAD security initiatives may impinge on ASEAN centrality or damage their trade relationships with China. But there is significant enthusiasm. For continued

Manufacturing Outlook / July 2022

COVER STORY: ASIA OUTLOOK example, the Trade Minister from Indonesia, Muhammad Lutfi, stated they were keen to cooperate with the U.S. without damaging trade with China. His deputy went further, identifying the digital economy, supply-chain security, and gradual energy transitions as the main areas of interest. Vietnam analysts have since commented that “as one of the four pillars of IPEF, green energy is an industry that sees significant potential in Vietnam.” Given its favorable geographic advantages, Vietnam is expected to become a major destination for investment in renewable energy, particularly solar energy and wind power. Chinese companies have already moved their solar panel manufacturing to Vietnam, as well as to Cambodia, Malaysia, and Thailand.

Many details of the Framework are still being flushed out. It is unclear whether the U.S. initiatives will be enough to counter China’s gains in the region.

But it is critical that the U.S. strongly supports ASEAN member states pursuing IPEF initiatives.

The Group of Seven Summit - June 26-28, 2022 – Some results for ASEAN Leaders from seven democratic industrial giants, USA, EU, UK, Japan, Germany, France, Italy, and Canada, met in Bavaria, as Germany assumes the presidency of this informal forum in 2022. One of the major agenda items was the agreement on the Global Partnership for Infrastructure and Development. It will provide $600 billion to support certain developing countries in ASEAN, Africa, Eastern Europe, and Latin America, also to strengthen Europe’s energy security, and pay for initiatives critical for a better future, including health, digital technology, gender equality, and childcare, transformative clean energy sustainability, and subsea

cable connections. These investments are not loans or charity with strings attached but investment initiatives to enhance the presence of the world’s most robust democracies in developing countries while challenging China’s Belt and Road infrastructure project dominance.

In next month’s issue, we will do a deeper dive into understanding the manufacturing opportunities in ASEAN and factors to consider when deciding on a location for operations there.

Author profile: Christine is co-founder and President of China Human Resources Group, Inc, a management consulting firm based in Princeton NJ. She has provided U.S. companies with strategic development and project implementation services for projects in China since 1986. n

THE FLAGSHIP REPORTS The Flagship Reports with Dr. Chris Kuehl is both an “Officer of the Watch” briefing of economic conditions and an Executive Briefing on specific situations impacting those conditions. Written and presented by the officers of Armada Corporate Intelligence, Dr. Kuehl lightens up the mood of sometimes distressful geoeconomic news with a bit of humor. This monthly podcast includes information from the Flagship Reports issued 3 times and week, and AISI, the Armada Strategic Intelligence System, a tool for durable goods manufacturers that dives deep into the sector each month to provide more than 95% accurate near-term forecasts.

Manufacturing Outlook / July 2022

27

NORTH AMERICA OUTLOOK

JULY 2022

NORTH AMERICA OUTLOOK

by Chris Kuehl No Normalcy With Black Swans 2022 was supposed to be a “return to normal” year after recovering from the “black swan” pandemic of 2020, but then we get hit with the second “black swan” - Russia’s invasion of Ukraine and the disruption in the energy market. What now? The paramount issue has been inflation and what can be done about it. Most all of the recession predictions have been based on the assumption that interest rates will soar, but this is not yet what the Fed is asserting. Thus far, it has brought rates up faster than expected but estimates still hold between 2.5% and 3.5% by the end of the year. These are high but not enough to trigger a recession. Interest rate adjustment

28

does very little to impact oil prices or the supply chain crisis, and both of these are fueling the majority of the inflation threat. The vexing reality is that a solution to the Ukraine war that results in lifting sanctions on Russian oil and gas will cause the per barrel price of oil to fall by as much as $50 or $60. A solution to the supply chain mess in China would similarly reduce inflation threats. The optimistic scenario is that inflation starts to fade by the end of the year, but pessimists point out that the threat could be present through much of 2023.

The supply chain issue is familiar by now. The questions are whether the Just In Time system is gone

forever and what would replace it?

The evidence is that companies are diversifying as fast as they can. This has meant shifting production back to the U.S. in some cases, and it also means shifting to other nations (Vietnam, Thailand, Mexico and even nations in Africa). Those that have moved back to the U.S. are using robotics and technology to remain competitive. Over a trillion dollars has been spent reshoring to the U.S. already, and that is expected to double this year. The appeal of reshoring is obvious, but there are major inhibitors, as well. The major problem is labor supply - there are not enough trained workers for the current continued

Manufacturing Outlook / July 2022

NORTH AMERICA OUTLOOK demand and certainly too few for a future of extensive reshoring. There are also issues of infrastructure and even regulatory burdens. The U.S. is not as equipped to handle an influx of business as would be preferred. Even the availability of power is expected to be an issue.

The Fed has long asserted that its target for the Fed Funds rate was around 2.5%. In recent months they have expanded that assertion a little and may be willing to hit as high as 3.0% or even 3.5%. The cautionary note they express every time is based on their desire to keep the economy growing and unemployment numbers down. The goal is a “soft landing” and that means rates that are perhaps at 2.5%. They are well aware that inflation drivers are not very responsive to rates right now. The fact that one of the leading hawks at the Fed opposed the three-quarter point hike is significant. It suggests that there is still substantial reluctance to slam the brakes on - even as inflation numbers keep rising. All the rates that respond to the Federal Funds rate are up but certainly not to record levels.

They are still far below where they were prior to the 2008 recession.

The rate of joblessness is still very low, and even with the potential for a downturn, the rate is not expected to rise. The solutions to the labor market stress are now far more complex and involved. The U.S. needs to focus on training the people it has. There will have to be an effort to find and recruit labor talent from other nations.

Beyond all this, there is the immediate need to find ways to produce in a labor short environment, and that is going to mean extensive reliance on technology, automation, and robotics. This has moved beyond the Manufacturing sector into the Service sector.

The betting is that most of the world will be slipping into recession by

the end of this year or early in 2023, but the U.S. may not be among those experiencing that decline.

The expectation is that growth will have slowed considerably from the blistering pace of last year (nearly 6%) but will settle in the “normal” range between 2.0% and 2.5%.

In general, the commodities sector has been volatile, and that is not unusual.

When the Federal Reserve referred to inflation as transitory, it did not mean the Fed thought inflation was going to be temporary. Transitory is “Fedspeak” for inflation that is rooted in commodity costs. These are always rising and falling according to demand and supply. The turmoil in the supply chain has affected Chinese production as well as demand. The price of steel has accelerated even as projects have been stalled and the price has yet to “tail over.” Aluminum has seen some declines as production ramped up and demand from the airlines slowed slightly. The commodities that are linked to oil have also seen a lot of volatility with the price of crude.

Plastics and resins have been sporting higher prices, and these are expected to keep moving up as long as the per barrel oil price keeps moving up. If there is good news on that front it is that major producers of these products are in the U.S. and Europe - and not in Russia.

Canada has been riding the wave of commodity price hikes, and that has meant better quarterly data than in the U.S. Oil and food are key exports from Canada, and prices have been setting records. Unfortunately, Canada also pays the higher input costs for its manufacturing sector, and even the farm sector has been hampered by the higher fuel and fertilizer costs. GDP growth was up for the third straight quarter – by 0.8%. This was not only fueled by the energy sector but household spending.

Inflation numbers are higher than they have been since the 1980s at 7.7% and up from 6.8%. The rate of joblessness fell slightly to 5.1% from 5.2%.

Mexico emerged from the doldrums of the Purchasing Managers’ Index but barely. It was sporting a reading of 49.3 and is now at 50.2. The GDP numbers grew by 3.6% over the miserable Q4 rate of 0.1% and almost all of this was due to oil exports (and food). The unemployment rate is still supposedly 3.0% but very few trust the data that Mexico releases.

Independent estimates hold that jobless rates are closer to 15%.

Inflation is running at close to 8.0% as well. n Chris Kuehl

Manufacturing Outlook / July 2022

29

EUROZONE OUTLOOK

GLOBAL OUTLOOK

EUROZONE

by Chris Anderson S&P Global Eurozone Manufacturing Composite Purchasing Managers’ Index (PMI), softened from 55.5 in April to 54.6 in May, an 18-month low. Manufacturing orders fell for the first time in almost two years as inflation continues. There was a weaker improvement in the health of the Euro manufacturing sector, and an accompanying fall in business confidence among the lowest seen in the past two years amid concerns regarding the outlook for prices, supply chains and demand.

Manufacturers added to their stocks of purchases at the quickest pace in three months during May. Demand fell in May, amid high selling prices.

New export orders also decreased at the sharpest pace for nearly two years.

Western Europe’s new vehicle registrations are down for the tenth month in a row, in April, again due to a supply chain crisis, and inflation discouraging buyers. Sales were down 20% to 830,447 in April.

Forecast for the year is at less than 10 million vehicles.

THE UK saw a slowdown in growth in May as production, new orders

30

Manufacturing Outlook / July 2022

and employment rose at weaker rates.

Production growth was at a sevenmonth low. The consumer goods sector was hit by weaker consumer demand. Input cost and output price inflation remained high. Rates of expansion in production, new orders and employment all fell: there was weaker growth in domestic demand, lower export sales, disruption from supply chains, increasing cost pressures and the war in Ukraine.

The PMI for May, at 54.6, was down from April’s 55.8.

New orders fell in both the consumer and intermediate goods sectors, the former closely linked to the current cost-of-living crisis. May saw new export orders fall for the 8th time in the past 9 months, with companies attributing lower overseas orders to

Brexit difficulties, transportation delays, shipping disruptions and the war in Ukraine. Input cost inflation was still high in May, but easing from April. Chemicals, energy, food, freight, fuels, gas, metals, oil, plastics, polymers, timber and transportation were all reported as up in price. Sales prices were increased accordingly.

Employment was up for the 17th consecutive month. The outlook for 12-months production is positive, but confidence is down to a 17-month low, due to a possible recession, rising cost pressures and stretched world supply Chris Anderson, chains. n Staff Writer

GLOBAL PMI OUTLOOK

GLOBAL PMI OUTLOOK

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

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

MFG EXPANDING, BUT CAREENING TO CONTRACTION JUNE 2022 BUSINESS SURVEY INSIGHTS

the first time since September 2018 that all constituents are strengthening, we believe the current outlook is far murkier with 13/18 weakening and the global economy marching toward further weakness.

According to our scatterplot of 18 surveys, five economies recorded Expanding-Strengthening; an additional thirteen reported Expanding-Weakening; while none fell in the Contracting-Strengthening or Contracting-Weakening categories.

In June, both China surveys -- CFLP (50.2) and Caixin (51.7) recovered back to expansion territory. While this is

Confidence appears to be building on the side of some positive recovery in most supply chains. Yes, there are opportunities for improvement, but it has not been smooth sailing.

Help wanted signs still dominate many major thoroughfares. Energy prices, along with other commodity prices, have come in some in recent

weeks on the back of rising global recession fears and more China lockdown concerns. These should help take some price pressures off businesses, but it remains to be seen how much longer consumers can hold.

Given the current PMI readings from around the globe, we see continuing expansion with numerous readings in the low to mid 50s, particularly in manufacturing. It has taken quite an effort to sew the patchwork of products and relationships that make the wheels keep turning. We don’t expect a perfect recovery out of an imperfect business cycle.

continued Manufacturing Outlook / July 2022

31

GLOBAL PMI OUTLOOK ISM U.S. Manufacturing PMI™ The U.S. Manufacturing sector, despite a multitude of challenges, internationally and domestically, has managed to remain at or above the 258-month average of 53.1 since July of 2020. This changed with June’s reading of 53.0, and these downward trends seem ominous in light of the “slow growth-no growth trends.”

Indeed, it has been a very interesting period economically and politically due to global health concerns with Covid and Covid lockdowns and contrasts in the direction that governments want to pursue.

Manufacturing supply chains are still struggling with factory closures.

Help Wanted signs persist in most industries. There is hope that a slowing economy will begin to remove pressure from a hot labor market. That being said, particular attention must be paid in: metals, chemicals, agricultural, energy, and electronics.

These five PMI components plus the remaining indexes in the series are trending lower, and we expect that will continue during the balance of the year. According to the press release, “The past relationship between the Manufacturing PMI® and the overall economy indicates that the Manufacturing PMI® for June (53.0 percent) corresponds to a 1.5-percent increase in real gross domestic product (GDP) on an annualized basis.” Further deterioration will expose areas of weakness in the sector.

outpace Inventories by an average of 6-8 points. The complexity of the survey results make it difficult to forecast with limiting factors such as oil prices, Ukraine war, lack of border control, Chinese lockdown, rising crime, and supply shortages that directly affect the consumer.

Customers’ Inventories: The index The index (35.2, +2.5) for raw materials, components, and finished goods. This is “too low” for the 69th consecutive month and the index has been under 40 percent for the past 23 months. This is an indication that buyers are still struggling to keep plants synchronized with their supply

chains. Businesses will have a few priorities for 2022, those will be continuing to be unravel inventory issues, dealing with supply and commodity shocks, and preparing for a potential recession.

Prices: The Manufacturing Prices Index (78.5, -3.7) showed pricing pressures facing businesses eased again in June. Now that the rate of change on prices appears to have peaked, we expect to see supplier deliveries quicken, which is less supportive of higher prices. That being said, prices remain atop the list of concerns for manufacturers as they see no end in sight for the increases.

Drivers: While the overall PMI is still indicating growth, it is also revealing an overall trend which is softening expansion.

New Orders Minus Inventories: This key spread fell into negative territory (-6.8), signaling Inventories are growing faster than New Orders and that allows for some degree of inventory liquidation at this time.

Hopefully a chance to remove slower moving items from the books. We like to see New Orders typically

32

Manufacturing Outlook / July 2022

continued

GLOBAL PMI OUTLOOK

n

Manufacturing Outlook / July 2022

33

MATERIALS OUTLOOK

JULY 2022

MATERIALS OUTLOOK

THE COST, MAKING, TREATING, AND APPLICATIONS OF MATERIALS.

by Royce Lowe Graphene, the Next Wonder Material?

There are many more materials that go into manufacturing other than metals - although metals are effectively primordial - and some of these will always find a place in the manufacturing chain. In 2004, at the University of Manchester in the U.K., a material called graphene was isolated by Andre Geim, a Dutch-British scientist, and Konstantin Novoselov, a RussianBritish scientist. To make their discovery, Drs. Geim and Novoselov used Scotch tape to peel individual layers away from a graphite block.

They won the Nobel prize for demonstrating a 2D material having length and width but no depth other than the diameter of the carbon atom.

Graphene resembles a chicken wire lattice and consists of monolayers of carbon atoms bonded in a repeating hexagonal pattern. It is the thinnest known material. It is some 200 times stronger than steel, and is exceptionally lightweight and flexible. It is an excellent conductor of heat and electricity. It has recently

34

been shown that a superconducting version (where electricity can pass with no resistance) can be created by arranging several sheets of graphene at particular angles.

It sounds like a panacea, but despite all its wonderful properties, and some uses in electronics, water filtration, and specialist sports equipment, graphene hasn’t hit its commercialization stride. But it seems there may be something on the horizon that could change all that, and it has to do with manufacturing and slowing down global warming.

It’s something quite concrete; in fact, it is concrete, the substance made by mixing sand, gravel, water, and cement, and cement is made by roasting limestone (calcium carbonate) to drive off carbon dioxide, leaving behind calcium oxide. Some 5 billion tons of cement are produced each year, accounting for 8% of the world’s man-made carbon dioxide emissions. Compared with other major polluting industries, the cement industry is way out in front.

Adding less than 0.1% by weight

of graphene to the mixture results in a concrete that is 30% stronger, meaning that less concrete is needed and less carbon dioxide is released.

Sounds good for graphene, but as with all discoveries, these things take time. The first quarter of 2019 saw a global production capacity of 3,000 tons of graphene, but by the first quarter of 2022, this figure was up to 12,700 tons. Graphene has been made from methane and waste and discarded mixed plastics. Two of the world’s biggest suppliers use proprietary water-based processes to do the exfoliation. NanoXplore, in Montreal, recently increased its capacity to 4,000 tons per year, while China’s Sixth Element Materials Technology is looking to up its 1,000ton annual capacity.

The search for different sources to produce graphene is underway on a global level. In the U.S., Dr. James Tour and his colleagues at Rice University in Houston have successfully tried coal, petroleum coke, discarded food, old tires, and mixed plastic waste. Dr. Tour is also interested in the effects of graphene on concrete manufacture. About a continued

Manufacturing Outlook / July 2022

MATERIALS OUTLOOK year ago, Dr.Tour testified before a Congressional committee on graphene, particularly the research he and his group were carrying out. One of his group developed a flash graphene process using electricity that can instantaneously convert materials to graphene. He foresees production of hundreds of tons per day in the next few years. Graphene is said to aid resistance to seawater and, in some instances, to obviate the need for rebar in some construction applications.

Currently, production of the material is somewhat expensive, but a little goes a long way in most applications.

There has been mention of health risks from using graphene, but this has not deterred research and use. The immediate future use of the material looks to be in concrete. Nationwide Engineering in the U.K., together with the Graphene Engineering Innovation Center (GEIC) at the University of Manchester, created Concretene, a graphene-enhanced concrete. Concretene has been

designed for cementitious products in the construction industry, particularly concrete, to provide a technology to reduce carbon dioxide in its manufacture. It can be easily adapted internationally with minimum changes to existing processes.

One kilogram of Concretene mixed with 10 tons of concrete reduces emissions by up to a 30% reduction in calcium oxide, elimination or reduction of steel reinforcement, and reduction of the cement content of the concrete by up to 50%. Performance gains include significantly improved tensile shear capacity, rapid early compressive strength gain, reduced porosity and permeability, enhancing durability, water and fire resistance with a longer lifespan, and reduced maintenance.

Concretene reduces project construction costs by 10-20% through material and preliminary savings. Graphene’s older brother,

carbon nanotubes, which have been in development for over a decade, has found an application as cathodes for the lithium-ion batteries used by E.V.s. Graphene itself is also being considered in these batteries.

The U.S. infrastructure program looks ripe for the use of graphene in concrete. There is no raw material problem here, no mining issue, just a need for government agencies’ support and equipment supply. Dr. Tour testified that many graduate scientists are returning to Asia because of a lack of equipment in the U.S. This is a ball that must not be dropped.

Non-ferrous metal prices, meanwhile, are tumbling to levels not seen since the great recession of 2008/2009.

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

continued Manufacturing Outlook / July 2022

35

INNOVATION OUTLOOK

BUILDING THE NEXT GREAT THING IN FLEXIBLE HYBRID ELECTRONICS NextFlex, a Manufacturing USA® institute, advances U.S. manufacturing of flexible hybrid electronics.

Manufacturing USA, a public-private partnership with 14 manufacturing institutes across the nation, connects companies, academic institutes, non-profits, and local, state, and federal entities to solve industry-relevant advanced manufacturing challenges in new technology areas with the goals of enhancing industrial competitiveness and economic growth and strengthening national security.

Technology Focus Area Flexible Hybrid Electronics: combine low-cost printed circuits with the processing power of thin semiconductors to create a new category of electronic devices that can stretch, bend, and flex to conform to surfaces. Flexible hybrid electronics circuits are being built into a wide range of products that bend with the contours of our world or bodies. The low-cost, small size, and reduced weight of these devices creates versatile products that deliver the “Internet of Things. Flexible hybrid electronics-enabled products are being used in human health and performance monitoring, structural health monitoring, (e.g. buildings and bridges), soft robotics and antennas.

Approach to Innovation and Collaboration

LEARN MORE

+

CONNECT WITH NEXTFLEX San Jose, CA 408-797-2244 info@nextflex.us nextflex.us

NextFlex brings together partners to overcome the manufacturing challenges in commercializing cutting-edge flexible hybrid electronics products that will enhance our lives. This is done through: Technology roadmaps and funded collaborative projects Shared manufacturing labs at the NextFlex Technology Hub Education and workforce training through FlexFactor®

Advanced Manufacturing National Program Office, NIST | www.ManufacturingUSA.com | 301-975-2830 | amnpo@nist.gov

36

continued Manufacturing Outlook / July 2022

INNOVATION OUTLOOK

COLLABORATIVE PROJECT EXAMPLES “GE benefits from participating in NextFlex projects because they advance technology in a collaborative, low-risk way, helping us to realize our vision of healthcare in the future.”

– Azar Alizadeh, Principal Scientist, GE Global Research

SMART BANDAGE: Purdue University, Integra Life Sciences, Indiana University, and Western Michigan University are partnering with NextFlex to develop a bandage that can both measure and manage oxygen levels in a wound and promote faster healing compared to a standard bandage.

FLEXIBLE ARDUINO®: NextFlex has successfully proven the robustness of the flexible hybrid electronics manufacturing process by producing multiple functional samples of a flexible Arduino. The NextFlex process for manufacturing the flexible Arduino uses 60% fewer process steps, resulting in faster manufacturing at lower cost and an end-product that is smaller, two-thirds lighter, and usable in more applications than a rigid board Arduino.

FLEXFACTOR® TRAINING FOR STUDENTS: The program is reaching a diverse population of youth and transitioning adults while helping to increase the numbers of women, veterans, and under-represented populations in technology and advanced manufacturing. NextFlex’s proprietary FlexFactor program uses a project-based STEM learning format that combines skill-building in entrepreneurship, product development, and flexible hybrid electronics technology.

“NextFlex has become the focal point of the flexible hybrid electronics ecosystem by facilitating much of the discussion around this evolving technology and drawing together a diverse community of subject matter experts that are driving advancements at a rapid pace.”

– Joseph Kunze, Ph.D., Founder, President, CEO, SI2 Technologies, Inc. Advanced Manufacturing National Program Office, NIST | www.ManufacturingUSA.com | 301-975-2830 | amnpo@nist.gov n

Manufacturing Outlook / July 2022

37

E-COMMERCE OUTLOOK

JULY 2022

E-COMMERCE OUTLOOK

by TR Cutler Post-pandemic Manufacturers’ eCommerce Surge in Africa and Latin America Emerging markets in Africa and fastgrowing markets in Latin America have posted immense eCommerce growth in the post-pandemic period.

Consumers in these markets actively participate in global eCommerce and increasingly shop cross-border.

To support this increase in activity, new payment infrastructures that reflect native consumers’ habits and preferences are emerging in these regions.

Despite the inflationary and supply chain concerns, 2022 has seen a strong, post-pandemic rebound in online shopping as the global eCommerce market is estimated to amount to 13 trillion dollars in value. This online sales increase from emerging markets will contribute 20% to all retail sales in

2022. Local payment methods (LPMs) played a crucial role in supporting the growth of this economic activity by setting a native and stable payment infrastructure to support the demand for online shopping both locally and cross-border.

value. Last year in Kenya alone, the transactional value reached 60 billion dollars. Mobile payments have become the norm amongst African consumers as Internet access and smartphone usage in the region are rapidly increasing.

Frank Breuss, the CEO of Nikulipe and an expert on LPMs and crossborder payments, shared some of these insights for this content.

Breuss suggested, “The demand for eCommerce and cross-border shopping is growing in the African region, which means merchants entering the market will have to solve the challenge of catering to the consumers’ payment preferences. For this reason, the merchants will have to work together with PSPs (Payment Service Providers) to establish efficient infrastructures including Mobile Payment providers, banks, or the companies which can facilitate access to local LPMs.”

Sub-Saharan Africa Mobile payments dominate the subSaharan region as a preferred Local Payment Method, with adoption in countries such as Kenya reaching up to 72%. The context is very important — only around 35% of the region’s population has a bank account. The estimated transactional value of mobile payments was 701.4 billion dollars in 2021, which accounts for 70% of the world’s $1 trillion mobile money

Latin America It is no surprise that the LATAM region transactions are mainly dominated continued

38

Manufacturing Outlook / July 2022

E-COMMERCE OUTLOOK African eCommerce worth $46.1 billion by 2025 - As smartphones and Internet technologies become increasingly accessible in Africa, the continent will become a lucrative market for the eCommerce industry.

According to the numbers presented

by StockApps.com, the African eCommerce market will reach annual revenue of $46.1 billion by 2025.

by cash and card payments with Visa and Mastercard as the main providers.

Some countries in the region have started initiatives to foster alternative payment methods. Breuss noted, “The payment industry landscape of Latin America is quite diverse, but cash and card are still kings in the region.

While the unbanked population still relies on their mobile phones and cash to make payments, some countries are working on payment innovations involving Open Banking technology.

The maturing payments infrastructure is in line with the growing appetite for international goods, and it is only a matter of time until this market skyrockets to increased eCommerce activity.”

Emerging markets will continue to grow and take a more significant share of the global eCommerce market.

Merchants entering the aforementioned markets will have to solve unique challenges by offering native LPMs preferred by local consumers. The preferred LPMs range from mobile payments to online banking and eWallets instead of traditional card payments seen in established western markets. One of the fastest growing markets in the region is Colombia, according to Rafael Atehortua, the country manager for the Manufacturing Media Consortium.

More Africa Data Revealed … $33.3 billion in 2022 Africa is shaping up to be the next

hotbed for Internet-based businesses.

As smartphones and the Internet become more prevalent in African countries, the population has started to shift towards online shopping.

According to the stats available on Statista, the African eCommerce industry is expected to grow at a compound annual growth rate (CAGR) of 24.7% between 2017 and 2024. In 2017, the industry’s annual revenue was just $7.7 billion, and it is expected to increase to $42.3 billion in 2024. Thus, the yearly income stands to increase by almost 500% in seven years.

In the last couple of years, the pandemic has also helped the industry, like everywhere else on the globe.

Thus, one can also expect the recent surge in growth to slow down in the coming years. In 2021, the African eCommerce industry brought in $28 billion in revenue. Compared to $21.4 billion in 2020, the 2021 figure represented a 31% annual increase. As per the report, the annual growth rate is expected to gradually decline to 9% by 2025.

In 2022, the African eCommerce industry is predicted to produce $33.3 billion in revenue, following an increase of 19%. Next year, the industry will grow by 14.7% to $ 38.2 billion. In 2024, the annual growth rate will further drop to 11%, with $42.3 billion in revenue. In 2025, the annual revenue will reach $46.1 billion on the back of a 9% annual increase.

500 million eCommerce African users by 2025 - The growth in the African eCommerce industry is primarily down to the expanding eCommerce user base on the continent.

In 2017, only 138.9 million people shopped online in Africa. This figure is expected to grow up to 519.8 million in 2024, at a CAGR of 17.9%. It is interesting to note that the revenue growth rate is higher than that of the user base. The eCommerce penetration in the African population in 2024 is expected to be 40%.

Author Profile: Thomas R. Cutler is the President and CEO of Fort Lauderdale, Floridabased, TR Cutler, Inc., celebrating its 24th year.

Cutler is the founder of the Manufacturing Media Consortium including more than 9000 journalists, editors, and economists writing about trends in manufacturing, industry, material handling, and process improvement.

Cutler authors more than 1000 feature articles annually regarding the manufacturing sector. Cutler has established special divisions including African manufacturing, Colombian manufacturing, Gen Z workforce, and Food & Beverage. Cutler was recently named the Global Supply Chain journalist of the year for the second time in a row. Over 5200 industry leaders follow Cutler on Twitter daily at @ThomasRCutler. Contact Cutler at trcutler@trcutlerinc.com. n

Manufacturing Outlook / July 2022

39

AEROSPACE OUTLOOK

JULY 2022

AEROSPACE OUTLOOK

by Royce Lowe The State of Play in the Air Following a couple of lean years in the air travel industry, there seems to be a consensus that things are improving at a very acceptable rate and that in a year or so, airlines will be making money again. At least that’s the opinion and prediction of Willie Walsh, the chairman of the International Air Transport Association (IATA). He and others talked to Bloomberg at the association’s recent 78th annual general meeting in Doha.

Walsh said airlines have emerged “leaner, tougher and nimble,” having defied predictions for widespread bankruptcies and failures, and that “industry-wide profit should be on the horizon in 2023.” He forecast that by next year, most markets should see traffic reach or exceed pre-pandemic levels.

As airlines emerge from the pandemic, they face critical labor shortages, high fuel prices, and intensifying pressure to reduce emissions. They’re also seeing increased sales as customers come back following the lifting of Covid restrictions, taking leisure trips and catching up with friends and family.

But there are serious staffing issues at both airports and in airliners.

What’s good for the airlines should be good for the aircraft manufacturers. In fact, London’s Heathrow Airport has asked carriers to cut flights due to a problem with a baggage system. London’s Gatwick will cancel hundreds of flights over the summer following a similar move at Amsterdam’s Schiphol airport. It seems major airlines were caught off guard by the sudden take off of customer demand. This whole scenario has not deterred the

aircraft manufacturers. Airbus CEO Guillaume Faury says the company is seeing record demand from airlines to replace aircraft. While demand for narrowbody jets will exceed supply in most scenarios, he said that’s not yet the situation for widebody jets because international travel hasn’t fully recovered.

The delayed arrival of aircraft engines is keeping Airbus from delivering some planes to customers as some supply-chain problems continue to aggravate the manufacturer’s recovery from the coronavirus crisis, despite strong demand. Twenty narrowbody jets that were fully built by the end of May were still missing engines, which will lead to late deliveries. Faury said that, aside from the engine delays, overall supply-chain challenges appear to have stabilized. Airbus plans to increase monthly output of its A320 series by 50% and sees strong future demand. continued

40

Manufacturing Outlook / July 2022

AEROSPACE OUTLOOK Gulf carrier Emirates said it is in talks to take delivery of A350 widebody jets ordered from Airbus S.E. over a shorter period because of ongoing uncertainty about delivery of Boeing Co.’s delayed 777X model.

With deliveries of the 777X now not due until 2025, Emirates is looking to speed up A350 arrivals once the first aircraft from an order for 50 is shipped, most likely in late summer 2024, Tim Clark, the airline’s president, said recently.

In April, Boeing pushed back 777X deliveries to 2025, five years later than originally planned, and said it won’t resume production until 2023, prompting some plane-leasing firms to suggest that the future of the reworked version of the 777 is in doubt. Clark said Emirates now has a tentative deadline of July 2025 for deliveries of the 777X, for which it has more than 100 orders. The world’s biggest long-haul airline first ordered the plane in 2013 for deliveries that were scheduled to begin in mid-2020.

Clark said he’s not convinced that Boeing’s new delivery target will be met, and that the General Electric Co. engines have yet to go through Emirates’ acceptance program, plus the flight test program. Emirates has meanwhile taken steps to upgrade the current fleet of 777s. Clark said such levels of uncertainty were unacceptable, and as such the world’s largest fleet of A380 superjumbos is also being returned to service and will remain active until the mid2030s.

For not the first time in his dealings with Boeing, Clark went on, critically: “I’m not sure the management had eyes where they should have had the eyes. They need help at the top level, they need to enmesh themselves in the workings of the business, at the shop floor level.”

Air India Ltd., the formerly state-run airline now under new ownership is considering ordering as many as 300 narrowbody jets, according to people familiar with the matter. This

could be one of the largest orders in commercial aviation history as the airline looks to overhaul its fleet.

The carrier may order Airbus S.E.’s A320neo family jets or Boeing Co.’s 737 Max models, or a mix of both, the people said, asking not to be identified because the discussions are confidential. A deal for 300 737 Max10 jets could be worth $40.5 billion at going prices, although discounts are common in such large purchases, and delivery could take years, even decades.

There seems to be little doubt that the airline and aircraft manufacturing industries are on their way to regaining the power they had prepandemic. There is also no doubt that labor problems in the industry will require resolution as soon as possible, as will the ongoing dispute between Boeing and Emirates.

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

Manufacturing Outlook / July 2022

41

ENERGY OUTLOOK

JULY 2022

ENERGY OUTLOOK Big Oil On Board The Green Hydrogen Train

by Jocelyn Bright Hydrogen has been the fuel of the future for decades, always promising to deliver huge benefits in about five years’ time. Things have been looking up since seven of the biggest green hydrogen project developers came together in late 2020 to launch the Green Hydrogen Catapult Initiative in a bid to increase the production of green hydrogen 50-fold by 2026.

Green hydrogen is produced using renewable energy and electrolysis to split water and is distinct 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 to prevent them causing climate change.

The new initiative aims to cut the cost of green hydrogen to less than $2/kg, which would help to cut emissions from the world’s most carbon-intensive industries including steelmaking, shipping, chemicals production and power generation. The founding partners are Saudi clean energy

group ACWA Power, Australian project developer CWP Renewables, Chinese wind turbine manufacturer Envision, European energy giants Iberdrola and Ørsted, Italian gas group Snam, and Yara, a Norwegian fertilizer producer. The companies hope to see 25GW of green hydrogen production by 2026, which would have a major impact on the emissions of heavy industry and transportation sectors. In late 2021, the coalition’s original members and three new ones nearly doubled that target to 45 GW of electrolyzers being financed by 2026 and commissioned by 2027. continued

42

Manufacturing Outlook / July 2022

ENERGY OUTLOOK With this latest initiative, the deadline is being set sooner. The target exceeds the European Union’s goal, set in 2020, of developing 6 GW of green hydrogen electrolyzer capacity by 2024 and 40 GW by 2030. It is suggested this target can be reached much sooner.

Scaling up the cost-effective production of electrolyzers, the devices that use electricity to convert water to hydrogen and oxygen, is the key first step in reducing hydrogen’s cost. Renewable energy is required to power the process, and solar and wind power costs have fallen significantly in the past decade. The hydrogen has to be stored, and this takes quite an infrastructure. Fuel cell electric vehicles, production of ammonia and fertilizers, and petroleum products are some of the major applications of green hydrogen, and some processes in steelmaking can use hydrogen.

After years of just playing with the product, major oil companies are finally planning to invest on a scale that would make green hydrogen a serious business. They have a very particular vision of a lowcarbon future. Multibillion dollar developments are in the works that generate vast concentrations of renewable electricity and convert it into chemicals or clean fuels that can be shipped around the world to power trucks, ships or even airplanes.

The month of June 2022 has seen big news about hydrogen. BP Plc is taking the lead in the $36 billion Asian Renewable Energy Hub, a project that is looking to install 26 gigawatts of solar and wind farms over a vast 6,500-square-kilometer (2,500 squaremile) stretch of Western Australia’s Pilbara region. The electricity generated will be used to split water molecules into hydrogen and oxygen. Once fully developed, annual

production would be about 1.6 million tons of green hydrogen or 9 million tons of ammonia, the latter feedstock to make fertilizer.

For the production of green hydrogen, very competitive renewable energy resources are necessary. BP has gone to Australia because of the sun, while TotalEnergies is in India because lowcost ammonia is potentially a very big market.

TotalEnergies SE has joined Indian billionaire Gautam Adani’s conglomerate in a venture that is looking to invest as much as $50 billion over the next 10 years in green hydrogen. An initial investment of $5 billion will develop 4 gigawatts of wind and solar capacity, about half of which will feed electrolyzers producing hydrogen used to manufacture ammonia. The venture could expand to 1 million tons of annual green hydrogen production by 2030, driven by 30 gigawatts of clean power.

Shell’s Vice President for hydrogen says it’s only a matter of time before Shell Plc follows with a megaproject of its own. Shell is looking for a place where there are sufficient wind and solar resources for a large-scale project that would make best use of its strengths.

There is some way to go on the road to scaling up green hydrogen projects. Moving from a 10 megawatt size to gigawatt size will take time, and it will be necessary to build facilities of hundreds of megawatts, or 10 times the size of pilot projects currently operating in Europe. Such projects will enhance the operational knowledge and the electrolyzer manufacturing capacity necessary to scale up to the next level. It is estimated that the average size of a green hydrogen electrolyzer is 3 to 4 megawatts. That should increase by 20 times by 2025. This still leaves a lot of work to be done.

U.S. giant Chevron Corp. is ready to spend billions on a mixture of green and blue hydrogen, which uses a chemical reaction to split natural gas to capture and store the carbon dioxide. Smaller players in the oil market are also getting involved, with Trafigura, a base metals and oil trader, looking at a number of midsize green hydrogen projects, such as a 440-megawatt development near Adelaide, Australia.

Large-scale hydrogen, unproven though it may be, could represent the best chance for the current generation of major oil companies to remain as key players in a mid-21st century, climate-compatible energy industry. But at some point, oil and gas will have to start declining to come into sync with the Paris accord.

Green hydrogen is the best fit for a new low-carbon profit center because it’s a big long-term growth market, and fits in well with the oil companies’ existing businesses.

The major global oil companies still spend the bulk of their money on oil and gas, but are devoting a growing proportion to low-carbon energy. This has included major investments in areas well outside their core business, such as offshore wind farms, solar plants, battery technology and electric-car chargers.

Much time and investment has been thrown the way of green hydrogen.

There is no doubt it will find its place on the energy scene, the only questions being when, to what extent, and at what Jocelyn Bright, Staff Writer end-user cost? n Manufacturing Outlook / July 2022

43

AUTOMOTIVE OUTLOOK

JULY 2022

AUTOMOTIVE OUTLOOK

by Lawrence Makagnon Prancing Horses, and Big Rigs, going Electric Sleek, shiny, very vroom vroom - for the fortunate few - that’s Ferrari! Its complex in Northern Italy is being fitted out to make battery-powered cars. The company will invest 4.4 billion euros ($4.6 billion) to develop fully electric and plug-in hybrid models that will account for 60 percent of its production by 2026. The plant will be retooled to produce EVs and assemble battery modules. The first fully electric Ferrari is scheduled to go on sale three years from now.

But Ferrari is somewhat late. It’s way behind Tesla, of course, but it also lags

44

Porsche, whose Taycan EV has been on the road since 2019, by about six years.

Still, those prancing horses.

Meanwhile, and about as far from Ferrari as possible, broad adoption of heavy-duty electric trucks is looking closer than ever with manufacturers releasing new big rigs and the announcement that multimegawatt charging is coming in 2024.

A Scania truck was recently observed charging at more than 1 megawatt, or roughly four times greater than what Tesla’s Model 3 can charge. Swiss firm ABB has a new multi-megawatt charger, with an impressive capacity of up to 3MW, that will be ready for pilot testing next year and commercial availability in

2024. Multi-megawatt charging won’t be necessary for all electric-truck journeys, but more than 40% of freight activity in Europe involves trips above 500 kilometers (311 miles). That’s outside the range of most electric truck models; hence at least one charging stop will be required. Heavy-duty truck models such as Volvo’s F.M. range and Daimler Truck’s Freightliner eCascadia have battery capacities of around 450-550 kilowatt-hours and ranges up to about 400km. Increasing the power above the maximum 350kW presently available will help drivers get back on the road in minutes rather than hours. Trucks account for around 19% of all road transport emissions in Europe. Hence continued

Manufacturing Outlook / July 2022

AUTOMOTIVE OUTLOOK the European Commission is eager to get larger-scale charging networks up and running.

The latest regulation on alternative fuels infrastructure, first proposed in mid2021, requires countries to install truck charging stations on both sides of some 170,000km of European roads every 60km to 100km. More chargers will be added, with a minimum capacity of 700kW, up from 350kW. The region’s biggest truck manufacturers are also investing in charging infrastructure. The European Commission recently approved a joint venture between Volvo, Daimler Truck, and Traton that plans to invest 500 million euros ($525 million) to set up 1,700 charging points across Europe by 2027. In the U.S., Daimler Truck is involved in a similar initiative, investing $650 million with Florida electric utility NextEra Energy and BlackRock to create a nationwide network of commercialvehicle chargers.

Battery-powered rigs accounted for a mere 0.2% of global truck sales last year.

Volvo, one of the leaders, says it had a 42% share of the European market for electric trucks in 2021, which consisted of only 346 registered vehicles. Volvo said recently that it will start serial production of its heavy-duty electric rigs in the fall, adding that it took orders, including letters of intent, for more than 1,100 electric trucks last year.

While the good news is that more models are coming to market, questions remain around the speed and cost of rolling out adequate charging infrastructure for big rigs, namely the time it takes to get grid updates permitted and built. It’s in the cards that this progress happens, and it more than likely will.

Back to EV cars, we have a serious contender on the block, one that impresses even Elon Musk. Earlier this year, South Korean carmaker Hyundai Motor Co. brought out two new battery-powered cars - the Hyundai Ioniq 5 and its sibling, the

Kia EV6 - which went right up the sales charts, overtaking the Nissan Leaf, Chevrolet Bolt and all other available EVs not made by Tesla. In the U.S. this year through May, Hyundai sold 21,467 of these two machines, beating even the Ford Mustang Mach-E, which was the choice of 15,718 drivers.

Analyst LMC is forecasting car sales of 9.95 million in western Europe for the year 2022. This compares with 14.29 million in 2019. The Seasonally Adjusted Annual Rate in the U.S. is running at around 13.1 million vehicles. China car sales are down in April and May, by 48% and 12.6% respectively, while plug-ins more than doubled in May, year-over-year, to 400,000 units and a 31 % market share, a trend that is forecast Lawrence Makagon, to continue. n Staff Writer

Manufacturing Outlook / July 2022

45

CYBER SECURITY OUTLOOK

JUNE 2022

CYBER SECURITY OUTLOOK

By Ken Fanger, MBA, CMMC-RP, President, On Technology Partners

Now, a Warning – Know What is Important

“Now, a warning,” are famous words spoken in the movie Death Becomes Her. For those who’ve never seen the movie, or don’t remember, Meryl Streep’s character is given a magical potion that will allow her to be young and beautiful forever. After taking the potion and drinking the entire contents, the woman who gave her the potion turns to Streep’s character and says, “Now, a warning.”

The most telling part of the movie came when Meryl Streep’s character looked up with a terrified look in her eyes and replied, “NOW, a warning?!”

You could see the fear in her eyes, but it was too late, she already drank the

46

Manufacturing Outlook / July 2022

potion. Why is a line from a movie in the early 90s so appropriate to our modern cyber world? In the movie, if Streep’s character sustained damage or injury to her body, it would become permanent, but she would never die.

This warning was not shared with her until after she drank the potion and nothing could be changed or un-done.

How often in life does it seem that we encounter the same type of thing (minus the magic potion)? We take an action just to find out there’s unexpected and undesired consequences that come from it that we either didn’t know about, or were never warned about. In the cyber security world, most of us

don’t think about this until after we’ve clicked on a bad link or unknowingly installed a corrupt program. However, this is also true when we’re planning our cyber protection.

In this crazy, time-starved world that we live in, we often hope that someone will come along and take care of everything that we need and that we won’t have to make any decisions. We already have so many decisions to make that it would be such a relief if someone took the reins and made some decisions for us. Unfortunately, that’s not how things work; we all need to take an active part in addressing what’s important to us.

continued

CYBER SECURITY OUTLOOK Next, have everyone rate the top three risks that the company faces. Record the top three. As a group, discuss why each of the items listed is in the top three for both lists. As a group, determine if the top three risks match up with the top three pieces of information.

Taking the reins starts with an assessment of what’s important to us. If you haven’t done a risk assessment, then the time has come to conduct one.

Each company is unique, so you may not require a full assessment like the ones that my company helps organizations to perform. If you’re a small business, you can conduct a smaller, less intense version. I’ve included some steps below to help you get started.

And Goals – 1. To understand where our important information is

The first step is to gather your leadership team and work together to define what is important to the company.

You’ll want to set out the basic ground rules and goals that you are looking for. Here are some examples:

While this is not a complete list, it is at least a starting point. It is also possible to have goals for meeting compliance requirements, like CMMC, or other goals related to your industry.

Ground Rules – 1. Each person will be allowed to share their ideas of what is important without others commenting or disagreeing 2. No one is wrong and no concern is bad 3. All ideas are recorded to be evaluated later 4. There are many risks, don’t get overwhelmed

Here is an example: you own an inner-city grocery store. Your top three data points are credit card numbers, inventory records, and employee records, but the top three risks are robbery, embezzlement, and fire. It is clear to see that the information and the risks of loss are not the same, and that is ok.

2. Get a baseline of risks that we face 3. To create a response plan for those risks 4. To be informed of the threats and dangers that our company and our information faces

Next, see how the risks relate to the important information. In this case, the matrix could look something like this: Author profile:

Now that you have your goals and rules, you can start to determine, as a group, what risks you may face.

1. Ask each person to go around the room and identify one important piece of information and write each down.

2. Continue around the room until all important information the group can think of has been identified.

3. Ask each person to identify at least one risk that they can think of and write each down.

4. Continue around the room until everyone has identified all the risks they can think of.

Now, on a piece of paper, have each member of the group record the top three pieces of information that the company has. When each person has voted, mark the top three pieces of information.

Ken Fanger, MBA has 30 years of industry experience in the fields of technology and cyber security, and is a sought-after CMMC Registered Professional, helping manufacturers and contractors to meet DoD requirements for CMMC compliance. He is passionate about technology deployment, and his MBA in Operations & Logistics has helped him to be an asset in the designing and deployment of networks to enhance the manufacturing experience. Over the past 5 years, he has focused on compliance and security, including working on the SCADA control system for the Cleveland Power Grid. Mr. Fanger works with each client to identify their unique needs, and develops a customized approach to meeting those needs in the most efficient and cost-effective ways, ensuring client success. n

Manufacturing Outlook / July 2022

47

ISSUES OUTLOOK

JULY 2022

ISSUES OUTLOOK

by Royce Lowe

The Skilled Labor Problem, Again It’s been written about. It’s been to presidents and back. This publication has treated the subject with the respect it’s due, and it’s due a lot of respect.

Unfortunately, not an awful lot has been done about it, even though it’s known to work, and is the basis of manufacturing in a good number of highly efficient western manufacturing countries. We’re talking about skilled labor. Without it, American industry wouldn’t exist, neither would global industry. Some countries benefit from it more than others, but the U.S. isn’t at the top of the list.

Chinese supply chains an expensive and risky proposition, and many American corporations have moved production from China, sometimes to the U.S.

Michael Collins, who writes books on such topics, wonders how the U.S. got into the skilled labor shortage jam, and how does it get out of it. There are presently a number of factors affecting the increasing total cost of manufacturing overseas, such as increased foreign labor costs, increased transportation costs, Trump’s tariffs, and a shortage of critical materials including semiconductors, and electric batteries. Such problems made

Manufacturing has been losing machinists, tool and die makers, steel makers, millwrights, and other skills, for decades. Insufficient maintenance workers are being trained to fill the gap of retiring workers. Surveys and forecasts galore have been carried out to tell us, for example, that the U.S. will be missing 400,000 skilled welders by 2024, and that 2.69 million more manufacturing workers will retire by 2030.

48

Manufacturing Outlook / July 2022

According to the Reshoring Initiative, some 224,000 manufacturing jobs were reshored in 2021. Enthusiasm for restoring tends to be a potential American manufacturing renaissance.

The problem - and it’s been a known problem for 30 years - is the shortage of skilled workers. The problem with the problem is the relative inaction in trying to solve it.

We might wonder here, what about automation and its role in carrying out skilled tasks? We might reply that it’s in its relative infancy, and that in any event it needs skilled workers to “watch over it.” But what about the urgent need for entry-level workers, and their recruitment, where manufacturing is competing with such employers as Amazon, UPS, and Fedex, that offer higher starting wages and bonuses. The Labor Department’s latest data shows 860,000 unfilled manufacturing jobs in March 2022.

Entry-level wages are $22 per hour at Amazon and $15 per hour at fastfood restaurants. This plus the fact that in February 2022 some 337,000 workers quit manufacturing (2.7% of the manufacturing workforce), and that many young workers move from job to job collecting signing bonuses.

If we forget reshoring and look at the federal infrastructure program, we’ll see that according to a government announcement in May 2022, there were 4,300 projects underway with $110 billion in federal funding.

continued

ISSUES OUTLOOK The administration says 556,000 new workers will be required, a good number of them in manufacturing.

It’s no news as to how this mess started, with parents wanting to see their kids off to college - to keep up with the other kids going to college - so they wouldn’t end up taking a “dirty” job. And the government throwing money after colleges rather than after vocational training. Then the jobs went overseas, and the rest is history.

Today there is a huge shortage of workers – more than 11 million overall.

Manufacturing entry-level workers are not beating down doors to work for $15 per hour. There aren’t enough skilled workers to replace those skilled workers currently retiring. There needs to be a serious commitment on the part of all involved in the manufacturing chain, from the theoretical to the hands-on practical, but particularly from corporation heads and politicians who can look at a problem with the sole aim of solving it.

A January 2020 training survey by the Manufacturing Institute shows the average number of hours of training, per employee, among their members

is a mere 27.7 hours per year, and for new members 42.9 hours per year.

The study shows “75% of industrial organizations identified reskilling the workforce as important or very important for their success over the next year, but only 10% said they were very ready to address this trend.” Mr. Collins feels that if a good percentage of these jobs are highly skilled, then what is required is advanced or longterm training, such as apprenticeship training.

goods produced. But only if they have the skilled personnel to make them.

Survey upon survey by organization upon organization will fall on fallow ground unless manufacturers themselves publicly commit to longterm (read apprenticeship) job training to (at least) replace the skilled workers leaving the manufacturing industries.

They will also need to match the starting wages at Amazon and Fedex, to dissuade their employees from moving to greener pastures.

The problem is that manufacturers do not want to invest in training that takes thousands of hours to complete.

Reference to the website of the Office of Apprenticeship Training, since 2001, shows that the total annual number of registered apprentices in manufacturing has not increased at all in the manufacturing sector since that time. Meanwhile, apprenticeships in other sectors like construction are growing.

For American manufacturing, and for the infrastructure programs, there is no alternative but a wholehearted commitment on the part of all responsible to make manufacturing work. The future is critical, and not just the next few years; the future is now. n

There seems to be a general consensus that reshoring would be good for the U.S. economy. It makes sense that manufacturers would have greater control over the costs and quality of

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.

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

Manufacturing Outlook / July 2022

49

ISSUES OUTLOOK

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

(COMPLIANCE UNDER DEVELOPMENT)

*

50

Manufacturing Outlook / July 2022

*Toll free within the U.S.

PLUS 3 MONTHLY SHOWS

VIDEO INTERVIEWS AVAILABLE ON YOUTUBE

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