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WOMEN IN POWER: AN INTERVIEW WITH CAROL MILLER CMO FOR MATERIAL HANDLING INSTITUTE PAGE 10

FEATURE STORY: THE BOLD PREDICTIONS AND (LIKELY) FIRST STEPS FOR MANUFACTURERS IN 2022 PAGE 14

THE CASS TRANSPORTATION INDEX PAGE 22

AFRICA OUTLOOK PAGE 42

AUTOMOTIVE OUTLOOK PAGE 50

CYBER SECURITY OUTLOOK

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FEBRUARY ISM PMI: 58.6%

Released March 1st -The Full Executive Summary Report On Business - Page 24

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Manufacturing Outlook / March 2022

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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 KEN FANGER BRAD POPE KYLE UEBELHOR PARKER J. THOMAS LIRAN AKAVIA CHRISTINA POLITI Production Manager LINDA HOPLER Advertising ADVERTISE@MFGTALKRADIO.COM Editorial Office JACKET MEDIA CO. 75 LANE ROAD FAIRFIELD, NJ 07004 (973) 808-8300 © 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.

31 GLOBAL PMI OUTLOOK

PUBLISHER’S STATEMENT

Mostly Expansion Still by Norbert Ore

Transitioning from Pandemic to War – More Uncertainty for Manufacturing

MANUFACTURING OUTLOOK

ASIA OUTLOOK

Riding A Wave Of Manufacturing Expansion by Royce Lowe

COVID-19, War and Trade; Impacts on Manufacturing by Christine Casati

MANUFACTURING TIDBITS

Insights from inside manufacturing in action

10 WOMEN IN POWER: AN INTERVIEW WITH CAROL MILLER CMO FOR MHI by TR Cutler

14 FEATURE STORY: THE BOLD PREDICTIONS AND (LIKELY) FIRST STEPS FOR MANUFACTURERS IN 2022 by Kyle Uebelhor, Parker J. Thomas and Christina Politi

18 COVER STORY: REDUCING EMISSIONS: HOW CAN COMPANIES BE GREENER WHILE INCREASING THEIR PROFITS? by Liran Akavia

22 CASS INDEX LOGISTICS REPORT Cass Transportation Systems

24 ISM MANUFACTURING REPORT ON BUSINESS

Some Improvements and Challenges With Continuing Expansion

38 METALS OUTLOOK

Of Nickel and Aluminum and Other Things by Royce Lowe

40 INNOVATION OUTLOOK Harnessing The Power Of Smart Manufacturing

42 AFRICA OUTLOOK Venture Capital and Global Investment: The African Growth Story for 2022 and Beyond by TR Cutler

46 AEROSPACE OUTLOOK Now It’s The 787 by Royce Lowe

48 ENERGY OUTLOOK The U.S. Wind Rush by Jocelyn Bright

50 AUTOMOTIVE OUTLOOK

New Car Blues by Lawrence Makagnon

NORTH AMERICA OUTLOOK

Backup Buddy; You Need One by Ken Fanger

EUROZONE OUTLOOK

The Good, Bad, and Ugly Scenarios for Manufacturing by Chris Kuehl

Continued Expansion and Strength by Chris Anderson

CYBER SECURITY OUTLOOK

TECHNOLOGY OUTLOOK Accurate Demand Forecasting by Brad Pope

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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.

56 ISSUES OUTLOOK Japan, The Automation Nation by Royce Lowe

PUBLISHERS STATEMENT

Transitioning from Pandemic to War – More Uncertainty for Manufacturing Just when we thought it was safe to go back in the water as Covid was losing its grip on us, Putin invaded the Ukraine. Now we are faced with stiff inflation and a new wild card variable that will impact energy as Russia, one of the world’s largest oil producers, damages nuclear reactors in the Ukraine that will cause demand for fossil fuels to climb even further. Energy is a major expense for manufacturers; for some, it is their #1 expense. Brent crude, the benchmark generally used for oil prices, has risen above $125 and no one knows how high it will go. Beneath $50 a barrel, Russia was losing money on every barrel it pumped. Oil well above $50 a barrel will pay for Russia’s war effort. And with nuclear capacity in the Ukraine knocked offline, demand for oil will rise further. This is a double-edged sword. The Federal Reserve sees it as inflation, and is likely to ratchet up the lending rate more rapidly or more aggressively. However, to the consumer, rising gas prices at the pump syphons money out of their takehome pay, so they will have to cut spending, likely on discretionary items. Consumers cutting spending, which can happen quite mercurially, will dramatically deflate demand, so an overreaction in rate hikes by the Fed could create a nasty backlash, ushering in a recession in 2022. The Fed has raise its benchmark federal-funds rate 25 basis points, and has stated that 5 additional quarter point increases are expected in 2022 as inflation rages. Pain at the pump is already being felt by consumers. Food prices are also soaring, along with retail shortages of goods in grocery stores across the country. Shortages generally trigger hoarding, which is already being seen by grocery retailers. It isn’t just toilet paper this time; it is meat, cheese, canned foods, frozen foods, and other staples. This, in turn, cause prices to rise even faster until demand shock reverses, where the upward demand spike flames out and demand doesn’t just fall, it nearly evaporates. Manufacturers are already seeing the demand shock boom. When consumers have stocked up and gas prices take a more meaningful bite out of budgets, the upward spike will suddenly reverse and demand will precipitously fall. The supply chain disruption and reconstruction will be hit with yet another major quake, rattling the newly-formed supply chain from end-to-end. Then there are metal prices. Nickel skyrocketed in price from $20,000 per ton in late December to more than $80,000 in early March with such volatility that the LME suspended Nickel trading. Nickel is used in nickel alloys, stainless steel alloys, and alloy steels. Those will increase in cost soon. Expect everything that has nickel as an alloy to increase in price. An old Chinese saying is, “May you live in interesting times.” Well, we are. Today, with our instant news Internet, we can read about, hear, and see one or more of the Four Horsemen of the Apocalypse in various parts of the world. Just as the pandemic was waning, war reared its ugly head. The number of individuals suffering food insecurity in the U.S., the bread basket of the world, is increasing sharply. Uncertainty is become all too certain these days. Keep an eye on the Institute for Supply Management’s Manufacturing Report on Business® that could encounter a sudden, sharp reversal of manufacturing’s fortune. Gain further insight into the manufacturing outlook in this issue of Manufacturing Outlook. Get ready for a potentially wild ride in 2022. 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. FOLLOW US:

Manufacturing Outlook / March 2022

MANUFACTURING OUTLOOK

MARCH 2022

MANUFACTURING OUTLOOK GLOBAL MANUFACTURING IN UPTURN. SUPPLY CHAIN DISRUPTION EASING, BUT MORE NEW QUESTIONS. U.S. MANUFACTURING TICKING UP. CHIP SHORTAGE AND STEEL PRICES STILL BIG QUESTIONS. NON-FERROUS QUANDARY. RUSSIA INVADES UKRAINE! continued

Manufacturing Outlook / March 2022

MANUFACTURING OUTLOOK by ROYCE LOWE February saw the creation of 678,000 nonfarm jobs, and the unemployment rate falling to 3.8 percent. There were notable job gains in leisure and hospitality, professional and business services, healthcare, and construction. There were 60,000 jobs created in construction, 48,000 in transportation and warehousing, and 36,000 in manufacturing, of which 20,000 jobs in durable goods, 11,000 in fabricated metal products, 8,000 in machinery, and 3,000 in primary metals. There was a loss of 18,000 jobs in motor vehicles and parts. The Bureau of Economic Analysis says the U.S. Real Gross Domestic Product increased at an annual rate of 7.0 percent in the fourth quarter of 2021, according to the “second” estimate. The real GDP increase in the third quarter of 2021 was 2.3 percent. IHS Markit’s remarks on U.S. manufacturing for February show the PMI figure moving up from

55.5 in January to 57.3 in February. Production growth is on the rise with stronger demand and easing supply disruption. There is higher growth in new orders which gives a boost to employment and stock purchases. February saw the least marked deterioration in supplier performance since May 2021. Cost pressures softened but selling prices increased at a faster rate. New export orders were up at their fastest for five months. The increases in new orders led to greater optimism in February, and the production expectations for the coming year are at their strongest since November 2020. GLOBAL CRUDE STEEL PRODUCTION WAS DOWN BY 6.1 PERCENT YEAR-OVERYEAR IN THE MONTH OF JANUARY for the 64 reporting countries – which represent 98 percent of world crude steel production – to 155.0 Million Tons (MT). U.S. crude steel production for January was 7.3 MT, up 4.2

percent year-over-year. In January: China produced 81.7 MT, down 11.2 % year-over-year; India 10.8 MT, up 4.7 %; Japan 7.8 MT, down 2.1%; Russia (estimated) 6.6 MT, up 3.3%; South Korea (estimated) 6.0 MT, up 1.0%; Germany 3.3 MT, down 1.4%, and Brazil 2.9 MT, down 4.8%. The EU (27 countries) produced 11.5 MT, down 6.8%. Primary Global Aluminum Production in January was reported at 5.513 million tons, with production in China, at 3.100 million tons, representing 56 percent of the world total. Production was 517,000 tons in GCC; 392,000 tons in the rest of Asia; 262,000 tons in Western and Central Europe; 321,000 tons in North America and 349,000 tons in Russia and Eastern Europe. The seasonally adjusted selling rate for U.S. light vehicles in the U.S. in February is forecast at 15.9 million, 7% up on 2021. For February 2022, the U.S. auto sales forecast from J.D. Power and LMC Automotive is for just under 1.1 million cars and trucks, down 11% vs. February 2021. The situation is one of low supply - high demand, hence the high car prices. The JP MORGAN GLOBAL MANUFACTURING PMI – a composite index produced by JPMorgan and IHS Markit in association with ISM and IFPSM (International Federation of Purchasing and Supply Management) – rose from January’s 53.2 to a 2-month high of 53.6. Global manufacturing growth upped its pace in February, and supply chain stresses show signs of easing. There was a mild increase in the expansion rate, as production, new orders and employment all strengthened. Business optimism continued

Manufacturing Outlook / March 2022

MANUFACTURING OUTLOOK mount and delivery times lengthen significantly. There was material scarcity, particularly from lengthy lead times. There were capacity pressures and increasing backlogs. The PMI for February at 56.7, was up from January’s 56.2.

regarding the year ahead increased to a ten-month high. There were expansions across the consumer, intermediate and investment subsectors. New export orders also saw a slight improvement. Global manufacturing employment was up for the 16th consecutive month in February, with an increase in the majority of nations. There are still problems with supply chains, but there are signs that delays are easing. THE ECONOMIST magazine, in its latest weekly report on world economies, highlights changes in Gross Domestic Product (GDP), Consumer Prices, and Unemployment Rates for what it considers the world’s major economies. These data are

not necessarily good to the present day, but are mostly applicable to at latest the past two months, and show definite trends in the world economy. The figures are qualified as being the latest available, and with reference to a given quarter or month. The figures for GDP represent the percent change on the previous quarter, or annual rate. The consumer price increases represent year-over-year changes. The unemployment figures, percent, are for the month as noted. CANADA saw stronger operating conditions amid solid production growth, and both new orders and purchasing activity saw firm gains, supporting employment growth. Inflationary pressures continue to

Domestic demand for Canadian manufactured goods was strong, but export sales fell for the first time in over a year. Inflation was up in the form of increases in materials, transportation, energy, and fuel costs. Firms are upbeat regarding production for the next twelve months. Desrosiers Automotive Consultants say that February’s light-vehicle sales are down 12.4 percent year-overyear to 98,722 units. The Seasonally Adjusted Annualized Rate is at 1.62 million units. MEXICO saw manufacturing conditions worsen to a lesser extent in February. Production and new orders remain in contraction during February, and inflationary pressures recede. There is a lack of raw material due to lack of availability and very slow delivery. Mexico’s PMI rose from 46.1 in January to 48.0 in February. You might have been watching the wild upward spikes in Nickel prices. While we expect these to soften, once producers and middlemen can make a bigger buck off of geopolitical or geoeconomic events, prices tend to settle at a higher level even though no additional costs or expenses have occurred in the production of a commodity - in this case, nickel, unless a recession causes a downward adjustment. n Author profile: Royce Lowe, Manufacturing Talk Radio, UK and EU International Correspondent, Contributing Writer, Manufacturing Outlook.

Manufacturing Outlook / March 2022

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MANUFACTURING TIDBITS

Women in Power: An Interview with Carol Miller CMO for Material Handling Institute By: TR Cutler

continued Manufacturing Outlook / March 2022

MANUFACTURING TIDBITS Carol Miller, MHI Chief Marketing Officer, has more than 29 years of marketing and communications experience in the materials handling industry. Miller leads the marketing outreach for MHI, including its MODEX and ProMat events. With nearly three decades of experience in building brands and leading marketing and communications teams, Miller was made CMO last December. Her talents include strategic development and tactical implementation of national and international branding, marketing, and public relations campaigns along with demonstrated ability to develop and execute integrated marketing programs that utilize traditional and new media in a cross-functional team environment. After nearly three decades at MHI, what has surprised you most? “When I joined MHI, material handing was seen as a more siloed function within the four walls of the facility and MHI reflected that. Most of our members didn’t really see their place in the greater supply chain. What has surprised me the most is how that has changed, and material handling is now seen as really the engine that drives the supply chain ecosystem and how all movement and handling of material and product – whether inside or outside the four walls of a facility – is all part of a supply chain ecosystem that is highly interdependent at every link in the chain.” What has changed since COVID? “I think the pandemic has changed so much for our industry. Supply chain has always been an industry in constant change and evolution,

but now that change has become more revolutionary due to the disruption caused by the pandemic. As firms are seeking solutions to mitigate this disruption and risk, MHI members are leading the way with this change with solutions that make operations faster and more accurate, transparent, and agile.” The mix of exhibitors at MODEX 2022 are more global and have wider product offerings. Why do you think that is? “MHI’s vision has grown with the industry to develop forward-looking reports like our Annual Industry Report and Transformation Age Roadmap to document industry shifts. This shift is seen in the broad representation of solutions on the MODEX and ProMat show floors, with traditional material handling solutions showcased alongside emerging solutions in robotics, automation, and digital technologies. These innovations are produced by solution providers from around the globe – reflecting the global nature of supply chains. The solutions offered by the 850 exhibitors at MODEX span the entire supply chain so a wide offering is essential to provide a one-stop event for manufacturing and supply chain professionals. Additionally, there are some really exciting things happening in emerging technology and innovation in our space – solutions that were not even part of the equation five years ago are seeing high adoption levels as firms seek to meet customer demands for faster, cheaper, and flexible delivery of products that are also sustainable, transparent, and socially responsible.”

What do you think is most misunderstood about material handling today? “Material handling has always been the secret engine that delivered product to consumers and served their needs, but it was really a secret to those outside the industry. Now, thanks to pandemic disruption, material handling and the overall supply chain is a known entity. When supply chains were working, they were invisible, but that is no more. Ironically, the pandemic helped us do as an industry what we had been struggling to do for years – elevate awareness of the importance of our industry to global commerce.” Share a little about why the relationship with WERC and MHI happened and what it portends moving forward? “The addition of WERC under the MHI umbrella complements our overall strategy to continue building our knowledge offering for the industry. The combination of WERC’s members and their expertise in the warehousing and distribution space supports MHI’s strategy to bring material handling and logistics solution providers and practitioners together in a collaborative environment for connecting, educating, and advancing the industry. Together our platform is stronger and delivers more value to the industry and our members.” It appears there is increasing participation by women. How has the industry encouraged this amazing contribution of women? “As a woman in this industry, I am very gratified to see our industry’s

Manufacturing Outlook / March 2022

continued

MANUFACTURING TIDBITS

emphasis on diversity and inclusion initiatives and the tremendous strides we have made in this area. MHI has a dedicated Diversity, Equity and Inclusion initiative and has four women on our volunteer leadership team for 2022 – Annette Danek-Akey, Executive Vice President, Supply Chain at Penguin Random House, Karen Norheim, President & CEO at American Crane and Equipment on our Board of Governors, Melonee Wise, VP Robotics Automation at Zebra Technologies, and Crystal Parrott, Chief Operating Officer at Plus One Robotics on our Roundtable.

These amazing leaders, who happen to be women, are shining examples of what is possible, and what is coming, for our industry.”

How have supply chain disruptions changed the critical role of material handling in getting goods to market?

With more MODEX exhibitors from countries outside of North America, to what do you attribute this global participation?

“There’s never been a better time to be part of this industry. Life is changing and this change is bigger than material handling and supply chain – it is really about how people’s lives are changing. How our industry continues to react and adapt to that change will be exciting to watch.

“The innovation in our industry is not limited to firms based in North America. We want to showcase the best solutions at our MODEX and ProMat events and encourage participation from solution providers from across the globe. Supply chains are global and so are the solutions that make them work effectively.”

We now have a tremendous opportunity to educate and shape the expectations of consumers and solve their needs. With this opporcontinued

Manufacturing Outlook / March 2022

MANUFACTURING TIDBITS tunity comes the responsibility to serve them with the transparency, environmental, and social responsibility that they are demanding while we meet and exceed their needs for product delivery. The good news is that MHI members have the solutions to deliver on this new promise.” How has the tight labor force changed the utilization of robotics, automation, and goods-to-person technologies? “The skilled worker shortage has been the biggest challenge for manufacturing and supply chain professionals for the past nine MHI Annual Industry Reports. The pandemic has exacerbated this challenge. Robotics and automation provide a tremendous opportunity to improve supply chain performance, but they will never replace humans. These solutions actually elevate human jobs – improving overall worker satisfaction which should go a long way to solve the workforce challenge as more people see the exciting opportunities available in our industry.” What role does MHI want to play in driving the industry over the rest of this decade? “We see our role as driving and facilitating market access, knowledge, leadership, and connections for our industry. We do this by bringing the industry together to connect and learn not only at our MODEX and ProMat events, but also through our unique educational and knowledge content, MHI Industry Group and WERC programming.”

What are you most looking forward to over the next several years at MHI? “One of the most gratifying parts of my role at MHI is telling the unique stories for our industry and of the exciting innovations and leaders in our space. These stories help successfully navigate the revolutionary change our industry is facing.” What benefit in being an MHI member is most overlooked? “The connections, relationships, and strong friendships our members make over their careers. These are the benefits that are less tangible than market access and knowledge, but they are the most meaningful.” Author Profile: Thomas R. Cutler is the President and CEO of Fort Lauderdale, Florida-based, TR Cutler, Inc., celebrating its 23rd 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 Africa Manufacturing, Gen Z Workforce, and Food & Beverage Manufacturing & Logistics. Cutler was named the Global Supply Chain journalist of the year. Over 5200 industry leaders follow Cutler on Twitter daily at @ ThomasRCutler. Contact Cutler at trcutler@trcutlerinc.com. n Manufacturing Outlook / March 2022

FEATURE STORY

The Bold Predictions and (Likely) First Steps for Manufacturers in 2022

continued Manufacturing Outlook / March 2022

FEATURE STORY By: Kyle Uebelhor, Parker J. Thomas and Christina Politi From supply constraints to the war for talent, manufacturers experienced an unparalleled number of disruptions in 2021. Everyone had to be agile these past few years. In reality, no one really knows what curveball might be next. However, we do know that truly exceptional executives from leading firms thrive in uncertainty by demonstrating enduring leadership characteristics. Enduring leaders look ahead and not behind. They survey their competition and those around them but they’re not beholden to the current state, nor do they benchmark themselves against the “as is.” Moreover, we know these leaders create a culture that looks well beyond the next quarter’s earnings report. They focus on the people and the programs that will take on whatever the “next” is. Research from the Alexander Group indicates that enduring leaders, those who thrive in uncertainty, encounter six specific commercial issues. Here are strategies needed to tackle these six issues and to thrive in 2022 and beyond. Prediction #1 Turnover within commercial (marketing, sales, and service) teams will remain unsustainable at 15-20%, forcing an evolution of conventional recruiting and retention strategies. COVID resulted in a complete 180 on the view of employment, in turn resulting in “The Great Resignation.” Manufacturing has been no exception as sellers and key support resources shuffle to different companies within

the industry and, in many cases, exit for larger career and life changes. Data revealed that seller turnover has increased from 12% in 2017 to as high as 15% in 2019-2020 and threatens to maintain or increase. Leading organizations are overhauling talent management practices to incorporate Diversity, Equity, and Inclusion (DEI) in all aspects of their career path, compensation, and job responsibilities to attract and retain top talent from non-traditional sources. First step: Manufacturers who will win the war for talent won’t simply throw more money at the problem. Rather, they will focus on multi-faceted employee engagement that aligns cultural purpose with individual destiny. Prediction #2 Account ownership will become a team sport. Manufacturers will see an overall reduction in their commercial teams’ headcount, but there will be a proliferation of roles across marketing, sales, and service leading to higher productivity. It’s the death of the superhero seller. As buyers demand more support throughout the purchasing process, organizations are deploying new roles across the commercial team. The data indicates investing in key support roles yields 34% higher productivity and 10% higher E/R efficiency. Leading manufacturers who recognize this and leverage roles such as Revenue Operations and Customer Success will capitalize on this advantage. First step: Traditional “Sales Operations” will evolve into “Revenue Operations.” Sellers who take input from Revenue Operations on account

planning and value messages will excel. Customer Service will evolve into Customer Success to ensure adoption of products and services, and soon receive upsell and cross-sell quotas. Prediction #3 The Internet of Things (IoT) will begin a seismic shift from capex (selling things) to opex (selling outcomes or usage) models. Enduring leaders understand this dynamic impact to their income statements and valuations. They will focus on recurring revenue and promoting the technology behind their manufacturing. “Capex to opex” is an expression in the manufacturing space these days. Most manufacturers consider the goods they sell to be ‘cap x’ products with a traditional sales motion. The opex view states that they’re now monetizing their products via a recurring revenue model (e.g. subscription, consumption, outcomes, etc), which shows up on an income statement as an expense, not a capital good that has balance sheet implications. The opex model requires a new type of sale to new types of buyers, hence the challenge. Buyers are seeking to optimize their purchasing and usage of key products to further realize business outcomes. Manufacturers that sell connected or “smart” products are adding service to the value proposition. The data indicates that service brings in 11% of total revenue for the average manufacturer, while more IoT-enabled and service-led companies are bringing in 30%+. IoT offerings can be monecontinued

Manufacturing Outlook / March 2022

FEATURE STORY Despite the final transaction being self-serve, the work to get there and the value delivery that must follow remain the responsibility of an engaged commercial team. First step: Manufacturers will further enhance electronic data interchange capabilities and selectively begin activating “click-to-buy” websites. A growing number of non-strategic accounts and select strategic accounts who prefer automation will no longer receive face-to-face field coverage.

tized in different ways, including: • Higher price relative to non-connected product • Additional subscription with dash boards and analytics • Services and maintenance contracts • Bundled PaaS (product as a service) First step: IoT and recurring revenue sounds sexy, right? Well…most strategic leaders understand that the terrain in which they compete might not be ready for advanced opex concepts. A CEO of a large global industrial capital equipment manufacturer recently explained that he doesn’t have to monetize all the embedded “smart” products they’ve installed over the past decade; he merely needs to use the insights generated from their IoT products to tell a story of “predictable” revenue (i.e., where, when and how much their products will need replacement). To accomplish this feat, he is empowering sellers to deliver insights and outcomes, while upskilling services teams to harness those

insights to improve customer engagement. Additionally, he is building consultative competencies into all customer-facing roles. These coverage adjustments allow him to accurately predict revenue two years, not two quarters out. Prediction #4 Half of manufacturing and distribution purchases will be made without a face-to-face interaction. Certain high-volume accounts and most of the rest of market customers will use expanded self-serve models. Data that comes through marketing/ alternative channels and self-serve is richer, more insightful, and actionable than ever before. Industrial sales forces with e-commerce achieve 15% higher productivity and 20% lower sales costs with similar margins. Successful organizations will find the right mix of product offerings and customer segments to assign to selfserve and reserve traditional coverage for opportunities that need it most.

Prediction #5 Manufacturers will add a new chair to the C-Suite: the Chief Revenue Officer (CRO). As focus shifts from point-to-point problem-solving to holistic business outcome solutioning, enduring leaders know that buyers are looking for more support both upfront and on the back-end of the purchase process. Organizations must align pre-sales, sales, and post-sales activities to create a seamless customer experience. In 2020, 23% of respondents across industries reported having a CRO, but <5% of manufacturers surveyed had a combined commercial leader. Only by having a coherent go-to-customer model across purchase stages will sales forces be able to win, maintain and grow incremental spend. First step: Conventional silos between marketing, sales, and service will not only fall—they will no longer be tolerated. Driven by evolved buyer journeys, executive leaders will force each commercial department to coordinate, collaborate and win as a team. continued

Manufacturing Outlook / March 2022

FEATURE STORY Prediction #6 Marketing and Service will have revenue quotas.

be funded—hence the need for quota expansion.

To reach buyers how and where they want to be met, leading manufacturers are creating cultures of continuous and seamless engagement models that span marketing, sales, and service. Integration of the commercial team allows for collaboration across the buyer journey and provides long-term innovation selling. New tools and roles provide targeted messaging, making marketing revenue generation measurable. These sophisticated offerings require a robust post-sales strategy through service teams and imply a greater reliance on existing customers for expansion selling. All of which comes at a price that must

First step: Marketers and commercial service organizations’ production will be measured, and compensation and incentives will be aligned to key sales objectives and revenue growth. Conclusion As the last two years have shown, nothing is a given. But enduring leaders (and those who want to allocate resources towards likely first steps) will most definitely continue to invest in their commercial teams to drive culture and differentiated growth. About the authors: Alexander Group is a revenue growth management consulting firm. For more information, please visit alexandergroup.com. n

Manufacturing Outlook / March 2022

COVER STORY

Reducing Emissions: How Can Companies Be Greener While Increasing Their Profits? By: Liran Akavia

Never before has reduced emissions been such a high priority for manufacturers - particularly those in energy-intensive industries like cement, steel, chemicals, and glass. Today, factories and production lines in these industries are measured against their targets for CO2 reduction almost as much as they are judged for other objectives like quality, throughput, yield, and energy efficiency. With increasing government regulations, public awareness, and even direct consumer pressure, it’s no wonder that many are even aiming for zero emissions (or “net-zero”) in the next few decades.

But cutting emissions isn’t like any other objective. As many manufacturers are already painfully aware of, reducing the carbon footprint of a production line or factory comes with significant challenges. Emissions Reduction Conflicts With Other Production Objectives

Even before decarbonization became a priority, manufacturers were already having to juggle multiple, conflicting objectives: increasing yield and quality at the same time; reducing energy costs while increasing throughput, and so on. The push to reduce emissions has added yet another objective to the mix - one that conflicts with almost every other objective at any production line. How can manufacturers be expected to keep up with demand and consumer expectations - with the constant pressure to improve yield, throughput, and quality - while simultaneously drastically reducing emissions? continued

Manufacturing Outlook / March 2022

COVER STORY Manufacturers are already pursuing several approaches to this challenge, to varying degrees of effectiveness; from CO2 capture and storage technologies to alternative fuels and raw materials to more careful attention to energy efficiency. But still, an inherent tension exists between manufacturers’ other core objectives (yield, quality, throughput, scrap, etc) and many of these emissions reduction efforts - particularly the latter two.

Manufacturers Are Limited By What Is Humanly Possible

Emissions, Like Other Inefficiencies And Losses, Are Rooted In The Manufacturing Process

If process efficiency is the key, then why haven’t energy-intensive manufacturers simply doubled down on efficiency? After all, many of the manufacturing industry’s best minds are being applied to just that mission on production lines throughout the world.

To understand the source of this tension, and to overcome it, we must first appreciate that the root causes of emissions usually stem from inefficiencies in the production process itself. Not coincidentally, this is the same place process engineers will usually find the root causes of problems relating to throughput, yield, quality, and so on. For example, when it comes to general energy efficiency, manufacturers would be more than happy to use less power (and save on energy costs in the process). The problem is they still need to maintain or even improve their existing throughput, quality, and other factors. Squeezing more out of less power requires a much more efficient production process. Another example would be in the cement manufacturing industry. Many cement manufacturers are already substituting fossil fuels for more carbon-neutral alternative fuels like recycled waste - but these alternatives can wreak havoc with their production processes, so efficiency is often sacrificed as a result, particularly when it comes to quality metrics. Running a more stable and efficient production process with fuels that are inherently less stable requires a highly-efficient production process.

Process-Based Artificial Intelligence - Optimizing Conflicting Production Objectives This problem is in great part what has spurred the rise of Industrial Artificial Intelligence. Machine Learning algorithms are uniquely capable of analyzing unlimited quantities of data continuously, in real-time.

The problem is that process experts and engineers have always been limited to manual methods of analysis. It’s impossible to know all the “unknown unknowns”; instead, process experts must rely on their expertise, experience, and sometimes intuition, to come up with theories about why process inefficiencies occur. Then, together with the operators, they need to act quickly enough, before it’s “too late” to prevent significant losses or inefficiencies.

But manufacturing data is uniquely complex. It’s not enough to just run a black box algorithm on the data and hope for the best. There are so many unique complexities to take into account - from parallel processes to dynamic traceability, raw material variances, dynamic external factors, market demand, and much more. A “generic” algorithm won’t take these complexities into account, and the result will be inaccurate or garbled insights that don’t reflect the reality on the line. Process-Based Artificial Intelligence™ is a new technology, developed by Seebo, that overcomes this challenge, by embedding process expertise into advanced Supervised Machine Learning algorithms. This includes modeling the entire production process - including raw ingredients, and even external factors that may influence the process like weather or temperature.

But it simply isn’t humanly possible to analyze all the data, all the time, while bearing in mind all the interrelationships and correlations between different setpoints, as well as the constant dynamic changes occurring on the line at any given moment. While many analytics tools exist to help make this process more efficient, they still don’t alter the fundamental reality. Even with the help of self-service analytics platforms, process experts are still limited by what is humanly possible to analyze.

By understanding the unique details and complexities of each individual production line, Process-Based AI can empower process experts and production teams to find a path through their competing objectives, and forge a production process that is more efficient in all of those areas without sacrificing any one of them. continued

Manufacturing Outlook / March 2022

COVER STORY Reach Full Production Potential With Artificial Intelligence The global optimization described above naturally opens up new horizons for manufacturers, enabling them to reach the full potential of their production processes. However, before this can be done, the algorithms must first quantify the unrealized potential, to understand where improvements can actually be made. After all, manufacturers will never reach 100% efficiency; there will always be certain levels of production losses and inefficiencies on any given line. Quantifying the precise areas where inefficiencies can be eliminated, and improvements can be made is crucial. Here, again, the problem of conflicting objectives comes into play. What does overall “efficiency” look like if a production line could be doing very well in one or two areas (e.g. throughput and quality) but poorly in another (e.g. emissions or energy efficiency)? AI combines all the production objectives on a line into a single, “multidi-

Seebo Operating Envelope: Know the most important process parameters & their optimal ranges | Credit: Seebo

mensional objective model,” which provides a unified view of overall process efficiency. Using this model, AI can quantify untapped process potential on the line. Using Automated Root-Cause Analysis, the algorithms then identify the hidden causes of inefficiencies that prevent the line from reaching its potential.

But the core value of Process-Based Artificial Intelligence really shines through in delivering precise setpoints and process ranges necessary to actualize that previously-untapped potential and realize the full potential of the production line - across quality, yield, energy, throughput, emissions, or any other objectives and constraints set by the manufacturing team. Of course, all of this can only provide value if the operators on the factory floor can act on these insights in real-time. Using AI, process experts can empower their production teams to do precisely that, by defining Proactive Alerts which inform the operators as soon as the production process deviates from the ideal setpoints and ranges - together with precise Standard Operating Procedures on how to correct the process inefficiencies as they occur. Greener And More Profitable With AI, Factories Can Be Both

Seebo Process Potential Identifier: Quantify your untapped process potential | Credit: Seebo

Production lines and processes possess a significant untapped potential continued

Manufacturing Outlook / March 2022

COVER STORY particular production line. For some manufacturers this will enable them to produce more while consuming less energy; for others, it will mean finally knowing precisely how to run a stable, efficient production process using alternative fuels and/or raw materials. But for manufacturing in general particularly energy-intensive industries - this is a watershed moment. Instead of juggling and trading-off between conflicting objectives and constraints, manufacturing executives can finally realize the full potential of their production lines and run factories that are both greener and more profitable. n

Seebo Proactive Alerts: Prevent inefficiencies before they occur | Credit: Seebo

that’s simply waiting to be unlocked. Using Process-Based Artificial Intelligence™, the “conflicting” objectives manufacturing teams struggle with daily - quality, throughput, yield, energy efficiency, emissions, scrap can be optimized together. Production processes can achieve global, continuous optimization, rather than piecemeal, localized optimization. This is as true for the overarching “conflict” between running a more profitable production line or factory, and a greener, more sustainable one.

By quantifying precisely how much untapped potential for improved efficiency exists on the line, and then knowing precisely what conditions to maintain on the line to reach maximum efficiency, process experts can navigate a way towards greater profitability - with higher quality, throughput, and yield for example while still significantly decreasing their emissions levels. The precise potential and means of doing so will vary depending on the industry, the individual manufacturer, or even the

Author profile: Liran Akavia is the COO and co-founder of Seebo. He is a serial entrepreneur and sales leader who specializes in the fields of AI and manufacturing - particularly in reducing waste and quality losses. Before founding Seebo, Liran co-founded and led Playfect, which manufactured millions of gaming accessories that were sold across more than 35 countries, before being acquired in 2013. Liran has lived and worked in Israel, Australia, China, and France.

Manufacturing Outlook / March 2022

CASS INDEX OUTLOOK

Cass Transportation Index Report by CASS INFORMATION SYSTEMS, INC.

Cass Freight Index - Shipments U.S. freight volumes regained ground in February after a significant January Omicron impact, with the shipments component of the Cass Freight Index up 8.6% from January, and up 3.6% y/y. The 3.6% m/m (SA) increase in the shipments component of the Cass Freight Index reversed almost half of the 7.4% Omicron-related decline in January. Omicron effects lingered into February, so we would expect further sequential improvement in March. War-related effects on freight volume

are likely to be small in the nearterm, but higher energy prices will have an increasingly negative effect over time. Freight Expenditures The expenditures component of the Cass Freight Index, which measures the total amount spent on freight, rose 10.6% m/m in February to 4.453 after an 8.9% Omicron impact in January, and was up 42% y/y. On an SA basis, expenditures rose 7.0% m/m, mostly on the rebound in shipment volumes, but higher rates also played a role.

On a two-year stacked basis, the Expenditures component of the Cass Freight Index was up 66% in February, with shipments up 8% and rates up 54%. This index rose 38% in 2021, after a 7% decline in 2020 and no change in 2019. Tougher comparisons in the coming months will naturally slow these y/y increases, but just using normal seasonality from here, the increase in 2022 will still be about 25%. Inferred Freight Rates A simple calculation of the Cass Freight Index data (expenditures continued

Manufacturing Outlook / March 2022

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

CASS INDEX OUTLOOK divided by shipments) produces a data set of inferred freight rates that explains the overall movement in cost per shipment. The freight rates embedded in the two components of the Cass Freight Index accelerated to a 37% y/y increase in February from 35% in January. Cass Inferred Rates rose 1.6% m/m on a seasonally adjusted basis in February, setting another new record. The m/m increase is mainly as Omicron-related effects on capacity continue to push rates higher, which will continue to impact new contract rates for a few more months. However, in early March there are signs of lower spot rates despite the large increase in fuel prices. Though Class 8 tractor capacity remains tight and is at increased risk if the Russia/Ukraine war worsens the chip shortage, we are seeing tangible signs of improvement in driver availability, which could begin to slow the trend in freight rates. As the railroads continue to struggle, excess miles in the freight network are persisting, which also adds to these costs. Chassis production has only improved enough to turn the direction of the chassis fleet from contraction to slight growth, and the chassis fleet remains far from what is needed to address rail network congestion. After rising 23% in 2021, Cass Inferred Freight Rates are on a 23% trend again for 2022. The data set is diversified among all domestic 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® rose 12.6% y/y in February after an

upwardly revised 12.8% y/y increase in January to 158.0. Recognizing this data series trends below the ~20% increases in public TL fleet per-mile rates, we have fine-tuned the process with a broader information set to improve its reflection of the market. We estimate a 3% downward impact from longer length of haul (due to mode shift from rail to truck) on the Cass Truckload Linehaul Index.

manufacturing, just so happens to be concentrated in Odessa, Ukraine, an export hub on the Black Sea. These gases, purified in Ukraine but generated in Russian steelmaking, supply roughly half of the world’s neon, according to various estimates, and ~90% of U.S. chip-making neon supply, according to Techcet, specialty chemical consultants. Supplies of nickel, palladium, and other commodities are also at risk. Just as chip supply was starting to improve, the risk to auto and truck manufacturing supply chains has risen again. A worsening chip shortage could hit vehicle production and tighten trucking markets further, and the energy shock brings a whole different set of repercussions for the economy at large.

Adjusting for this, both sets of rates (Cass and public truckload carriers) are rising in the mid- to high-teens percentages here in early 2022. In other words, if length of haul was not increasing we would likely be reporting a ~16% increase in this index. (Though we don’t have much Q1 data from public fleets, ACT Research has a strong track record of forecasting these rates.) Excess miles, rising fuel surcharges, and accessorial fees are all factors which are not reflected in the Cass Truckload Linehaul Index, so the increase in total truckload cost, depending on how these factors shake out, is between the 13% y/y increase in the Cass Truckload Linehaul Index and the 37% y/y increase in the inferred rate (which, as a reminder, is a mix of all domestic modes). Strong freight demand and significant capacity limitations are continuing to press truckload rates higher. As intermodal network congestion gradually eases over the course of 2022, a reversal to shorter length of haul will likely add upward pressure to this index above and beyond market rate increases. Freight Expectations Energy markets aside for the moment, global supply of neon gas, critical for laser lithography in semiconductor

The spike in crude oil prices to $120+ per barrel as the U.S. moved to cut off Russian oil imports will cost U.S. consumers and slow freight demand. Truckload fleets pass through most of their fuel costs, but generally do not have surcharges on empty miles, so there is a modest financial hit to carriers. Shippers face a roughly 5% increase in U.S. truckload freight costs this year just from adjusting fuel surcharges to higher prices, assuming things settle down a bit from here. In the week after the war started, U.S. retail gasoline prices jumped 50c per gallon and diesel surged 75c to a record $4.85 from $4.10 per gallon. In a week, this added about 4% to the cost of truckload freight, about 12c/mile in fuel surcharge. But spot rates have not risen to account for the higher fuel price, implying deflation net of fuel. Supply side progress continues, and we’ve lowered our GDP forecasts to account for significantly higher fuel costs. n

Manufacturing Outlook / March 2022

ISM REPORT OUTLOOK

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

ISM PMI at 58.6% for February 2022 Released March 1st

ISM PMI for the past 5 years

FEBRUARY 2022 58.6%

Expanding Contracting

continued

Manufacturing Outlook / March 2022

ISM REPORT OUTLOOK INSTITUTE FOR SUPPLY MANAGEMENT®

Analysis by

reportonbusiness Economic activity in the manufacturing sector grew in February, with the overall economy achieving a 21st consecutive month of growth, say the nation’s supply executives in the latest Manufacturing ISM® Report On Business®. The February Manufacturing PMI® registered 58.6 percent. The Prices Index registered 75.6 percent, down 0.5 percentage point compared to the January figure of 76.1 percent. The Backlog of Orders Index registered 65 percent, 8.6 percentage points higher than the January reading of 56.4 percent. The U.S. manufacturing sector remains in a demand-driven, supply chain-constrained environment. The COVID-19 omicron variant remained an impact in February; however, there were signs of relief, with recovery expected in March. A higher-than-normal quits rate and early retirements continued. The 16 manufacturing industries reporting growth in February — in the following order — are: Apparel, Leather & Allied Products; Textile Mills; Paper Products; Transportation Equipment; Machinery; Miscellaneous Manufacturing‡; Primary Metals; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Furniture & Related Products; Plastics & Rubber Products; Fabricated Metal Products; Food, Beverage & Tobacco Products; Nonmetallic Mineral Products; Chemical Products; and Petroleum & Coal 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 58.6% ®

PMI

Manufacturing grew in February, as the Manufacturing PMI® registered 58.6 percent, 1 percentage point higher than the January reading of 57.6 percent. The Manufacturing PMI® continued to indicate strong sector expansion and U.S. economic growth in February. All five subindexes that directly factor into the Manufacturing PMI® were in growth territory. The New Orders and Production indexes remained at strong levels.

2020

2021

2022

58.6% 50% = Manufacturing Economy Breakeven Line 48.7% = Overall Economy Breakeven Line

Manufacturing at a Glance INDEX

Feb Index

Jan Index

% Point Change

Direction

Rate of Change

Trend* (months)

Manufacturing PMI®

58.6

57.6

+1.0

Growing

Faster

New Orders

61.7

57.9

+3.8

Growing

Faster

Production

58.5

57.8

+0.7

Growing

Faster

Employment

52.9

54.5

-1.6

Growing

Slower

Supplier Deliveries

66.1

64.6

+1.5

Slowing

Faster

Inventories

53.6

53.2

+0.4

Growing

Faster

Customers’ Inventories

31.8

33.0

-1.2

Too Low

Faster

Prices

75.6

76.1

-0.5

Increasing

Slower

Backlog of Orders

65.0

56.4

+8.6

Growing

Faster

New Export Orders

57.1

53.7

+3.4

Growing

Faster

Imports

55.4

55.1

+0.3

Growing

Faster

Overall Economy

Growing

Faster

Manufacturing Sector

Growing

Faster

*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 (3); Aluminum (21); Aluminum Products (2); Cable Assemblies; Copper (2); Corn; Corrugate; Corrugated Packaging (16); Crude Oil (2); Diesel Fuel (14); Electrical Components (15); Electronic Components (15); Food Oils; Freight (16); Labor — Temporary (10); Lumber (3); Natural Gas (8); Ocean Freight (15); Packaging Supplies (15); Pallets; Paper Products (2); Plastic Resins (2); Polyethylene; Resin Based Products (13); Rubber Based Products (7); Semiconductors (13); Solvents; Soy Based Products (2); Steel* (19); Steel — Stainless (16); Steel Products* (18); Surfactants; and Zinc Compounds (2).

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.

continued 14

ISMWORLD.ORG

Manufacturing Outlook / March 2022

ISM REPORT OUTLOOK

ISM Report On Business ®

Manufacturing PMI®

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

New Orders (Manufacturing) 2020

February 2022

New Orders

2022

2021

ISM’s New Orders Index registered 61.7 percent. Of the 18 manufacturing industries, 13 reported growth in new orders in February, in the following order: Apparel, Leather & Allied Products; Paper Products; Transportation Equipment; Textile Mills; Computer & Electronic Products; Miscellaneous Manufacturing‡; Electrical Equipment, Appliances & Components; Petroleum & Coal Products; Chemical Products; Plastics & Rubber Products; Machinery; Fabricated Metal Products; and Food, Beverage & Tobacco Products.

61.7%

52.9% = Census Bureau Mfg. Breakeven Line

Production (Manufacturing) 2020

Production

2022

2021

58.5% 52.4% = Federal Reserve Board Industrial Production Breakeven Line

The Production Index registered 58.5 percent. The 10 industries reporting growth in production during the month of February — listed in order — are: Transportation Equipment; Paper Products; Computer & Electronic Products; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing‡; Primary Metals; Machinery; Fabricated Metal Products; Chemical Products; and Food, Beverage & Tobacco Products.

Employment (Manufacturing) 2020

2021

Employment

2022

52.9%

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

Supplier Deliveries (Manufacturing) 53.1% 2020

2021

2022 80

66.1%

ISM’s Employment Index registered 52.9 percent. Of 18 manufacturing industries, 10 industries reported employment growth in February, in the following order: Apparel, Leather & Allied Products; Primary Metals; Machinery; Electrical Equipment, Appliances & Components; Furniture & Related Products; Miscellaneous Manufacturing‡; Computer & Electronic Products; Transportation Equipment; Plastics & Rubber Products; and Fabricated Metal Products.

Supplier Deliveries The delivery performance of suppliers to manufacturing organizations was slower in February, as the Supplier Deliveries Index registered 66.1 percent. Fifteen of 18 industries reported slower supplier deliveries in February, in the following order: Paper Products; Textile Mills; Nonmetallic Mineral Products; Machinery; Food, Beverage & Tobacco Products; Furniture & Related Products; Fabricated Metal Products; Miscellaneous Manufacturing‡; Chemical Products; Plastics & Rubber Products; Petroleum & Coal Products; Computer & Electronic Products; Primary Metals; Transportation Equipment; and Electrical Equipment, Appliances & Components.

Inventories (Manufacturing) 2020

2021

2022

53.6% 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).

Manufacturing Outlook / March 2022

Inventories The Inventories Index registered 53.6 percent. The 12 industries reporting higher inventories in February — in the following order — are: Apparel, Leather & Allied Products; Textile Mills; Nonmetallic Mineral Products; Furniture & Related Products; Primary Metals; Transportation Equipment; Miscellaneous Manufacturing‡; Machinery; Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Computer & Electronic Products; and Fabricated Metal Products.

ISM REPORT OUTLOOK

ISM Report On Business ®

Manufacturing PMI®

February 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

Customers’ Inventories ISM’s Customers’ Inventories Index registered 31.8 percent. No industries reported too high customers’ inventories in February. The 16 industries reporting customers’ inventories as too low during February — listed in order — are: Textile Mills; Fabricated Metal Products; Machinery; Transportation Equipment; Paper Products; Miscellaneous Manufacturing‡; Computer & Electronic Products; Wood Products; Petroleum & Coal Products; Nonmetallic Mineral Products; Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco Products; Plastics & Rubber Products; Furniture & Related Products; Chemical Products; and Primary Metals.

31.8%

Prices (Manufacturing) 2020

2021

2022

The ISM Prices Index registered 75.6 percent. In February, 17 industries reported paying increased prices for raw materials, in the following order: Nonmetallic Mineral Products; Printing & Related Support Activities; Textile Mills; Primary Metals; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing‡; Paper Products; Chemical Products; Computer & Electronic Products; Wood Products; Electrical Equipment, Appliances & Components; Furniture & Related Products; Machinery; Transportation Equipment; Petroleum & Coal Products; Fabricated Metal Products; and Plastics & Rubber Products.

75.6%

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

Backlog of Orders (Manufacturing) 2020

2021

Prices

2022

65%

Backlog of Orders ISM’s Backlog of Orders Index registered 65 percent. The 14 industries reporting growth in order backlogs in February, in the following order: Apparel, Leather & Allied Products; Furniture & Related Products; Textile Mills; Paper Products; Electrical Equipment, Appliances & Components; Transportation Equipment; Computer & Electronic Products; Food, Beverage & Tobacco Products; Petroleum & Coal Products; Wood Products; Fabricated Metal Products; Machinery; Plastics & Rubber Products; and Chemical Products.

New Export Orders (Manufacturing) 2020

2021

2022

New Export Orders ISM’s New Export Orders Index registered 57.1 percent. The nine industries reporting growth in new export orders in February — in the following order — are: Textile Mills; Transportation Equipment; Food, Beverage & Tobacco Products; Computer & Electronic Products; Plastics & Rubber Products; Fabricated Metal Products; Chemical Products; Miscellaneous Manufacturing‡; and Machinery.

57.1%

Imports (Manufacturing) 2020

2021

2022

55.4%

‡Miscellaneous

Imports ISM’s Imports Index registered 55.4 percent. The 10 industries reporting growth in imports in February — in the following order — are: Furniture & Related Products; Primary Metals; Nonmetallic Mineral Products; Transportation Equipment; Miscellaneous Manufacturing‡; Computer & Electronic Products; Machinery; Plastics & Rubber Products; Food, Beverage & Tobacco Products; and Chemical Products.

Manufacturing (products such as medical equipment and

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

Manufacturing Outlook / March 2022

NORTH AMERICA OUTLOOK

MARCH 2022

NORTH AMERICA OUTLOOK

The Good, Bad, and Ugly Scenarios for Manufacturing by Chris Kuehl To note that there is considerable volatility these days would certainly rank as the understatement of the year. The emergence of a full-blown energy crisis on top of the continued confusion around the supply chain, inflation projections, and the Fed’s possible response has left manufacturers without a great deal of direction regarding the rest of the year. There are basically three scenarios in play at the moment – a good, bad and ugly.

Manufacturing Outlook / March 2022

The Good Scenario asserts that growth in 2022 will be slower than it was in 2021 but it will not grind to a halt. The expectation would be growth for the manufacturing sector near 2.5% to 3.0%. This is based on three positive developments – a reduction in the energy inflation levels, a full rebound in consumer activity as the pandemic impact fades, and a return to some more normal levels of employment. These seem pretty unlikely at this stage but

hardly out of the question. Some kind of ceasefire or progress as far as Ukraine is concerned will open the possibility of Russian oil and gas flow, the restrictions in place due to the pandemic have largely faded already, and higher wages have been drawing more people back to work. The Bad Scenario holds that energy prices stay high and continue to account for as much as 70% of the inflation surge. There is no recovery in terms of Russian continued

NORTH AMERICA OUTLOOK

The job situation may still improve somewhat as wages draw people in but there will be resistance from employers unwilling to hike wages as high as the workforce seems to demand.

months (if not years) of decline. The commodity hikes in the metal sector are not quite as dramatic since Russia is not as dominant as it can be in energy, but there is an impact. North America could even benefit from this scenario as it will mean an emphasis on oil and gas production for many years to come and that stimulates both US and Canadian production. Wages continue to rise and that introduces the dreaded wage/price spiral in which price hikes stimulate demands for even higher wages.

That leaves The Ugly Scenario and it could be very ugly. If the Ukraine war escalates and more aggressive sanctions and punishments are exacted, then there will be a breakdown of the Russian energy sector that would mean many

Of the three scenarios, the most likely is the “bad” and that creates opportunities as well as threats. The desire for more energy will stimulate the manufacture of everything from pipelines to all the machinery involved

energy and the subsequent inflation surge begins to affect all aspects of the manufacturing community – from higher commodity price inputs to more expensive transportation. This scenario at least continues to assert the pandemic continues to fade as an economic factor.

in this expansion. There will be some dramatically different trends in manufacturing – declines in sectors such as automotive as shifts in demand are motivated by price hikes. Aerospace will likely slow as air travel starts to fade again. On the other hand, the machinery sector expands and so do those sectors oriented to high tech. Time will tell which scenario becomes dominant and we encourage manufacturers to hope for the best and prepare for the worst that they might experience from the current Chris Kuehl state of affairs. n

Manufacturing Outlook / March 2022

EUROZONE OUTLOOK

GLOBAL OUTLOOK

EUROZONE

Continued Expansion and Strength by Chris Anderson IHS Markit’s Eurozone Manufacturing Composite Purchasing Managers’ Index (PMI), stayed well above 50 at 58.7 in January and 58.2 in February. (The suppliers’ delivery time gauge is inverted in the calculation of the PMI.) Manufacturing production growth was supported by stronger demand and fewer delivery delays in February, with demand for eurozone goods up at the fastest pace since last August. Supplier delivery times lengthened at the weakest extent for over a year, but inflation is still high. There were stronger improvements at the consumer and intermediate goods producers. There was weaker

Manufacturing Outlook / March 2022

expansion at investment goods, but they still performed strongest overall. Heavy backlogs accompanied continuing increasing employment. THE UK saw production and new orders increasing in February at quicker rates, but new export orders were down for the fifth time in six months, with Brexit still an issue. Input price inflation remains high. The growth rate of UK manufacturing production went to a 7-month high in February, helped by stronger domestic demand, fewer raw material shortages, and easing global supply chain pressures. Cost increases are starting to moderate.

The PMI rose from 57.3 in January to 58.0 in February. Production and new orders rose across consumer, intermediate, and investment products. This led to increased job creation, with employment increasing for the 14th consecutive month. There were reports of increases in a broad range of materials, including chemicals, electronics, energy, foodstuffs, and metals. Car sales in Western Europe are still looking disastrous, with January sales down 6 percent, to an annual selling rate of 9.7 million units per year, versus a rate of 11.3 million per year in December. Lack of chips is a large part of the problem. Norway passenger car registrations in February saw plugins take 86.1 percent of the market, with 75.6 percent BEVs (full battery) and 10.5 percent Chris Anderson, plugin hybrids.n Staff Writer

GLOBAL PMI OUTLOOK

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

Prices Rise Omicron Spreading January 2022 Business Survey Insights According to our scatterplot, nine economies recorded ExpandingStrengthening; an additional seven reported Expanding-Weakening; two reported Contracting-Strengthening, and none reported ContractingWeakening from the prior month. In February, China and Australia

transitioned from contracting to expanding while Mexico and Brazil are still contracting. In addition to survey results, we try to point out challenges and opportunities manufacturers and service providers face in their markets. It won’t be possible to increase the manufacturing base in the U.S. without a cost-effective supply of energy. Depending on the product, energy can be 50 percent or

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

more of the cost. A competitive steel industry for instance is dependent on natural gas, metallurgical coal, and transportation of bulk minerals. We see today that the petroleum industry is being reconfigured, as countries and companies dissolve traditional relationships. Hopefully, the private sector and government can work together to keep energy from being a victim.

U.S.

continued Manufacturing Outlook / March 2022

GLOBAL PMI OUTLOOK ISM U.S. Manufacturing PMI™ While February is a short month sandwiched between two 31-day months, it still performed well (58.6, +1.0). It showed improvement over January and appears to be sustainable as we look ahead to March and beyond. Recently, oil hovers above $90 per barrel and there is talk of $125 per barrel. On top of that, many global component suppliers, whether by mandate or Covid, shut down operations completely at the early stages of Covid and are still trying to compensate for their lost production time. The increased energy costs and commodities pricing pressures have spread across many commodities – metals, chemicals, agricultural, energy, and electronics, appear to be among the hardest-hit groups. The table below and to the right exhibits the 12-month performance from Mar 2021 to Feb 2022. The 12-month performance for the PMI components depicts growth in output, weak employment, and insufficient inventory replenishment across a broad spectrum of products. We look for these trends to remain in place during 2022.

+1.5), a contrarian in that it signals slower delivery times above 50.0 as economically bullish, are still stretched. New Orders Minus Inventories: This key spread rose to 8.1 (+3.4), signaling New Orders are improving and Inventories are growing at a pace very close to January’s rate. We like to see New Orders typically outpace Inventories by an average of 6-8 points. The outlook for growth in supply chains should improve monthly during the year. Customers’ Inventories: The index (31.8, -1.2) for raw materials, components, and finished goods was “too low” for the 65th consecutive month. The index has been under 40 percent for the past 19 months. This is an indication that buyers are still struggling to keep plants synchronized with their supply chain. It appears that priorities for 2022 will continue to be unraveling inventory issues in many supply chains.

Prices: The Manufacturing Prices Index (75.6, -0.5) declined slightly in February. Recovery of costs related to inflation is a major challenge. The 16 manufacturing industries reporting growth in February — in the following order — Apparel, Leather & Allied Products; Textile Mills; Paper Products; Transportation Equipment; Machinery; Miscellaneous Manufacturing; Primary Metals; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Furniture & Related Products; Plastics & Rubber Products; Fabricated Metal Products; Food, Beverage & Tobacco Products; Nonmetallic Mineral Products; Chemical Products; and Petroleum & Coal Products. The only industry reporting a decrease in February compared to January is Wood Products. (* indicates reports of both increases and decreases in market pricing which we interpret indicates a turning point in the market).

According to the press release, “The past relationship between the Manufacturing PMI® and the overall economy indicates that the Manufacturing PMI® for February (58.6 percent) corresponds to a 3.5-percent increase in real gross domestic product (GDP) on an annualized basis.” Drivers: New Orders (61.7, +3.8), Production (58.5, 0.7), Employment (52.9, -1.6) and Inventories (53.6, +0.4) boosted Manufacturing activity in February. Supplier Deliveries (66.1,

continued

Manufacturing Outlook / March 2022

GLOBAL PMI OUTLOOK A Quick Word On Capacity Eleven industries are operating below their pre-pandemic capacity utilization levels in the U.S., contributing to output limitations. Looking at the relative importance, these eleven groups comprise 50% of industrial production.

Manufacturing Outlook / March 2022

ASIA OUTLOOK

MARCH 2022

ASIA OUTLOOK by Christine Casati

MAJOR DEVELOPMENTS: COVID-19, WAR AND TRADE; IMPACTS ON MANUFACTURING

COVID-19, War, and Trade; Impacts on Manufacturing As of March 1st, daily cases breached 55,000 with a 4-day lockdown looming (March 26th-April 3rd). China “offered” to help in late February, ordering Hong Kong to ratchet up measures and mandate city-wide testing, sending in teams of medical workers to assist. The Hong Kong government now plans to test the entire population of 7.4 million three times in March. After enjoying a relatively peaceful virusfree environment for months, people there are experiencing overwhelming panic and confusion. There has been no clear information released to the media (as of this writing) on how the testing plan will be implemented.

Supermarket shelves are now empty and quarantine camps are strained. There have not been enough hospital beds for all those testing positive with serious cases. As Omicron surges, hospitals cannot keep up with the deaths. China has promised unlimited supplies of food and medical equipment, which started arriving on March 1st. The U.S. government has warned against traveling there (Level 4). Hong Kong’s Covid death rate is now one of the highest in the developed world, with the elderly being both the most vulnerable and the least vaccinated. (NYT, Bloomberg)

IMPACT ON TRAVEL & BUSINESS The U.S. Consulate General Hong Kong and Macau has warned those planning to travel or reside there that children who test positive “are separated from their parents and kept in isolation until they meet local hospital discharge requirements” (U.S. State Department). Hong Kong’s rigid Covid-19 measures are among the strictest in the world. The talent pool is draining with no new arrivals. The number of people departing Hong Kong has risen dramatically and the Bank of America Corp analysts estimate that “2% to 3% of Hong Kong’s continued

Manufacturing Outlook / March 2022

ASIA OUTLOOK population could depart every month” once Covid peaks. There has been a mass exodus of Cathay Pacific airline pilots who have resigned and left Hong Kong over draconian hotel quarantines between flights. In the finance and investment sector, hundreds of expatriate employees of major U.S. financial institutions, including Citigroup Inc., Goldman Sachs Group Inc., Morgan Stanley, as well as hedge funds, asset managers, and private equity managers, have already been struggling with uncertainty over stable schooling and access to medical care for their families. Some have simply resigned. The current situation has further exacerbated the ongoing war for limited talent during a surge in the growth of Chinese investments and stock listings in Hong Kong. Some institutions may be forced to relocate

key employees to retain them. Others are providing special bonuses and perks, such as extra weeks of leave, more money for food, and even enticements such as cash vouchers for a night on the town when the city reopens. It is hard to predict how long these challenges will affect businesses in Hong Kong and more broadly the Greater China Region.

blindsided. Russia took advantage before it was too late, knowing it was going to invade Ukraine, using the Olympics to urge China’s President Xi to make one of the greatest foreign policy blunders of his career, leaving China on its own to walk a “diplomatic tightrope” with its largest trading partners, the United States, European Union and Japan (ASEAN).

CHINA, RUSSIA, AND TRADE

What is the potential fallout and implications for trade relations? If we look at China’s current level of trade with Russia, it is insignificant for China but significant for Russia. China is Russia’s No. 1 trading partner which accounts for 16% of the value of its foreign trade. But total trade with Russia only accounts for 2% of China’s total trade volume. That may change somewhat under the new “friendship” agreement involving 15 separate trade sub-

There is no doubt that China is having second thoughts about the February “no limits” friendship agreement with Russia during the Olympics in the wake of the invasion of Ukraine. As noted by Lingling Wei of the Wall Street Journal, the “ripple effects…may cost China dearly.” (WSJ 3/4/22). In trying to show solidarity with Russia against the dominant U.S., China was

continued

continued Manufacturing Outlook / March 2022

ASIA OUTLOOK agreements. But these will be tested given Russia’s ongoing invasion of Ukraine. China agreed to eliminate restrictions on imported wheat and barley from Russia and has signed significant energy import agreements with GAZPROM (natural gas) and Rosneft (oil). Last year, Russia was China’s secondbiggest supplier of oil (16%) after Saudi Arabia. China also bought 5% of its natural gas imports from Russia. Russia has also guaranteed that China will get “as much coal as it needs,” up to 100 million MT with no timeline specified. In the meantime, China has opened three new coal mines and upgraded others to ensure they do not face another energy crisis anytime soon. Other significant trade developments concern the financing of these future commodity transactions with Russia in the wake of expanded economic sanctions on Russia. Reuters reported on March 1st that “China’s coal imports have stalled because buyers couldn’t secure funding from state banks worried about international sanctions.” And while the China Banking and Insurance Regulatory Commission on March 3rd announced it would not be participating in sanctioning Russia, it has indicated it does not want to run afoul of U.S. and European economic sanctions which may impede its own foreign trade transactions. It has also announced that two of China’s major banks, ISCB and the Bank of China, will restrict the financing of Russian commodities to remain compliant with U.S. and EU sanctions. Although the energy sector is not subject to sanctions, Beijing will still need to consider “practical constraints” on its dealings with Russia, given that so many Russian banks are sanctioned.

Manufacturing Outlook / March 2022

DEVELOPMENTS IMPACTING CHINA’S MANUFACTURING There are growing impacts on China’s manufacturing sector which have nothing to do with Russia. One is the ongoing zero-tolerance Covid restrictions. Another is the dramatic increase in government intervention over the past year to constrain some private industrial sectors and control the flow of information in all enterprise sectors. On the Covid side, restrictions and lockdowns are jumping from one locality to another, in some areas severely restricting the movement of employees from village to village surrounding major manufacturing operations, impeding their ability to get to their workplaces. The same restrictions impede trucking and the delivery of raw materials and supplies. In the steel industry, China is systematically curtailing the production capacity of many smelters, especially those producing low-value, low-grade steel, (carbon, low alloy), which use up similar amounts of energy as higher grade, more valuable steel materials. Some smelters have closed down entirely and others have been told to limit production to 50% of capacity. This has made these materials and the products derived from them more costly and more difficult to acquire. It has also created gaps and a lack of synchrony with national and global market prices. The government has used a variety of measures, such as environmental restrictions and energy limits to reduce private enterprise smelting. Some smelters simply close down before inspections occur because compliance is so costly. CHINA saw a slight improvement in its manufacturing sector in

February, and a slight improvement in production coupled with the fastest increase in total new orders since last June. Purchasing activity increased in February. New export orders fell again, and there was a further drop in employment, for the seventh month running, which contributed to a fresh increase in backlogs. Optimism regarding future production improved to an eight-month high in February. Chinese car sales were up 1 percent in January at 2.53 million units., with passenger cars up 7 percent to 2.19 million units, commercial vehicles down 26 percent to 340,000 units, and NEVs up 140 percent to 431,000 units. The PMI rose from 49.1 in January to 50.4 in February. CHINA’S PERSONAL INFORMATION PROTECTION LAW (PIPL) Another notable development creating confusion and concern: China’s Personal Information Protection Law, which was adopted in August and took effect on November 1st, 2021. It has created confusion over how to comply in every sector. The Standing Committee of the National People’s Congress stated goal in passing this law is to “protect the rights and interests of personal information, regulate personal information processing activities, and promote the rational use of personal information.” One provision of the law requires that any cross-border data transfers be submitted first to the Cyberspace Administration of China. Violations could result in huge fines. Every company in every sector is busy trying to figure out how data handlers and controllers should communicate and receive consent from individuals and legal entities. There are so many unanswered questions that it is expected to take months for sector-specific continued

ASIA OUTLOOK solutions to emerge. In the meantime, companies are reviewing their data management practices and privacy policies, securing and reviewing the implementation rules as they become available, and hoping for the best. This law affects all companies, not just internet companies, which share data and/or transact business, including ride-hailing apps, food ordering apps, google apps, etc. The only sector which is not subject to these provisions is, well, the government itself. Next month we will return to our deep dive into China’s Belt and Road Initiatives after we look at China’s economic and trade relationships with Ukraine, their mutual trade exposure, and the damage that has been done by the ongoing invasion.

In Japan, their PMI slipped from 55.4 in January to 52.7 in February. Japan saw a softer expansion in February, with a renewed fall in production coupled with near-stagnation in new orders. Input prices rose at the fastest pace since August 2008, and there was a survey-record increase in stocks purchases amid delays and shortages. There was a new rise in COVID-19 cases, and ongoing material shortages contributed to a renewed reduction in production levels, while new orders almost stagnated. New export orders rose for the sixth successive month, from strong demand for automotive and electronic components from China. Employment was up, though at the slowest pace since November 2021.

India saw production and new orders expand at an accelerated rate in February, and across the three sub-sectors, with consumer goods being the best performer. The PMI rose from 54.0 in January to 54.9 in February. Input price inflation softened to a six-month low, and business optimism improved to a four-month high. Employment was down at the softest pace for three months. Author profile: Christine is cofounder 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

Manufacturing Outlook / March 2022

METALS OUTLOOK

MARCH 2022

METALS OUTLOOK

by Royce Lowe Of Nickel and Aluminum and Other Things Although the price of hot-rolled coil from U.S. mills is running at around half what it was just a few months ago, the consensus seems to be that things will get tight again, but that we won’t see prices approaching $2,000 per ton for a long time yet. People were “caught out” by the

alarming series of price increases in 2021, and were refusing offers at $1,300 per ton, when the price later hit $1,960 per ton sometime last fall. The whole scenario was complicated by imported steel that arrived late last year, and an ensuing lack of demand. A further complication was

a recent $50 per ton increase issued by Nucor. Suffice it to say that we seem to be in a situation where buyers will place orders very carefully, after much rumination, for a goodly while. While steel prices took a battering, those of non-ferrous metals, continued

Manufacturing Outlook / March 2022

METALS OUTLOOK to an all-time high of 58 million tons. For the first nine months of 2021, Indonesia produced more than India, thus establishing itself as the world’s second-largest stainless steel producer. Indonesia has an abundant supply of nickel, and could well add to its stainless steel production capacity, expanding it by more than six percent in 2022.

particularly nickel and aluminum, are setting records. The CEO of Alcoa, the number one U.S. producer, recently reiterated his company’s position to not add new aluminum capacity, suggesting the world shouldn’t rely on the company to help ease supply problems. Alcoa’s position, as stated last November, is to build only low-emission production facilities using technology developed by a joint venture with Rio Tinto called Elysis. This process will produce cleaner, even cheaper aluminum than will conventional smelting. The rationale behind the decision not to go ahead with conventional smelting is that by the time it is designed and construction started, Elysis as a package will be ready to go. The price of aluminum recently reached an all-time high, with the Russian invasion of Ukraine compounding ongoing shortages of the metal. Century Aluminum Co., the second-largest U.S. producer, is pondering restarting some of its facilities. This may be picnic time for U.S. aluminum producers, but particularly for Canadian producers, where the majority of U.S. primary aluminum comes.

Nickel, that very necessary component in the manufacture of stainless steels, heat-resisting alloys, and EV batteries, is also enjoying its place in the sun. In the past six months its price has gone from $8.80 per pound to almost $14 per pound, and at time of this writing has hit $43,000 per ton – so fast and dramatically that trading on the LME was stopped. It should be noted that Russia supplies some 18 percent of China’s imports of refined nickel, and some 12 percent of its aluminum shipments. This in itself could serve to exacerbate the global situation. Prices quoted for non-ferrous metals - though not official LME figures serve to show the rapid increases that have occurred in the past month, data dated March 4. Copper: from $4.47 to $4.83 per lb.; Aluminum: from $1.4 to $1.75 per lb.; Nickel: from $10.7 to $13.65 per lb. to $21.50 per lb. ; Zinc: from $1.66 to $ 1.83 per lb. MEPS, the UK-based steel analyst, estimates that stainless steel production increased by a doubledigit percentage in 2021, driven by expansions in Indonesia and India. Global growth is expected at three percent in 2022, pushing production

Chinese stainless steel makers were the victims of curbs by government officials, but the mills are expected to regroup in 2022, add new capacity and produce some 31.5 million tons in 2022. Supply is unable to meet demand in Europe, where less than 7 million tons is forecast for 2021. A recovery in production in 2022 is foreseen. In the U.S., there are complaints from customers that they cannot purchase stainless steel cold-rolled coils and sheet directly from the U.S. mills. U.S. mills, in some cases, depend on imported slab and hot band for their own production, and have thus sought a Section 232 exemption. U.S. producing mills have in some cases put customers on allocation, preferring to produce the more profitable, exotic grades of stainless rather than the 304 types. The supply-demand situation for both aluminum and nickel looks for the moment to be on the critical list. The LME stock figures, a fair barometer of the global situation, for these metals, are on the decrease. The global metal situation is, to say the least, volatile, and looks like stayingthat way for some time. Author profile:

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

Manufacturing Outlook / March 2022

INNOVATION OUTLOOK

HARNESSING THE POWER OF SMART MANUFACTURING CESMII (Clean Energy Smart Manufacturing Innovation Institute), a Manufacturing USA® institute, accelerates smart manufacturing adoption through advanced technologies and intelligence to improve decision making, sustainability, productivity and energy efficiency. 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 Smart manufacturing optimizes business, technology, infrastructure, and workforce practices using engineered systems that integrate information technology with operational technologies. With smart manufacturing, manufacturers have the right information and tools to make better, real-time decisions. Smart manufacturing integrates previously siloed manufacturing processes using advanced sensors, controls, platforms, and modeling technologies to help U.S. manufacturers of all sizes. Bringing together information and operations will create, among other things, dynamic plant configurations and readiness; flexible product component and material configuration; just-in-case optimized inventory and management; adjustable ordering to reduce premium shipments; and customizable order options for customers.

Approach to Innovation and Collaboration

LEARN MORE

CONNECT WITH CESMII Los Angeles, CA 888-720-8096 cesmii.org

CESMII brings together dozens of partners in industry, government, and academia to focus on innovations that advance U.S. manufacturing competitiveness. This is done through programs such as: Test beds, application projects, services, and training enabled by the Smart Manufacturing Platform and Marketplace infrastructure Developing the nation’s first open platform and marketplace for secure, real-time data analytics, industrial applications, and manufacturing solutions Collaboration Space: a secure smart factory to demonstrate smart manufacturing technologies across the enterprise to validate productivity and profitability Workforce development including online courses, training for IT and manufacturing professionals, student courses, and smart manufacturing concepts in regional training

Advanced Manufacturing National Program Office, NIST | www.ManufacturingUSA.com | 301-975-2830 | amnpo@nist.gov 3.25.19

continued Manufacturing Outlook / March 2022

INNOVATION OUTLOOK

COLLABORATIVE PROJECT EXAMPLES “Smart manufacturing makes it possible for companies to reduce their energy use and save money on their energy bills by optimizing their manufacturing processes. In fact, increased investments in Smart Manufacturing could save American manufacturers $15 billion in annual electricity cost savings by 2035.” – Ethan Rogers, Program Director, American Council for an Energy-Efficient Economy

ENERGY REDUCTIONS IN CONTINUOUS STEEL CASTING: ArcelorMittal leads partners on this project to target zerodefect slabs in the continuous casting process by adopting smart manufacturing technologies and reducing overall energy intensity in existing state-of-the-industry operations.

FACTORY 4.0 EDUCATIONAL TOOLKIT: Penn State leads the development of a small-scale process simulator of machinery and software with smart manufacturing components for educational purposes. The system will develop communication and data storage architecture, optimize machine-learning algorithms, and develop educational modules and interfaces.

SMART MANUFACTURING WORKFORCE DEVELOPMENT MODEL PROGRAM: El Camino Community College leads the development and imbedded a smart manufacturing workforce model that leverages existing education and workforce training systems. This program is designed so that any curriculum, training component, or business development tool can be easily adopted and customized by organizations nationwide.

ENERGY-EFFICIENT CEMENT MANUFACTURING: University of Louisville leads the incorporation of smart manufacturing technologies and processes—modern monitoring, simulation and control systems - that will allow lower energy use through lowering firing temperature and times to reduce cost and environmental impacts in the cement making industry.

“We’re eager to share Savigent Technology and our passion for smart manufacturing with the CESMII network. These projects and initiatives will validate and increase productivity, energy efficiency and overall profitability, significantly improving the capabilities of participating U.S. manufacturing companies and their supply chain.” – Mark Besser, Vice President of Customer Success, Savigent Software

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

Manufacturing Outlook / March 2022

AFRICA OUTLOOK

MARCH 2022

AFRICA OUTLOOK

by TR Cutler Venture Capital and Global Investment: The African Growth Story for 2022 and Beyond When looking at indicators that predict the future African economy, none is as evident as foreign

investment. Heretofore, China and India have foreseen the economic opportunity of the African continent, people, and potential trajectory for extraordinary growth. While long overdue, the rapid announcements of venture capital, corporate funding,

and North American manufacturing participation is seeing demonstrable and dramatic upticks. Recently, Tage Kene-Okafor reported in TechCrunch that Egyptian social commerce startup Brimore raised continued

Manufacturing Outlook / March 2022

AFRICA OUTLOOK $25M led by IFC and Endure Capital. The Egyptian social e-commerce market will be worth over $14.8 billion by 2024. It can be attributed to the growth in online social sellers in the country, over 1.25 million them, helping little-known brands sell and distribute goods through different networks. Think of Etsy or Amazon as North American comparables. Brimore has seen impressive growth in the last three years; founded by Mohamed Abdulaziz and Ahmed Sheikha in 2017. Both founders witnessed how difficult it was for emerging brands to get products to the mass market due to the dominance of established brands, which built distribution infrastructure.

Women and stay-at-home-moms Women, including stay-at-home moms, wanted to start their e-commerce shops but had no clue how to go about it, nor did they have products to sell. “We started working on Brimore with the mindset of actually manufacturing products ourselves. However, producing our products wasn’t the wisest decision at that time as it was a very assetheavy model,” said CEO Abdulaziz to TechCrunch in an interview. TechCrunch’s Kene-Okafor suggested that Brimore connects both worlds via an app as an omnichannel social commerce platform. Small and medium-sized suppliers could give these individuals, who double as

sellers and word-of-mouth marketers, access to these emerging products. Egyptian manufacturers have advertising and marketing solved while sellers start e-commerce businesses and earn extra cash. Over the past three years, Brimore claims to have grown around 400x in revenue. More than 300 suppliers with approximately 8,000 different SKUs from packaged foods, personal care, and household goods are on the platform. The social commerce platform has also built a network of 75,000 sellers (74% of them are women) covering 27 cities, primarily rural and remote areas, in Egypt. continued

continued Manufacturing Outlook / March 2022

AFRICA OUTLOOK The International Finance Corporation (IFC) and Endure Capital led the new financing round. Walid Labadi, IFC’s country manager for Egypt, said this is the corporation’s largest direct investment in the social commerce space globally. Other investors include fintech giant Fawry, Flourish, Endeavor Catalyst Fund. Existing investors who participated in its $800,000 seed round and $3.5 million Series A, such as Algebra Ventures (led both rounds), Disruptech, and Vision Ventures, participated. U.S.-based corporations participate in African startups

Cloud credits of up to $10,000 for 100 startups will be made available as part of this program. Handson technical support, executive mentoring, go-to-market resources, and customer engagements will also be offered to startups. This program follows Oracle’s recent announcement of the opening of its first cloud region in Africa to meet the rapidly growing demand for enterprise cloud services on the continent. The Oracle Cloud Johannesburg Region will boost cloud adoption across Africa while also helping businesses achieve better performance and drive continuous innovation. The opening marks Oracle’s 37th cloud region worldwide with plans to have at least 44 cloud regions by the end of 2022, continuing one of the fastest expansions of any major cloud provider.

Milwaukee-built trains for Lagos, Nigeria Brenda Ordonez recently authored a story for WeAreGreenBay.com profiling how trains manufactured in Milwaukee are playing an essential role in helping West Africa achieve its first operational metro system. Talgo Incorporated facility in Wisconsin recently completed two sets of brand new 10-car Metro Trains. The governor of Lagos State, his Excellency, Badajide Olusola Sanwo-Olu, recently met the acting Milwaukee Mayor Cavalier Johnson. According to the Lagos State Government, when the Red Line project is complete it will have 11 stations and will be the first operational metro system in West Africa. “We hope that this [purchase of the trains] will be the beginning

Brendon Petersen reported in Ventureburn that Oracle launched a program to support tech startups in Africa. Oracle, the multinational technology company headquartered in Austin, TX has announced a program to provide support to the value of $1 million for tech startups in Africa. The program will help accelerate their digital initiatives with the latest cloud technologies and business resources. Led by Oracle for Startups, the company will provide extra resources and support to technology startups across Africa over the next two years. continued

Manufacturing Outlook / March 2022

AFRICA OUTLOOK Author Profile:

Follow the money

of a mutually beneficial business relationship. Providing a source of livelihood for our citizens is all about providing jobs for our people and that is what we are doing. It is about ensuring that we can build our economy; people can move from one location to another, and businesses can grow,” explained Governor Sanwo-Olu. The first phase of the Red Line rail project will begin in Q4 2022.

Whether funding startups, building trains or investing in e-commerce, one need only follow the money to see that the efficacy in African investments is a trend. As journalists, we would say, “This story has legs.” The notion of an emerging market has always been considered with disdain or belittling. Finally, the power of 1.37 billion+ people is being recognized, honored, and valued. The money trail provides predictive analytics and opportunities for industry to interact with a continent of people whose numbers are only second to China and India. North American investors have woken up and are smelling the wonderful African coffee.

Thomas R. Cutler is the President and CEO of Fort Lauderdale, Floridabased, TR Cutler, Inc., celebrating its 23rd 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. TR Cutler, Inc. launched two new divisions focusing on Gen Z and the African manufacturing sector. Cutler authors more than 1000 feature articles annually regarding the manufacturing sector. Over 5000 industry leaders follow Cutler on Twitter daily at @ThomasRCutler. Contact Cutler at trcutler@trcutlerinc.com. n

Manufacturing Outlook / March 2022

AEROSPACE OUTLOOK

MARCH 2022

AEROSPACE OUTLOOK by Royce Lowe Now it’s the 787 Boeing has been in trouble with the Federal Aviation Administration (FAA) for some time now, mostly because of its problems with the 737 Max. The latest move in this altercation is that the company no longer has the right to certify its 787 Dreamliner aircraft, as the U.S. Federal Aviation Administration (FAA) takes over the certification process on new jets. The FAA advised Boeing of its decision

to retain the authority to issue airworthiness certificates until it is confident “Boeing’s quality control and manufacturing processes consistently produce 787s that meet FAA design standards.” Boeing revealed at its January earnings call that it is looking at $5.5 billion in total costs for inspection and repair of Dreamliners, and for compensation of customers for lost flying, wiping

out its profits for the aircraft. Boeing hasn’t delivered any 787s since June, as the company and some of its suppliers attempt to explain and fix certain small structural defects caused in large part by the supply of sub-specification titanium and aluminum components - as previously reported here. In addition to the FAA’s authority over aircraft designs, the agency is also responsible for signing off on each continued

Manufacturing Outlook / March 2022

AEROSPACE OUTLOOK individual aircraft coming off the assembly line to ensure it meets quality levels and was built as designed. The agency said it would continue the inspections until it is confident manufacturing processes “consistently produce 787s that meet FAA design standards” and Boeing develops a plan to rebuild planes in storage. The FAA said it also wants to ensure the company’s “delivery processes are stable.” There are in fact over 110 787s that have been built but left undelivered while ongoing issues are resolved. It is estimated that repair of these aircraft will cost $2 billion, and that work will go on until at least the end of 2023. The present scenario reflects the ongoing tensions between Boeing and the FAA, particularly following their being at loggerheads for months over the 737 Max issue. On a lighter, more productive note, the year 2021 saw Boeing take more orders

than Airbus for the first time in three years, as the 737 Max came back on the market following its grounding, and the pandemic led to a record demand for freighters. As regards deliveries, the year saw 611 from Airbus and 340 from Boeing. China’s COMAC, Commercial Aircraft Corporation of China, is still struggling to get its C919 passenger jet off the ground but hopes to deliver one this year, some six years later than expected. The narrowbody jet began production in 2011, saw its first prototype in November 2015 and an inaugural flight in 2017. Technical issues and shipping delays have continued to hinder the aircraft’s progress, as has the Trump administration’s blacklisting of shipments of such equipment as flight controls and jet engines. Some 60 percent of C919 parts are supplied by U.S. companies, and special licenses are required from such

companies as General Electric and Honeywell. Although they tried, they could not get certification from China’s aviation regulator, CAAC, the Civil Aviation Administration of China, by the end of 2021, but are now aiming for 2022 certification and deliveries in 2022. The aircraft hasn’t been put through the requisite number of test flights; in fact, it has completed only 34 of 276. The C919 has a reputed range of 4,075 to 5,555 kms, can carry 168 passengers, and has currently 815 orders pending from 28 customers. Even with a price tag about half those of the 737 and the A320, the time is not yet ripe for the two major producers to fret about Chinese competition. n Author profile: Royce Lowe, Manufacturing Talk Radio, UK and EU International Correspondent, Contributing Writer, Manufacturing Outlook.

Manufacturing Outlook / March 2022

ENERGY OUTLOOK

MARCH 2022

ENERGY OUTLOOK

The U.S. Wind Rush by Jocelyn Bright According to Bloomberg Green, the US Bureau of Energy Management (BOEM), deemed 25 companies and consortia eligible to bid, on February 23rd, for the right to develop wind farms in the waters off New York and New Jersey, with more areas coming up for sale in the near future. This will give the winners the right to develop six lease areas, with a total area of just under half a million acres, in the New York Bight, a shallow stretch of the Atlantic between Long Island and New Jersey. This will accommodate between 5.6 GW and 7.0 GW of electricity. Some 500 wind turbines will supply electricity to the largest cities onshore, and will displace the coal and natural gas power plants presently being used. After three

bidding days in late February, the auction achieved $4.37 billion in high bids by six companies, who now have the right to proceed with projects of their choosing. The companies, with their corresponding bids and acreage, are shown in the chart below:

Late news tells us that German energy company EnBW has decided to exit the US offshore wind market and focus its future with offshore wind activities in Europe. The news comes only days after Attentive Energy LLC, a joint venture between EnBW and

continued

Manufacturing Outlook / March 2022

ENERGY OUTLOOK TotalEnergies, secured the second most expensive lease site in the New York Bight seabed lease auction. President Biden wants enough offshore wind farms to power 10 million homes by 2030, and is planning six more auctions, from California to the Carolinas. This is not the first auction of its kind in the U.S. The maiden auction in 2019 resulted in a joint venture of BP Plc and a division of the Norwegian oil giant Equinor jointly developing a wind farm near New York. This is the 816-MW Empire Wind 1 project, some 15-30 miles southeast of Long Island, over an area of 80,000 acres. This joint venture has qualified as a bidder for the upcoming auction. Empire Wind 1, originally scheduled to start up in mid-2025, has been put back to December 2026, due to legal and technical problems. Two further projects were won by the joint venture following selection in January

2021; Empire Wind 2 at 1.260 GW and Beacon Wind 1 at 1.230 GW, extending the JV’s contribution to around 3.3 GW. Meanwhile, over in Denmark, Vestas, the world leader in wind turbine manufacture, is preparing for the fabrication of a prototype blade representative of the 138 blades that Vestas will manufacture for the Empire 1 and 2 projects. The blades will be 115.5 meters (379 feet) long, and will soar 280 meters (919 feet) high. The blades are primarily made from fiberglass and epoxy. Marmen Welcon, a joint venture between Marmen of Trois-Rivières, Québec and Welcon of Denmark, manufacturers of onshore and offshore wind towers, concluded a strategic alliance with Smulders, a leading European-based international steel construction company, for the manufacture of transition pieces for

offshore wind turbines for the U.S. market at the Port of Albany facility that is presently under construction. Transition pieces, involving heavy steel fabrication, are the lower support structures beneath offshore wind towers that connect the tower to the foundation. The strategic alliance with Smulders forms part of the largest offshore wind investment in the United States involving Marmen and Welcon, in partnership with the Port of Albany and Equinor, a broadbased energy company and a world leader in offshore wind. Marmen Welcon, together with Smulders, will be the first to manufacture offshore wind towers and transition pieces in the United States, at the Port of Albany facility whose development is presently underway. Production of offshore wind towers is scheduled to begin at the end of 2023. This project, at some $350 million, represents a major move forward in renewable energy production in the U.S. The Port of Albany development, together with Marmen Welcon and the alliance with Smulders, will show the way to the manufacture of offshore wind towers and transition pieces in the U.S. Offshore wind developers may now source all their large steel fabricated components foundations, transition pieces, and towers - in the U.S. Some 550 jobs will be created at the Port of Albany. This project is supported by the New York State Energy Research and Development Authority (NYSERDA). This project will effectively be good for U.S. manufacturing, for the U.S. steel industry, for the production of huge quantities of clean electric power, and for the growth of U.S. technical expertise in the renewable energy sector. We will follow with interest the ongoing progress of the five companies who recently entered the fray. n

Manufacturing Outlook / March 2022

AUTOMOTIVE OUTLOOK

MARCH 2022

AUTOMOTIVE OUTLOOK by Lawrence Makagnon

New Car Blues Those readers who have a three-year-old car, who just bought a new one, or are thinking of doing so, may be interested in the recent J.D. Power studies relating to the quality of said cars. J.D. Power, the automotive consulting group, puts out the results of a U.S. Vehicle Dependability Study (VDS) every year. This study looks at dependability over a three-year ownership period, meaning the vehicles evaluated in this 2022 ranking are 2019 models.

J.D. Power also puts out an Initial Quality Study that measures initial quality by the number of problems per 100 vehicles (PP100) considering owners’ experience within the first 90 days of ownership. A lower score indicates fewer problems and higher quality. The industry average for 2021 is 162 PP100, an improvement of 4 PP100 from 2020. Overall, 20 of 32 brands improved their quality scores from the previous year. J.D. Power says seven of the highest-rated brands in its 2019 Initial Quality Study were among the 10

highest ranked in this study. Technology and infotainment systems are the primary areas slowing improvement in initial quality and remain the most significant problem areas for new-vehicle owners. People are frustrated by the technology they are being sold to make their lives better, then finding it very often doesn’t work. Hence the frustration. The top complaint in 2021 is the Android and Apple Canplay connectivity, especially when the connection is wireless. The continued

Manufacturing Outlook / March 2022

AUTOMOTIVE OUTLOOK

majority of problems are softwarerelated. Overall, the mass-market models outperformed the luxury models, possibly because the complex technology being introduced into the luxury models doesn’t work as expected. The 2021 IQS study saw the Ram truck score the highest IQ rating at 128. This is the first time that Ram, a division of Stellantis, topped the study. Dodge, another Stellantis division, was second at 139. These rankings represented a major improvement. Lexus, third at 144, was the highest-rated luxury model. IQS ratings stretch to manufacturing facilities that produce vehicles with the fewest defects or malfunctions. Toyota Motor Corporation’s Motomachi 2 plant in Japan, which builds the Lexus LC, received the Platinum Plant Quality Award for producing vehicles with the fewest defects. Two plants, Nissan’s Smyrna 1 plant in Tennessee and BMW’s Dingolfing 2 plant in Germany, received the Gold Plant Award. The VDS report, now in its 33rd year, covers 184 specific problem areas across nine major vehicle categories: climate; driving assistance (new in 2022); driving experience; exterior; features/

controls/displays; infotainment; interior; powertrain; and seats. Participating in this year’s study were 29,487 original vehicle owners. The 2022 VDS ratings put Kia at #1; Buick at #2; Hyundai at #3; Genesis, Hyundai’s luxury brand at #4, Toyota at #5, and Stellantis’ Dodge at #6. So the automotive industry has switched from supplying cars with “things that broke” to furnishing cars with so-called infotainment systems, or phones that won’t connect. There’ll be a breakthrough here in the not-too-distant future. Meanwhile in 2021, in Europe, over 10 percent of new cars registered were running entirely on battery power. Korean brands did very well in Europe in 2021, in large part due to sales of EVs. Hyundai and Kia were number 1 and 2 in increasing their share of the market among members of the European Automobile Manufacturers Association. Kia was the best-selling brand in the UK in January. The Korean EV models were basically conversions of gasoline models, and even at that, they were doing well. They are now producing vehicles that are built to be electric, and are aiming to do even better. Toyota, the world’s number one car seller, reports increased profits despite

a projected cutback in sales due to the semiconductor shortage. Amidst shortages of chips and production parts, leading to a cutback of some 800,000 units, the company succeeded in surpassing figures quoted by analysts. As did its Japanese rival Honda. Much of Toyota’s success has been put down to “its procurement ability, including from parts makers, remaining very adept.” Nissan will invest $500 million to remodel its Canton Vehicle Assembly Plant in Mississippi to produce two new electric vehicle models. The plant is due to become operational in 2025. Chip shortages, metal prices, particularly nickel, and delivery problems have been turning the global automotive industry on its head for some time now. So, in addition to waiting in line to buy a car with complicated software and connectivity problems, the customer, when he gets to the front of the line, pays appreciably more for the car he ends up Lawrence Makagon, grappling with. n Staff Writer

Manufacturing Outlook / March 2022

CYBER SECURITY OUTLOOK

MARCH 2022

CYBER SECURITY OUTLOOK Backup Buddy: You Need One

By Ken Fanger Have you ever lost a sentimental photo or your Great Aunt Betty’s famous banana bread recipe file? If you have, then you understand the value of a backup. Now think about that same lost file being your business accounting software or your CRM. While backups are vital to business success, they are often not thought about until after a disaster occurs. Just this week, I was reminded of the importance of a good backup. A normal update caused the loss of a server that resulted in a catastrophic failure. This resulted in the loss of the entire server system. That was the scary part. The good part was that with the backup

Manufacturing Outlook / March 2022

solution that was in place, we were able to get the entire environment back up and running within fifteen minutes. This was a far cry from an experience I had with a not-yet-new client using a not-so-good backup solution. This future client had a server with all their documents, including the customer tracking and billing information. The server was running Microsoft SharePoint and was used to contain all their financial and operational files (you know, the important stuff). One of the employees clicked on an email with a ransomware attack hidden inside. The ransomware started to attack multiple devices on the network

and found its way to their server. When it reached the server, it wiped out everything it could find, locking individual files and encrypting the entire SharePoint site. I was called after they had tried to pay the ransom but never received the key. By this time, it had cost them a thousand dollars and they had nothing to show for their efforts. When I arrived on-site, my first question was “Do you have a backup?” They were very proud to share with me that they do backup and it was right here…at which point they showed me an external hard drive attached directly to the server. My heart sank as I knew the backup was continued

CYBER SECURITY OUTLOOK more than likely encrypted as well, seeing as it was directly connected to the server. My suspicions were confirmed as I opened up the drive and saw the encrypted files. I turned and asked, “Do you have an additional backup that is not connected to the server?” They looked at me and I could see their disheartened expression. There was no other backup. These stories are here to remind us of how important it is to have backups of vital information—and even more vital to assure that the backups are working and safe (and not connected to your server). The first step is to determine what you need to backup. Determining this is built on how critical your data is. Backup costs increase with the size of the backup and the number of times that you need to backup. In the industry, this results in two areas of focus: RPO (Recovery Point Objective) and RTO (Recovery Time Objective). Why are these important to a company when designing a backup? Let’s start with the RPO. This just means how often you should be taking a backup. Do you take a backup once a day? Every minute? Once every hour? This can be determined by the cost of lost data, or how much it would cost if you were to lose all your information. If you only take an order once a day and that order is for $500, then you could do one backup a day with an expected loss of $500. If you are performing hundreds of thousands of transactions every minute, worth millions of dollars, then the loss of information could cost you millions even with a short data loss. Knowing what you can lose determines what your backup should be and what the associated cost could be. Then there is RTO. This is how long you can be down before you are up and working again. In the first $500 example above, if it takes a day to get back up and running, that would result in a loss of $500. The second example, however, would result in millions of dollars lost if it took a day to recover. With these two decision points in

mind, it is now vital to understand what you need to do to protect your information.

that is stolen is like giving your server to the internet—and I strongly suggest not doing that.

Here is the list of steps to assure that you are backed up and safe.

5. Test your backups. The industry rule is: “A backup is only as good as its last test!” If you have not tested your backup in the last year, you may find out that it has not worked in a year. The time to find out that the backup has not worked is not when you need the backup to recover. Sadly, that is when many people find out the backup did not work as intended. There’s not much worse than realizing that you lost everything, all your vital documents and information, right after realizing that your server was attacked. As the world moves toward more compliance standards like CMMC, backups will continue to be vital to your company’s survival. Don’t wait until it’s too late to learn if you have a “backup buddy.” Make backups your buddy every day.

1. Have a backup plan. Backup plans lay out what you are protecting, why it is important, what it is worth, and how you can recover. This helps to ensure that everyone understands and respects the value of the backup and how it keeps your company running. 2. Assure your backups are ransomware resistant. Ransomware is one of the greatest threats to your backup. Hackers know that backups are the best way for you to recover from a ransomware attack. Considering that their goal is to make you pay the ransom, their efforts are thwarted when their target has a strong backup in place. When choosing a backup, remember: if they can destroy or encrypt your backup, you are more likely to pay them. Ask your provider if their backups are ransomware resistant. 3. Perform your backups. Every time I consult with a client and tell them this step, I get a chuckle. Clearly, if you have a backup, you should be performing a backup— but that is not always the case. I have walked into more than a few offices where they told me that they perform backups. When I asked to see the backup, I found out that it had not been done for months or even years! If you are not performing the backup, you don’t have a backup. Most of the time, people don’t realize they don’t actually have a backup until they need the backup – and that is too late. 4. Secure your backups. Backups hold all your information, so if someone gains access to the backup, they could have your financial and vital information. Make sure that you know where your backups are and that they are secure. If using a cloud provider, ask them for their security standard or encryption process. If you are keeping hard drives as backups, make sure you have them in a locked area. A backup

Do you remember (way back) in school on field trips when you were told to find a buddy to keep you safe? Well, your backup buddy will help you keep your important information safe and secure. If you need help with your backups or would like to get our Backup Guide, please contact us at info@ontechpartners.com and ask for backup buddy help. n Author profile:

Ken Fanger, MBA has 30 years of industry experience in the fields of technology and cyber security, and is a sought-after CMMC Registered Professional, helping manufacturers and contractors to meet DoD requirements for CMMC compliance. He is passionate about technology deployment, and his MBA in Operations & Logistics has helped him to be an asset in the designing and deployment of networks to enhance the manufacturing experience. Over the past 5 years, he has focused on 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.

Manufacturing Outlook / March 2022

TECHNOLOGY OUTLOOK

MARCH 2022

TECHNOLOGY OUTLOOK

How Can Manufacturers Overcome Planning and Supply Chain Hurdles and Future-Proof Success?

By Brad Pope | Head of Customer Success at Kinsa

Accurate Demand Forecasting The supply chain crisis that has persisted since the onset of the COVID-19 pandemic was only exacerbated by the emergence of virus variants like Omicron. Major labor shortages and further shipping delays led to empty grocery and pharmacy shelves, and we all know loyal customers leave brands when they consistently can’t

find what they need when they need them. Many manufacturers are asking themselves: what can we do to overcome today’s supply chain hurdles, and set ourselves up for future success? Leveraging technology in demand forecasting and workforce planning is one surefire answer.

Kinsa is an illness insights business with a mission to help predict, prepare for, and prevent illness outbreaks. We capture secure, anonymous illness data in real-time from millions of households across the country using our app-enabled smart thermometers. This data is ingested into a Machine Learning (ML) algorithm to fuel

continued

Manufacturing Outlook / March 2022

TECHNOLOGY OUTLOOK symptom spikes at a hyperlocal level. This takes a lot of the guesswork out of demand and workforce planning.

the earliest, most accurate illness forecast on the market. These illness insights are used by Consumer Packaged Goods (CPG) companies with illness products (i.e. brands that make pain relievers, decongestants, disinfecting products, tissues, tea, etc.) to support demand and workforce planning. While the images of bare shelves throughout the pandemic were shocking to many, in the case of Kinsa’s clients, the challenge of an ebbing and flowing illness season wasn’t totally unfamiliar. The timing and intensity of cold and flu seasons vary from year to year, and it has historically been almost impossible to forecast demand. Illness volatility is business volatility, and it has serious repercussions, particularly across the labor force. Since Kinsa’s illness insights are rooted in real-time illness and symptom data, they help companies stay ahead of these issues. The data necessary for accurate demand planning varies by industry, but most CPG companies benefit from specific demographic and geographic data to understand where customer demand is going to be. User-generated data aggregated with other relevant third-party data provides insight into how, when, and where customers need products, which helps to prevent out-of-stocks,

reduce loss of sales, and improve brand reputation (and loyalty). Predictive illness insights can show where illnesses and their attendant symptoms will rise and fall. Brands can leverage predictive illness insights to shift inventory based on customer needs before demand increases. It also allows brands to prepare in advance to meet demand, including workforce planning. Even with limited availability, making mindful decisions on the allocation of product, and putting product where it’s needed most, saves time and relationships. Kinsa’s illness insights help companies with more accurate demand forecasting because they’re uniquely rooted in real-time illness signals garnered from over two million households across the country. Kinsa collects temperature, symptom, and demographic data completely anonymously. Since Kinsa smart thermometers are used at home within hours of symptom onset, and long before someone goes to the doctor or visits a lab, Kinsa’s data is earlier than most other healthcare data systems (like the CDC’s), which have a reporting lag. This data is aggregated with other inputs of publicly-available health data, weather data, and more. The output is the creation of an illness Data Hub with predictive power to forecast when and where illness will rise up to 20 weeks in advance, while simultaneously monitoring in real-time for

Illness product companies can leverage real-time insights for decisions about when to send additional product. This ensures that shoppers find the products they need to feel better on the shelf in their time of need. Since Kinsa’s illness Data Hub includes publicly-available health data, brands can see what a typical flu season looked like in years prior, plus real-time data that shows where and how fast illness is spreading. This enables brands to understand how exceptional illness levels are relative to previous time periods, which ultimately helps them make informed decisions about things like demand plans. Planning challenges and supply chain constraints will likely permeate the manufacturing world for years to come. High-quality data is essential to effective planning, which can help brands overcome current and future supply chain woes. Using the best data available is the best way to plan, and then manage through fluctuating demand. n Author profile:

Brad has over 20 years of experience in using retail data to solve supply chain and planning problems. Before joining Kinsa, Brad was the Vice President of Analytics and Data Science at Retail Solutions Inc., where he built and led two technical teams, guiding the delivery of solutions that customers used to make decisions about supply chain, e-commerce, shelf assortment, on-shelf availability, sales, and category management. Brad has his MS of Data Science from Indiana University, instructed retail data analysis at Northwest Arkansas Community College for over five years, and is Scaled Agile Framework (SAFe) certified. As the VP of Customer Success at Kinsa, Brad ensures Kinsa’s Insights solutions and unique data signals are used to curb illness to the fullest extent possible.

Manufacturing Outlook / March 2022

ISSUES OUTLOOK

MARCH 2022

ISSUES OUTLOOK

by Royce Lowe

Japan, the Automation Nation In a recent analysis of the global manufacture and sales of automation equipment, The Economist magazine took an in-depth look at the progress of these industries in Japan. The world has just been through a period of material shortages and supplychain issues. These have been good times for those in the business of keeping factories running and supply chains intact. Japanese manufacturers of industrial equipment have seen orders surge as companies turned to automation in the midst of COVID-19, tight labor markets, and rising shipping costs.

Manufacturing Outlook / March 2022

World stocks of industrial robots have tripled in the past decade according to the International Federation of Robotics. Each year Japan supplies 45 percent of new ones. It also produces lots of other automation equipment. Japan has four major companies in the automation business; Keyence, Fanuc, SMC, and Lasertec; companies that have grown markedly over the past five years. Although not well-known names, these companies represent the same importance to industrial supply chains as do semiconductors.

When we look to just-in-time manufacturing, brought about by efficiency seekers such as Toyota and Panasonic, we note that Japan was ripe for a splurge into automation. It has been involved in replacing humans with machines for decades. This became important, even necessary, for domestic manufacturers after Japan’s workingage population began to shrink in the 1990s. Today, other rich countries are following the same path. Keyence and SMC see over half their income from abroad; Fanuc and Lasertec, even more international, see more than 80 percent of theirs. continued

ISSUES OUTLOOK Some of the new overseas demand results from the world’s huge demand for semiconductors. SMC sells pneumatic control devices to chipmakers and has seen its business boom, particularly since America and Europe are looking to bring home more semiconductor production. Lasertec has a near-monopoly on inspection tools for the most advanced semiconductor photomasks, plates through which circuit patterns are etched onto silicon wafers. Keyence’s precision sensors are also crucial for the detection of flaws in semiconductor surfaces. Fanuc makes large factory-floor robotic arms and has long been a factor in car assembly lines. Fanuc further notes that EV development requires a range of new capabilities on the part of carmakers, necessitating new types of robots. Fanuc expects to supply Ford’s factory in Cologne, Germany, with 500 robots this year, as the plant becomes the Ford Cologne Electrification Center.

All four of these companies make lots of money in the design and manufacture of automation products. Fanuc, for example, uses many of its own robots to build robots for customers. SMC is a lesson in the use of human resources. It has a network of 6,000 salespeople who double as systems engineers with in-depth knowledge of customers’ equipment. Keyence uses no intermediaries to sell its products but relies solely on its own sales force, many of whom are engineers who spend much time at customers’ plants helping their customers’ operations go smoothly. All four companies are sitting on piles of cash, but are less generous with shareholders, and with R & D, as they should spend more here if they are to stay ahead of the game. They are also tight-lipped with investors about what is going on in their businesses. But for the moment automation is Japan’s game. In 2020, Japan produced 45 percent of the

world’s industrial robots, China 12 percent, South Korea 7, Germany 6, and the rest of the world 30. It is interesting to note that over the past decade, manufacturing employment in the U.S. has grown, even as the number of factory robots increased. No immediate worry then of robots taking over. n Author profile: Royce Lowe, Manufacturing Talk Radio, UK and EU International Correspondent, Contributing Writer, Manufacturing Outlook.

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