Metals Outlook October 2019 by Manufacturing Outlook

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EFFICIENT INVENTORY OPERATIONS USING MOBILE TECHNOLOGY PAGE 8

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MANUFACTURING TIDBITS PAGE 6

SIMPLIFYING ORGANIZATIONAL STRATEGY PAGE 35

SEPTEMBER ISM PMI: 47.8%

Released October 1st -The Full Executive Summary Report On Business - Page 40

ENGINEERS: THE PRACTICAL LIAISONS OF INDUSTRY 4.0 PAGE 44

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Manufacturing Outlook / October 2019

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TABLE OF CONTENTS

Publisher LEWIS A WEISS Editor in Chief TIM GRADY Creative Director CRAIG ROVERE Contributing Writers ROYCE LOWE TIM GRADY NORBERT ORE ANDREA OLSON CHRIS KUEHL ROSEMARY COATES THOMAS R. CUTLER Production Manager LINDA HOPLER Current Circulation 45,200 Advertising ADVERTISE@MFGTALKRADIO.COM Editorial Office JACKET MEDIA CO. 75 LANE ROAD FAIRFIELD, NJ 07004 (973) 808-8300

Text “RADIO” to 66866 for comments, suggestions and ideas and guest requests for MFGTALKRADIO.COM podcast. Open call for Contributing Writers for new and existing content. Let’s start a conversation – Contact us at editorialdept@mmoezine.com or visit mfgtalkradio.com/writer for more information. © 2019 Jacket Media Co. No part of this publication may be reproduced or used in any form without the prior written permission of the publisher. Metals & Manufacturing Outlook is a registered trademark of Jacket Media Co.

PUBLISHER’S STATEMENT

ENERGY OUTLOOK

A word from our publisher

! NEW

Energy and the environment

MANUFACTURING TIDBITS Insights from inside manufacturing in action *Editors note at bottom of Content page

8 EFFICIENT INVENTORY OPERATIONS USING MOBILE TECHNOLOGY from WithoutWire

GLOBAL PMI OUTLOOK by Norbert Ore

32 EUROZONE OUTLOOK A look at Europe

ASIA OUTLOOK

MANUFACTURING OUTLOOK A global look at manufacturing

China still in trouble

THE CREDIT MANAGER’S OUTLOOK by Dr. Chris Kuehl

SOUTH AMERICA OUTLOOK Brazil in the spotlight

NORTH AMERICAN OUTLOOK

SIMPLIFYING ORGANIZATIONAL STRATEGY

Manufacturing in the US, Canada & Mexico

by Andrea (Belk) Olson, MSC

METALS OUTLOOK The cost, making and treating of metals

MANUFACTURING DAY by Tim Grady

AEROSPACE OUTLOOK The aerospace industry

ISM MANUFACTURING REPORT ON BUSINESS

AUTOMOTIVE OUTLOOK

ENGINEERS: THE PRACTICAL LIAISONS OF INDUSTRY 4.0

Auto industry news

28 ISSUES OUTLOOK Issues around the globe

by Carien Viswat

*Editor’s Note on Manufacturing Tidbits As we expand and deepen our coverage of the industry, Manufacturing Outlook now includes this new section, Manufacturing Tidbits, our on-the-scene coverage of people, places and things inside manufacturers just like you, where the real stories happen but often go unheralded because manufacturers are busy making things happen. So, we will cover their accomplishments here.

PUBLISHERS STATEMENT

PUBLISHER’S STATEMENT Since the late 1980’s, All Metals & Forge Group (AMFG), an ISO-registered manufacturer of open die forgings and seamless rolled rings, has published and circulated to customers and interested parties a newsletter as part of its efforts to be an information resource to buyers in the metals sector. Originally published and distributed by mail as a print copy or CD, it became well known as MetalsWatch® that included excellent information written by Tom Stundza. Unfortunately, Tom passed away in 2010. Since 2010, MetalsWatch® has undergone further refinements and expansion, from 4 pages to 8 pages to 12 and then 16 pages. In addition, the name changed as well, from MetalsWatch® to Metals Outlook™ to Metals & Manufacturing Outlook™ and now, in response to its wider and more forward-looking, forwardthinking focus, to it’s new name: Manufacturing Outlook™. Like Manufacturing Talk Radio, Manufacturing Outlook™ is sponsored by All Metals & Forge Group as an information service and free ezine publication. If you have been a reader, you know that the content goes far beyond metals and manufacturing, and given the vastness, diversity and rapid evolution of the industry, we felt it was time to transition to a more general but expansive name from Metals & Manufacturing Outlook™. The logo ‘look’ of Manufacturing Outlook™ will be familiar to readers, and it will continue to present content in sections, such as North American Outlook, South America Outlook, Asia Outlook, Euro Outlook, the Global PMI Outlook, Automotive Outlook, Aerospace Outlook, Issues Outlook, Energy Outlook, the Credit Manager’s Outlook, and the Institute for Supply Management’s (ISM) Purchasing Manager’s Index (PMI) Manufacturing Report on Business®. It will also include feature stories and indepth articles by writers you recognize and new ones who have joined the editorial team to contribute their knowledge and experiences in the manufacturing industry. We are always seeking forward-looking, forward-thinking writers and content contributors with a depth of experience and thought leadership to enhance the extent of our coverage of this diverse, dynamic and digital industry. We are also open for advertising. Although All Metals & Forge Group sponsors Manufacturing Outlook™ ezine, it is part of the Jacket Media Co group of podcasts and other media content. This content is often in-depth reporting or thorough interviews on important industry subjects, including closely-aligned non-manufacturing sectors, such as mining, transportation and warehousing, wholesale trade and retail trade that are directly upstream or downstream of manufacturing. As you will see, hear and read from our media resources, which you will not see, hear or read to any meaningful depth from the mainstream media, manufacturing is the lynchpin of the U.S. economy, and where manufacturing goes, the economy goes. Enjoy this issue and future issues of Manufacturing Outlook™ and be sure to subscribe so that you won’t miss the digital trends and dynamic developments in the diverse industry generally called manufacturing – almost an understatement of its significance in every developing and mature economy globally. Lewis A. Weiss Publisher Contact laweiss@mfgtalkradio.com or text “RADIO” to 66866 for comments, suggestions and ideas and guest requests for MFGTALKRADIO.COM podcast. Lewis A Weiss, Publisher Manufacturing Outlook / October 2019

MANUFACTURING TIDBITS

VISUAL CONFIGURATION SOFTWARE THE SOLUTION FOR CUSTOMER-CENTRIC MANUFACTURING INNOVATORS by THOMAS R. CUTLER

A customer-centric manufacturing innovator recently report the value of visual configuration software sharing, â&#x20AC;&#x153;I can now do in minutes and hours what used to take days and weeks.â&#x20AC;? The rapidity of visualization represents a transformational change that leads to real sales results. The migration from Configure Price Quote (CPQ) solutions to Visual Configuration Software is happening quickly. Recently, G2 named ATLATL Visual the sole leader for Visual Configuration Software in the first-ever report on this rapidly growing and important category. This is of particular relevance because G2 provides these awards primarily based on user reviews. G2, an unbiased platform for users to review B2B software, is transforming how businesses evaluate new software investments.

Manufacturing Outlook / October 2019

Speed and visualization: Selling more faster Visual Configuration Software leader ATLATL has data to substantiate the rationale for this new product category. Customers experience significant increases in sales efficiency, articulating the value proposition that there is no faster way to sell than when a buyer sees and experiences the exact product they plan to purchase. ATLATL Visual enables consumers to see the available options, make choices that suit their needs, and review the exact configuration. This process subtracts the month-long iterative and laborious process experienced by customers of ETO (engineerto-order) products. The online user interface is dramatically faster than previous methods of sorting through product books, consulting with product teams, and assembling a quote.

MANUFACTURING TIDBITS First, the right features are essential. Users gave the ATLATL 3D Visual Configuration, AR Configuration, and Drag-and-Drop features perfect ratings. These features set the baseline for interacting with the visual configurator. Amazing features mean little if they are not easy to use. G2 data revealed that users rate ATLATL ease of use at 91% compared to the market average of only 86%.

Visual Configuration has emerged as a new category, responding to shifts in consumer demands; there is a need to experience products before investing.

Visual configuration never sacrifices accuracy. From the start, Visual Configuration Software is expertly implemented by the ATLATL team who works tirelessly with customers to understand the unique product rules and requirements built into the system. This level of detail ensures that each configuration is safeguarded from order errors, providing a confident and accurate buying experience. Powering this accuracy is a unique Rules Engine. From dimensions, engineering logic, and pricing, users configure the desired product, knowing precisely what is available while adhering to the exact rules set by the manufacturer. Speed and accuracy create a differentiated buying experience generating loyal customers. Customer expectation: A superior buying experience. The ease with which all consumers have grown accustomed to an easy online buying experience impacts the expectation of how B2B purchases should look and feel. Providing the right buying experience matters most to customers. As the Visual Configuration Software leader, ATLATL heard from users about the type of buying experience they must offer.

Creating impactful buying opportunities. Visual configuration users surveyed were most appreciative how the ATLATL team assisted them in creating impactful buying opportunities. The road to leadership in visual configuration did not happen overnight. For many years the Charleston, South Carolina-based ATLATL has been working to forge a path for visual solutions to become a key element in the companyâ&#x20AC;&#x2122;s go-to-market strategy. The G2 recognition validates the importance of this product category and leadership status. Delivering faster, more accurate, and more impactful sales experiences drives the continuous process improvements and adheres to lean manufacturing principles. Early innovators capture market share. Hard earned and well deserved. Author Profile Thomas R. Cutler is the President and CEO of Fort Lauderdale, Florida-based, TR Cutler, Inc., celebrating its 20th year. Cutler is the founder of the Manufacturing Media Consortium including more than 7000 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 can be contacted at trcutler@trcutlerinc.com and followed on Twitter @ThomasRCutler.

Manufacturing Outlook / October 2019

COVER STORY

Efficient Inventory Operations Using Mobile Technology Sponsored by WithoutWire Inventory Sciences Travis Smith & Sharon Sens

Manufacturing Outlook / October 2019

COVER STORY

Introduction While there is a long list of benefits to using smart devices in supply chain, this article focuses on what one can argue to be the most important: usability. Inventory operational efficiency is about how we as consumers and workers interact with devices and why usability is so imperative to driving efficiency when working with inventory. The arrival of modern mobile devices in supply chain applications is resulting in operational efficiencies not seen before. Usability is about ease of use. Watching a two-year-old flip through pictures and navigation menus on a smartphone is a shocking example of the power of easy. Yet these simple interfaces that have made this rapid adoption so historical, have been slow to make their way to supply chain. The good news is that this trend is changing. Until very recently, rugged handhelds have missed the boat. Mobile barcode scanning devices used in places like warehouses are often referred to as rugged handhelds because they were built to last, not built to evolve. Unfortunately, that means many devices have gotten old in technology years. The average life span for these devices is 10 yearsâ&#x20AC;&#x201D;just old enough to completely miss the usability benefits that have been garnered in by the incredible R&D investments of the mobile revolution.

The Challenge Simply adopting mobile technology in your inventory operations isnâ&#x20AC;&#x2122;t enough to guarantee improvements in efficiency. The mobile device and the software must enhance productivity, consider ergonomics, and be user-friendly. For example, software that requires multiple scans will waste costly time and can lead to increased errors, negatively impacting productivity. Likewise, inefficiently designed processes within applications can also lead to repetitive stress injuries. And a poorly designed software interface will require extensive training and lead to errors, reducing both productivity and user satisfaction.

On the other hand, a user-friendly application engineered to minimize scans and leverage mobile technology will help ensure efficient inventory operations.

Manufacturing Outlook / October 2019

COVER STORY

Overview of the Principles We summarize efficiency into three topics; productivity of the operation, ergonomics of the devices, and usability of the software.

Productivity Productivity in warehouse operations is measured by speed, accuracy, and endurance. Productivity is a product of good usability; however, it is not the most crucial component. Good process design that considers specific expectations for accuracy at each step is most important here. The key to good process design is to balance the reduction of steps, screens, scans, and taps with the need to ensure that the end result is reliable enough. The challenge here, is that the phrase “reliable enough” varies greatly across industries, the task being completed, and what place within the supply chain the process is occurring. What is acceptable for accuracy and fast across for one organization will be completely unacceptable to another. Here is a list to demonstrate the point: 

Distributor receives full pallets of wood shavings versus a rush order to fulfill a hospital request for serial tracked pharmaceuticals.



A field technician who is about to travel 30 miles to fix an air conditioning unit for a commercial building on a sweltering afternoon versus a manufacturer mass producing bread and must replenish their manufacturing line with more packaging.

The process design for inventory should include considerations for what a scan represents. Multi-scan and single scan modes help you tailor your process for efficiency. If it is determined that scanning is required to ensure accuracy of inventory, then the first question is whether to allow 1 scan to account for validation of multiple quantity movements or to require 1 scan for EVERY quantity. Serial tracked items can be accounted for by multi-scan (1 scan = multiple quantities) by using license plates or lazy data collection. License plates and lazy data collection are ways to avoid single scan (1 scan = 1 quantity). License plates are uniquely identified collections of inventory that can be transacted by a single scan. Process designs using license plates should be carefully considered. They can dramatically increase productivity when used appropriately, or if poorly designed will bring an operation to its knees. Here is where experience working with supply chain consultants can really make the difference. Lazy data collection allows the operator to delay collection of serial numbers to a later step in the supply chain. An example here would be to avoid breaking down full pallets of serial tracked products to capture the serial numbers only to rebuild the pallet for put away to storage. This step can be avoided by delaying the collection of a serial number until it is actually needed.

Single scan can also be useful for newly trained warehouse workers. Forcing them to scan every item in a single scan mode can be made at the user level until such time their accuracy can be confirmed as trustworthy.

Manufacturing Outlook / October 2019

COVER STORY When it comes to productivity, the software must be flexible enoughto work with a good process design, and while software must be configurable to meet these demands, the ultimate measure of efficiency will rest on the thoroughness of the process design.

Ergonomics Ergonomics, also known as the “human factor”, is about designing products for interaction by humans. Android and iOS devices bring powerful processing, incredible choices in apps, and global adoption. They also provide an amazing selection of devices with a high degree of concern for the human body. The ergonomics of the device is about minimizing strain on the user. Ergonomics measures repetitive actions, device weight, eye strain, and muscle strain in order to avoid persistent pain, disability, fatigue, and discomfort. Whether you need long-range scanning, low-cost devices, or even forklift mounted tablets, there are more ergonomic choices today because there are so many users for so many environments. It is estimated [Ericsson Mobility Report] that there are 2.6 billion smartphone users alone globally. Many devices of the past rely on physical keys to interface with the software. Training can become very specific to the device, which can be costly. The device should become a tool that is natural to use and users focus on being efficient in the app, rather than how to use the device or troubleshoot connectivity. All too often warehouse workers have been trained to deal with connectivity or device reboots. The maturity of Android and iOS platforms, when it comes to application isolation (you don’t need a reboot) and connectivity, are real benefits to the inventory worker.

Device Interface and Design Whether it’s consumer smartphones or warehouse rugged Android devices, buyers are seeing significant benefits when it comes to ergonomics. Android and iOS tablets are lightweight, and the choices for rugged enclosures that minimize wrist movements have grown significantly. Large easy to read text reduces eye strain when used.

One device that is making waves in the market is the first Android device by a major manufacturer built specifically for the warehouse. The Zebra TC8000 includes an all-touch keyboard. According to research done by Zebra, it allows users to type up to 40% faster with 60% fewer errors compared to traditional push-button keyboards. Another ergonomic advance found on the TC8000 is the scan angle. By tilting the device scanner 90o, the user isn’t constantly scanning and twisting their wrist to view the results. This has been shown to have a 14% to 55% reduction in wrist motion and a 15% reduction in muscle effort. Manufacturing Outlook / October 2019

COVER STORY

Usability Factors

In addition to maximizing productivity and addressing ergonomics, operational efficiency in the mobile world must also address the user interface—the connection between people and app. Mobile device screens present unique user experience challenges due to their limited real estate. However, when designed well, a mobile user interface can help reduce training costs, minimize errors, and increase job satisfaction.

Reduce Training Costs—and Increase Productivity An intuitive user interface requires minimal cognitive effort to accomplish a task. This reduces the amount of training required and improves productivity in general. Myriad books are devoted to user interface design; however, following the principles below will help optimize operational efficiency in the mobile world.   



Good interfaces present timely content with less noise. Intelligent presentation means presenting only the content and user actions that are relevant to the current task. When labeling tasks and steps or writing descriptive content, use terminology that is common to warehouse operations, rather than software-oriented language. Use terms and icons consistently throughout the interface. If an icon represents a specific task on one screen, the same icon should be used only for that task and used throughout the entire system to represent that task. Design icons and buttons with strong affordance. Affordance is a “perceived signal or clue that an object may be used to perform a particular action.” [Smashing Magazine] Consider the shopping cart icon used on e-commerce sites. Someone purchasing an item online for the first time would know the items they had selected would be found by clicking the shopping cart icon without having to learn this pattern. They can intuit this from action from their real-world shopping experiences. Leverage screen technology such as hyperlinks and buttons, rather than expecting a user to memorize archaic key sequences. For example, provide a “refresh” button or icon, as opposed to requiring the user to depress the “Shift” and “F5” keys which are commonly found on warehouse rugged handheld scanning devices. The search function should be globally available within your application, preferably in the same menu or panel where primary navigation or functions are located. Even the best user interface requires help content, but it’s only helpful if it’s easily accessed and organized in a way that parallels the software’s functions and layout.

Minimize Errors Obviously, the fewer errors made translates to less time wasted. How can a user interface minimize errors and help users recover from errors that cannot be avoided? 

  

Point out errors as soon as they are made and provide context for fixing the error. For example, consider an employee who is setting up a new item on a screen with several fields. An error made at the top of the screen could propagate additional errors in subsequent fields if the error isn’t caught and messaged as soon as it’s detected. This not only saves time by not requiring the user to correct more fields, it reduces frustration. Offer an easy escape, such as a “Cancel” button, so users who recognize their own mistakes can easily return to their starting point. Error messages should clearly indicate where the error occurred and be written so the user knows exactly what they did wrong and how to resolve the problem. Provide a confirmation option so users can review their work before they commit to an action that would require significant steps—and potentially another person—to fix.

Manufacturing Outlook / October 2019

COVER STORY Increase Job Satisfaction An intuitive user interface not only reduces training needs, it can provide an engaging experience that builds confidence in a system and helps employees with their tasks. Designing software for use with mobile devices is as important to job satisfaction as providing high-quality tools to a master mechanic. Both lead to higher job satisfaction. And it follows that a satisfied workforce reduces employee turnover as well.

WithoutWire Usability of the Software

Beyond the device and the operating systems lies the app itself. Usability isn’t just a nice-to-have checklist, it is the main ingredient for an app that must work well for warehouse workers, consumers volunteering at a food drive, 3PL customers, and even executives reviewing high level KPIs.

Anticipate the User

The key term we use here is Contextual Intelligence. Contextual Intelligence is the application logic’s ability to adapt its user interface to meet the needs of the current user state. In basic terms, the app anticipates and adjusts its data input requirements based on the user, the current operation, and the data in the application. We use search technology to simplify tasks such as scanning picks and bin moves. For example, if a picker is asked to go to a bin to pick an item, in the background the app will search the inventory location at that bin to determine whether we want the user to scan both the bin and the item, or if the only item in that bin is the one item, then we can bypass an extra scan. We analyze in real-time if a user can benefit from moving the entire contents of a bin or license plate based on the context of the operation. If the system determines a more efficient move can be accomplished using a full license plate pick, it provides the user with that option. FIGURE 1. REDUCING SCANS USING REAL TIME DATA

User Search

Search has become a basic staple of the app user. We provide searching as part of the overall experience within both the apps we build as well as the self-service portal on the web. Users type portions of text and the system narrows down the list (referred to by many developers as “intellisense”). Users no longer have to memorize part numbers or descriptions. The mobile experience of today’s inventory workers must include rapid lookup of items, bins, and inventory. Another search ability that is equally important to efficiency is what we call a main screen scan. From the main menu of the app, a user can scan anything in the system. This includes:     

serial numbers item numbers item SKUs and manufacturer barcodes license plates bin locations (including pick, staging, manufacturing, damage, and overstock)

FIGURE 2. MAIN SCREEN SCAN FOR RAPID SEARCH

Manufacturing Outlook / October 2019

COVER STORY When a user scans these barcodes, we provide a multitude of information on inventory quantities, locations, and from there users can access most common features from a swipe move on the list such as inventory history, cycle count, acquire barcode, and inventory adjustments.

Navigation If an app is hard to navigate, then users won’t want to use it. Navigation adheres to these basic rules: Role based – Users should only see functions, screens, and buttons that are available to their roles. We limit users based on their roles, which are managed via the self-service portal. Context based – In addition, based on context and state of any given operation, we disable buttons that are not available to the user. Another important concept when it comes to context is what is referred to as breadcrumbs. It allows users to move in and out of areas of the application without having to explicitly navigate to previous screens. Visual and Descriptive – We combine simple one color images, colors, and simple text to quickly allow users to understand the features of the system. New User Guide – Some new users need additional help understanding the flow of the app. Using descriptive bubbles that appear upon first launching the app reduces training time.

FIGURE 3. NAVIGATION USING COLOR, IMAGES, AND TEXT

Setup Wizard

User efficiency is also about the speed at which a user can experience the system. This is especially true in today’s fast paced world of constant information. Bringing the user into the core features of the system quickly was the driving factor in creating a setup wizard. We have incorporated a setup wizard that allows users to quickly experience our system as a trial/demo, or to actually set up their own physical inventory and prepare for a live system. Usability here is about education and choices. Part of the balancing act is to provide the user enough choices to make the experience meaningful, while not exposing the user to too many choices and require large amounts of training time. Training staff can be a very expensive proposition depending on the size of the workforce. The setup wizard gets users trained and understanding how the system works within minutes.

“Cancel,” “OK,” “Save,” “Close” Naming buttons is not as easy as it sounds. The problem in presenting FIGURE 4. SETUP WIZARD BIN TYPES consistent action words is very important yet it is a common usability mistake. Leveraging years of customer feedback, we designed our buttons with a consistency that brings fast training and user adoption. Saving or cancelling changes is another important usability consideration. Many inventory tasks deal with users in various environments where efficiency is about speed of data entry. For some companies, saving records that are incorrect can cause a lot of additional labor to resolve the error. For these areas of the system, we prompt the user to confirm the transaction before committing the change. For other areas where speed is more important, confirmation messages become a hindrance to users.

Manufacturing Outlook / October 2019

COVER STORY

Executive Summary WithoutWire Inventory Sciences is a place of constant R&D where our experts push the fields and disciplines related to inventory, warehousing, workflow, and supply logistics, as well as how humans interact with those warehousing ecosystems. And although we’re called “sciences,” we also understand that inventory science itself is, ironically, often an art. The WithoutWire inventory system combines technologies like Microsoft Power BI, Microsoft Office 365 integration, and Azure AD B2C security to deliver usability on Android and iOS devices, which is unique in the industry. We are so confident that our customers will agree, we provide free access to our full featured system so you can experience it yourself. Take a look—sign up now at www.withoutwire.com.

Authors

Travis Smith

Travis founded Appolis after a successful stint as CTO and co-founder of Inetium. He has built a highly successful Warehouse Management company that continues to thrive today. In 2016, Appolis was rebranded as WithoutWire Inventory Sciences. Travis has led Appolis’ expansion into iOS and Android based platforms built using Azure and other Microsoft technologies. Prior to Appolis, Travis has spent more than nine years consulting and architecting business solutions for companies like General Mills, Honeywell, US Bank, Cargill, Lifetouch, and Young America. He is creator of the original Essential Element product in November 1998. Travis spent two years as a senior solutions architect at Rainier Technology, based in Minneapolis, Minnesota. Sharon Sens

Sharon Sens provides both freelance and contract UX consulting services. She'd been enjoying a marketing career when, in 2003, she discovered she was a natural at something the business world called “usability" (it was common sense to her) and joined the UX movement in its early stages. Her primary role is user experience architect, or as some prefer, interaction designer. Sharon has considerable experience in responsive and adaptive platforms, mobile apps (iOS and Android), ecommerce and transactional sites, and contentfocused internet and intranet sites.

REFERENCES

Ericsson, “Ericsson Mobility Report” June 2, 2015. https://www.ericsson.com/mobility-report Smashing Magazine, “What Is The Most Underrated Word In Web Design?” By Natasha Postolovski, June 24, 2014. https://www.smashingmagazine.com/2014/06/affordance-most-underrated-word-in-web-design/ Zebra, Zebra corporate web site, July 24, 2016 https://www.zebra.com/us/en/products/mobile-computers/handheld/tc8000.html

Manufacturing Outlook / October 2019

MANUFACTURING OUTLOOK

OCTOBER 2019

MANUFACTURING OUTLOOK by ROYCE LOWE

Manufacturing Outlook / October 2019

MANUFACTURING OUTLOOK THE ISM PMI FIGURE FOR THE U.S. CONTRACTS FURTHER DURING SEPTEMBER: IHS MARKIT PUTS IT IN EXPANSION. GLOBAL MANUFACTURING REMAINS STAGNANT IN CONTRACTION, BUT STRUGGLES TO GET OUT. CHINA DOES BETTER IN SEPTEMBER. THE EUROZONE AND THE UK ARE STILL STRUGGLING. THE FOURTH QUARTER IS A QUESTION MARK ON MANY FRONTS. There is political chaos in both the U.S. and the UK, which is doubtless having an effect on the global economy, hence on its manufacturing industry. Tariffs and threats thereof, vis-à-vis both China and the EU, coupled with an unresolved Brexit, are leading the world into uncharted territory. The BLS jobs report for September shows the addition of 136,000 non-farm payroll jobs. The unemployment rate dropped to 3.5 percent, its lowest in 50 years. Professional and Business services added 34,000 jobs, Healthcare 39,000 jobs. There was little change in manufacturing, mining and construction jobs during the month of September. The Bureau of Economic Analysis recently released its ‘third’ estimate for the annual rate of Real GDP

growth in the second quarter of 2019, putting it at 2.0 percent. The figure for the first quarter of 2019 was 3.1 percent. The ISM PMI figure for U.S. manufacturing found its way into contraction, at 47.8 percent in September from 49.1 percent in August, representing its second consecutive month in contraction. The overall economy grew for the 125th consecutive month. IHS Markit’s remarks on the U.S., on the other hand, spoke of a slight improvement in operating conditions, a faster increase in production and new orders, and job creation up at a marginal rate. Demand, however, was not of the best, and business confidence was accordingly gloomy. September’s IHS PMI at 51.1 was up from August’s 50.3, signaling a slightly stronger end to the third quarter, but the worst performance across the manufacturing sector since the same period in 2009. New order growth was domestic with a fall in export sales. The level of optimism was at a threemonth high, but was relatively flat overall. Domestic customers who switched to domestic suppliers because of tariffs are seeing these suppliers struggle to deliver because of capacity issues. We await the fourth quarter with bated breath.

Manufacturing Outlook / October 2019

CREDIT MANAGER’S OUTLOOK

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

Combined Sectors It was fun while it lasted! “Last month featured a nice little rebound in the Credit Managers’ Index (CMI)—especially on the manufacturing side,” said Chris Kuehl, NACM Economist. “That gain was short-lived as this month there was a bit of a decline. The data is still pretty firmly in the expansion zone (above 50) but not as robustly as was the case earlier.” His take is that the indicators for the economy in general have been following that same pattern—some good indicators coinciding with some not so good. Industrial production numbers were far better than they were in the previous month and there was an improvement in the industrial capacity numbers as well. On the other hand, the Purchasing Managers’ Index sank into contraction territory for the first time in years with a reading of 49.1. The problems with the CMI were in the favorable categories, but the drop was not calamitous. The combined index score fell from 55.2 to 54.1, but still higher than the numbers seen in July (53.4). Readings in the mid-50s, however, certainly beat the high 40s that are showing up in the Purchasing Managers’ Index. The combined score for the favorable factors fell from 61.8 to 59.1, but again, this is better than the 58.6 notched in July. “There is certainly no reason to panic about numbers in the high 50s, but there is concern that a downward trend might extend,” Kuehl said. The combined score for the nonfavorable factors stayed almost the same as last month— going from 50.9 to 50.7. “This category has been teetering on the edge of contraction for months

Manufacturing Outlook / October 2019

and even years, but has been able to keep out of the contraction zone thus far.” The biggest drop in the favorable categories was in sales, which could be a potential problem. Last month the sales data was at a high point—64.4. This was close to the level reached in May. The reading this month fell to 58.7, about where it was in July. “A reading in the upper 50s is certainly no cause for alarm,” Kuehl said, “but the trend is not good and signals there may be more caution in the economy—an observation that has been made by many looking at other data points.” The other readings in this category were not as concerning. The new credit applications data slipped from 60.9 to 59.7, a pretty minor reduction. The dollar collections numbers went from 60 to 58.5. He suggests this is a bit more worrisome as it shows some creditors may be struggling a little. The amount of credit extended also fell out of the 60s with a reading of 59.7 as compared to last month’s 61.7. In sum, “the numbers are not as good as they were in August, but they have hardly fallen off the map.” The data from the nonfavorable factors didn’t vary much from the month before, but this is somewhat cold comfort as the readings are not all that high. The rejections of credit applications slipped a bit from 52.1 to 51.4. Kuehl explains that this category is tied to the applications for credit—if there are fewer applications and there are more rejections, it essentially means there are fewer good applicants. There was very little

CREDIT MANAGERS’ OUTLOOK change in terms of accounts out for collection. The reading this month was 48.4; it was 48.6 the month before. The more salient point is this category remains in contraction territory. The disputes numbers actually improved with a reading of 50 after an August reading of 49.4. It is always good to see a reading break out of contraction—even if only by a little. The reading for dollar amount beyond terms fell quite a bit, but has still managed to stay out of contraction (down from 53.6 to 50.2). He notes that this is worrying in that slow pays are the first sign of future problems. The dollar amount of customer deductions improved a little, which was somewhat unexpected. It has gone from 50 to 52.1. There was also an improvement in filings for bankruptcies from 51.6 to 52.1. According to Kuehl, “The bankruptcy numbers had been a bright spot for years, but had been slipping over the last few months, so it was reassuring to see an upward trend.” Manufacturing Sector As for the manufacturing sector, Kuehl said that it has been experiencing the greatest levels of volatility thus far this year. The start was pretty impressive, but there were developing concerns as the trade and tariff war began to take shape. By mid-year, the slowing global economy was taking a toll on the U.S. industrial sector. Much of what the U.S. exports is machinery and other higher tech goods, and the market has been suffering a little. These issues are expected to worsen. The combined score for manufacturing is at 54.3—less impressive than the month before (55.7). It is still higher than it was in July, however. The favorable numbers fell from the 60s, but remained firmly in expansion territory with a reading of 58.8. The nonfavorable factors came in very close to what they had been—51.2 as compared to 51.7. The sales data took a significant hit as it went from 65.3 to 57.9, a development that was not unexpected given all the challenges that have been facing the manufacturing sector of late. Kuehl attributes this to the global slowdown, as most of the major trading partners for the U.S. have been struggling. “Of the top15 U.S. trade partners, all but three now have Purchasing Managers’ Index readings below 50 and the three that are still in expansion territory are only at 51 or 52.” The new credit application numbers slipped from 60.1 to 59.5. The dollar

collections numbers also declined, but not by that much as they went from 59.6 to 58.7, certainly still respectable. The amount of credit extended numbers fell out of the 60s, going from 61.4 to 59.2. He notes that the favorable numbers are clearly still favorable as readings in the 50s are solid. The worry is that sales data tends to drive everything else.

There was less volatility in the nonfavorable categories, but the readings have been weak for several months and in some cases years. The rejections of credit applications data slipped, but stayed out of contraction territory with a reading of 51.9 compared to 53 last month. The accounts placed for collection did slip back into contraction with a reading of 49.7 from 50.6 the month prior. This takes the reading back to levels seen in July (46.7) and far lower than the June reading of 53.5. The disputes numbers remained almost as they were the month before with a reading of 50.6 after being at 50.3 in August. The dollar amount beyond terms slipped quite a bit from 55.9 to 52.1, but the good news is that the data is still in expansion territory. “The slow pay is often the first sign of trouble and thus far there are few major alarms sounding,” Kuehl said. The dollar amount of customer deductions improved as the reading rose from 49.3 to expansion territory at 51.1. The filings for bankruptcy reading recovered a little bit of ground as it went from 51.4 to 52. As far as manufacturing is concerned, there are conflicting assessments according to Kuehl. There have been more than a few positive signs and there have been negative indicators as well. The sense is that trends will be more negative as the trade war grinds on and more tariffs come into play.

Manufacturing Outlook / October 2019

NORTH AMERICAN OUTLOOK

OCTOBER 2019

NORTH AMERICAN OUTLOOK by ROYCE LOWE

The Institute of Supply Management PMI figure fell from 49.1 percent in August to 47.8 percent in September. New orders, production and employment are contracting; supplier deliveries are slowing at a slower rate and backlogs are contracting. Exports and imports are contracting. Of the 18 manufacturing industries, three reported growth in September: Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; and Chemical Products. The 15 industries reporting contraction in September â&#x20AC;&#x201D; in the following order â&#x20AC;&#x201D; are: Apparel, Leather

Manufacturing Outlook / October 2019

& Allied Products; Printing & Related Support Activities; Wood Products; Electrical Equipment, Appliances & Components; Textile Mills; Paper Products; Fabricated Metal Products; Plastics & Rubber Products; Petroleum & Coal Products; Primary Metals; Transportation Equipment; Nonmetallic Mineral Products; Machinery; Furniture & Related Products; and Computer & Electronic Products. Comments from the industry are not, to say the least, optimistic. There is mention of slowdown of demand, Chinese tariffs, and an inability to buy normal supplies anywhere but China. Plastic and Rubber Products talked of a 10 percent reduction in workforce.

NORTH AMERICAN OUTLOOK CANADIAN manufacturing crept out of the woods in September, as new orders rose for the first time in seven months and production increased slightly. The rate of job creation was on the up and the month saw the slowest rise in input costs in over seven years. The Canadian PMI in September rose to 51.1 from Augustâ&#x20AC;&#x2122;s 49.1. Both new export orders and business sentiment were up in the month. Light vehicle sales in Canada in September were off for the nineteenth consecutive month. Sales were 167,548 units, down 3.90 percent. YTD sales are off 4.10 percent. MEXICO is suffering from weak demand and saw a further reduction in production in September. Buying levels were down at the joint-fastest rate in survey history. There was more job shedding in September. All told, operating conditions deteriorated for the fourth consecutive month. The PMI in Mexico for September, 49.1 was virtually unchanged from Augustâ&#x20AC;&#x2122;s 49.0. Business sentiment, although at a four-month high, remained subdued. Some companies remain optimistic over upbeat sales projections and new investment.

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Manufacturing Outlook / October 2019

METALS OUTLOOK

OCTOBER 2019

METALS OUTLOOK by ROYCE LOWE

STEEL PRODUCTION STILL ON THE RISE. World crude steel production for the 64 reporting countries – which represent 99 percent of world crude steel production – for the month of August, at 156,038 MT , was up 3.4 percent year-over-year. China, whose production is almost exclusively responsible for the continuing global rise, was up 9.3 percent year-over-year. CHINA produced 87.251 MT of crude steel in August, up 9.3 percent year-over-year; Japan 8.116 MT, down 7.8 percent year-over-year; India 9.350 MT, up 1.5 percent yearover-year and South Korea 5.941 MT, down 2.6 percent year-over-year. Taiwan produced 1.890 MT in August, down 3.1 percent.

Manufacturing Outlook / October 2019

U.S. crude steel production for August 2019 was 7.497 MT, up 0.3 percent year-over-year. U.S steel coil prices took quite a hit in September and are now hovering around the low $500’s. All major U.S. steel companies report significantly reduced profits of late. Canada produced 1.060 MT of crude steel in August, off 8.0 percent year-over-year. Mexico produced 1.410 MT of crude steel in August, down 15.1 percent year-over-year. Crude steel production in Germany in August was at 3.266 MT, up 0.8 percent year-over-year; in

METALS OUTLOOK Italy 0.857 MT, down 26.7 percent year-over-year; in France 1.050 MT, up 11.2 percent year-over-year and in Spain 1.133 MT, down 4.6 percent year-overyear. The UK produced 0.563 MT of crude steel in August, up 3.0 percent year-over-year. Russia’s crude steel production for August was at 5.900 MT, down 4.0 percent year-over-year; Ukraine’s was 1.938 MT, up 8.5 percent year-overyear. Brazil’s crude steel production for the month of August was 2.524 MT, a decrease year-over-year of 13.4 percent. Primary Global Aluminum Production in August 2019 was reported at 5.407 million tons, with production in China, at 3.050 million tons, representing 56 percent of world total. Production was 469,000 tons in GCC; 374,000 tons in the rest of Asia; 286,000 tons in Western Europe; 321,000 tons in North America, and 356,000 tons in Eastern and Central Europe. Things are in a bit of a mess in the metals business these days, particularly in the steel end of things. From high, high prices just over a year ago, the prices of domestic hot-rolled and cold-rolled carbon steel coil have slithered down a slippery slope. U.S. Steel and other integrated mills have suffered most. Their operating costs relative to those of the electric furnace steelmakers, along with the falling prices, have really hit their bottom line. Even the electric furnace steelmakers have suffered, with Nucor and Steel Dynamics feeling the effects of the reduced demand that led prices to slide. Nucor cites softening in the auto, agricultural products and power transmission sectors. Things were great for a while following 2018’s tariff imposition, but no end of propping up can overcome the lack of demand that the steel industry has seen of late. When the dust settles, someone will surely come out and tell us all how much the tariffs really cost the steel industry, and more than in the U.S. alone. It’s interesting to note that in 1992, the integrated mills produced 62 percent of the nation’s H.R. coil: today that figure is 32 percent. Nickel, on the other hand, has seen a recent price hike, due, it is said, to the metal’s consumption being boosted by its use in batteries in electric vehicles. There are predictions of future supply

tightness, with Indonesia threatening a ban on exports amid a rather subdued demand for stainless steel and a growing global excess capacity for that alloy. Maybe Indonesia has made some kind of nickel deal with China? Alcoa, meanwhile, is going through its second reorganization since it split from its jet and car parts business in 2016, which was then followed by a refinement in 2017. The company will shrink its upper management in the face of heavy Chinese competition - backed up by huge subsidies, leading to excess plant capacity. All this is taking place amid demand concerns from the U.S. - China trade war and declining prices for aluminum, in spite of the 2018 tariffs. Domestic H.R. steel coil was at around $519 per ton in early October, down from $570 in early September; C.R. coil around $720 per ton in early October, down from $745 in early September. Price increases in Europe are not flying, with service centers ridding themselves of excess stock and hence placing fewer mill orders. Auto and machinery are down or flat all over Europe and the UK. MEPS INTERNATIONAL, the steel market consultancy, is looking for upward motion in the prices of both steel and scrap in early 2020. Copper was at $2.54 per lb. in early October from $2.58 in early September, but down from $2.85 a year ago; Aluminum was at $0.77 per lb. in early October, from $0.79 in early September, but down from $0.95 a year ago; Nickel was at $8.00 in early October, from $6.70 in early August, but up from $5.80 a year ago; Zinc was at $1.05/1.06 in early October, from $1.20 a year ago. Manufacturing Outlook / October 2019

AEROSPACE OUTLOOK

OCTOBER 2019

AEROSPACE OUTLOOK by ROYCE LOWE

Lockheed-Martin has been awarded a contract worth $4.6 billion to build at least six Orion spacecraft to carry astronauts to the moon. According to NASA, there will be $2.7 billion for the first three and $1.9 billion for a further three in fiscal year 2022. The first spacecraft is scheduled for 2024. Pratt and Whitney, meanwhile, has landed a $5.7 billion contract from the Department of Defense for over 300 F135 turbofan engines to power the forthcoming production of the F-35 Lightning II Joint Strike Fighter aircraft. Pratt and Whitney notes that this is the largest F135 production contract to date: it includes program management,

Manufacturing Outlook / October 2019

engineering support, production support and tooling. Delivery is scheduled for 2023. Federal investigators are due to report that some Federal Aviation Administration inspectors overseeing The Boeing Co.â&#x20AC;&#x2122;s training standards for the 737 MAX and other commercial jet programs were unqualified for that assignment, and that the FAA misled government officials examining the relationship between the FAA and Boeing in the wake of the two fatal crashes that have idled the 737 MAX program. The conclusions from this investigation have been reported to the Trump Administration and to Congressional officials, according to media reporting.

AEROSPACE OUTLOOK In February of this year, the FAA’s Office of Audit and Evaluation concluded that 16 of 22 safety inspectors did not complete formal training, while 11 of the 16 lacked flight-instructor certificates. In April, the FAA told a Senate panel that all its inspectors working on Boeing 737 MAX pilot training and procedures had been qualified. While the FAA maintains that claim remains accurate, its assertion is contradicted by the Special Counsel report. Airbus said tariffs on planes and parts will threaten American jobs, this following authorization by the W.T.O. of duties on $7.5 billion worth of goods against the EU. Such a move would negatively impact not only U.S.airlines, but also U.S. jobs, suppliers and air travelers.

Airbus says two fifths of the parts the make up an average Airbus jet come from the U.S. and help to support 275,000 jobs in 40 states through spending that has totaled $50 billion in the past three years, an amount that Airbus aims to double over the next decade. Airbus has also been delivering jets from its plant in Mobile, Alabama. At the end of August, North America accounted for some 14 percent of the Airbus jetliner backlog, while Europe made up 15 percent of that of Boeing. This sector had been booming until the 737 MAX crashes and quality problems with the 787 Dreamliner and some Airbus airliners. Orders in the sector will likely continue to grow as previous planes age and developing countries expand their passenger service.

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Manufacturing Outlook / October 2019

AUTOMOTIVE OUTLOOK

OCTOBER 2019

AUTOMOTIVE OUTLOOK by ROYCE LOWE

Manufacturing Outlook / October 2019

AUTOMOTIVE OUTLOOK U.S. LIGHT VEHICLE SALES………Detroit’s Big 3 published their sales results for September. There were two fewer sales days in September 2019 than in 2018. Sales around the critical Labor Day weekend this year were counted as part of August’s total.

wouldn’t want to support the break up of the company to let Porsche fly free, taking its profits with it. So for the time being, it’s status quo and Porsche’s extraordinary performance is not likely to be let go by VW any time soon. By the time this goes to press, the GM strike may be over. Who knows? It certainly didn’t look that way at the start of the strike on September 16. Then the issues were higher pay, greater job security, a bigger share of profits and protection of healthcare benefits. On October 6, this has narrowed to wages and pensions according to “a person familiar with the talks.” As of early October, only three plants are still running in North America; two in Mexico and one in Ingersoll, Ontario. Trump supposedly tweeted for GM and the union to “make a deal.”

About ten years ago, Porsche tried to buy Volkswagen. There was a bitter battle that left Porsche on the brink of bankruptcy, and VW picked up Porsche for a mere $8 billion. People those who can afford to buy one - like the Porsche sports car for the way it looks and for the way its growly, screaming internal combustion engine sounds. Volkswagen liked it because the company earned almost as much profit from the 253,000 Porsche units it made in 2018 as it did from the 1.5 million Audi's it made. The auto industry often sees operating margins in low single digits, but Porsche’s exceed 18 percent, with average profit per vehicle a huge 16,250 euros ($17,900) compared with Audi’s 3,200 euros and the massmarket VW brand’s 960 euros. Porsche also has a coveted badge, the horse-and-antlers, and back in 2002 it realized that it could put this badge on other models, such as the Cayenne SUV, which together with a smaller SUV, the Macan, now make up 64 percent of production. Some smaller VW shareholders would like to turn Porsche into a stand-alone business, pointing to the value unlocked by the Ferrari spin-off from Fiat-Chrysler in 2015. But Porsche is really a part of the VW Group, and its present and future success depends upon its sharing the cost of developing new models across the wider group. New batterypowered models will fall into this category. VW has powerful unions that are represented on the company’s supervisory board, and they

Ford has given up its independent control over its Indian operations and will move its assets into a joint venture in which Ford will hold 49 percent, with Mahindra, an Indian automaker. Ford has been in India for two decades but has struggled to compete with cheap, fuel-efficient vehicles from Suzuki and Hyundai. The auto market in India has been slumping of late. The automotive sales numbers ripple through the manufacturing contraction and will be watched closely for further weakening or strengthening. The latter would be preferrable, but at present, the outlook is for manufacturing to remain above a recession but operate in a contraction for the balance of 2019. The overall U.S. economy will do about the same.

Manufacturing Outlook / October 2019

ISSUES OUTLOOK

OCTOBER 2019

ISSUES OUTLOOK by ROYCE LOWE

The industrial robot has for some time been a fact of life, a conversation piece, and a great economizer of time, effort and money, once the initial cost has been overcome. It is an industry that is expected to grow to unimagined proportions with time. The worldwide industrial robotics market reached a record $16.5 billion in sales in 2018, according to the International Robotics Federation, which stated that 422,000 industrial robots were shipped worldwide in 2018, up 6 percent over 2017â&#x20AC;&#x2122;s figure. Shipments in 2019 are expected to decline, before rebounding with 12 percent growth per year between 2020 and 2022. The guestimate for 2022 is 584,000 units. Japan is, by far, the worldâ&#x20AC;&#x2122;s largest manufacturer of industrial robots, delivering 52 percent of global supply in 2018. China is, by far, the largest user of industrial robots, and in 2018 installed 154,000 units, compared with 55,200 units in Japan, 40,400 units in the U.S., 37,800 units in South Korea, and 26,700 units in Germany. These five countries represent some 80 percent of global usage of industrial robots. By industry, and not surprisingly, the automotive industry is the largest user of industrial robots, with 30 percent of annual sales going to this industry. Five markets account for 79 percent of sales to the automotive industry, with China, in 2018, at 39,351 units; Japan at 17,346 units; Germany at 15,673 units, the U.S. at 15, 246 units and South Korea at 11,034 units.

Manufacturing Outlook / October 2019

The electronics industry saw a substantial sales decrease in 2018, with sales of industrial robots to this industry down 14 percent to 105,000 units. This industry is thought to have been the most affected by the U.S.-China trade war. The Metals and Machinery industries, the third largest user, accounted for 10 percent of total demand in 2018 at 43,500 units. The Industrial Robot density, i.e. the number of robots per 10,000 employees, is highest by far in Singapore (831) and South Korea(774), wth Germany at 338, Japan at 327 and the U.S. at 217. Chinaâ&#x20AC;&#x2122;s figure is 140. No discussion of this topic would be complete without a mention of the cobot, or collaborative robot, which is generally understood as one that is intended to work alongside and/or directly interact with humans in a shared space. In terms of absolute quantity, the number of cobots represents a small percentage, with a 3.24 percent share of the 2018 total of 422,000 units. It should be stated however that the number increased from 11,100 in 2017 to just under 14,000 in 2018, up 23 percent. The progress of cobot installations in the near future bears watching. One additional note : the outlook is that robots and cobots will eliminate some jobs while creating others in what is referred to as creative destruction where existing practices are greatly disrupted to make way for new ways of doing things. It is the inevitable evolution of progress.

ENERGY OUTLOOK

OCTOBER 2019

ENERGY OUTLOOK by ROYCE LOWE

GE Renewable Energy is the preferred wind turbine supplier for Denmark’s Orsted for two of Orsted’s offshore wind farms, which marks the world’s first commercial development of GE’s Haliade-X12 MW offshore wind turbine. Subject to all legal approvals, Orsted will deploy two offshore wind farms making up its Mid-Atlantic cluster, namely: Skipjack (120MW) off the Maryland coast, expected commissioning in 2022, and Ocean Wind (1,100 MW) off the New Jersey coast, expected commissioning in 2024. Seven states on the East Coast of the U.S. have committed to building a total of 20 GW of offshore wind capacity by 2035, and hence will need a broad and diverse supplier base. The U.S. and Orsted have the rights to build offshore wind farms to serve the markets of Maryland, New Jersey, Rhode Island, New York and Connecticut for a total capacity of 2.9 GW to be commissioned by 2024. The Haliade-X12 turbine stands 260 meters (853 feet) tall, the rotor diameter is 220 meters (722 feet) and each blade is 107 meters (351 feet) long. The sweep of the turbine is 38,000 square meters (409,000 square feet.) Orsted also developed Hornsea One, a wind farm some 120km (approx.75 miles) off Britain’s Yorkshire coast in the North Sea. When completed in a few weeks, this will be the world’s largest off-shore wind farm, with 174 turbines dotted across 407 square

kilometres of water. Hornsea Two, already planned, will be even bigger. The blades, supplied by Siemens Gamesa, measure 75 meters (250 feet) and the towers are 90 meters high. Britain is no longer accustomed to being first, but it is already the world’s largest off-shore wind market. In 2018, turbines planted off its coasts had eight gigawatts (GW) of capacity, about a third more than the next-biggest market, Germany. This number is due to jump. In 2030, according to BloombergNEF (Bloomberg New Energy Finance) forecasts, Britain will have 30 GW of off-shore wind capacity, second only to China at 45 GW, with the U.S. forecast to generate at the time some 16 GW. When in full operation, the Hornsea One wind farm will be able to power a UK home for more than a day with a single rotation. It will be capable of providing power to over a million UK homes. There are 10 sources for generating electricity, with coal burning for electricity generation at 41%, natural gas at 22%, nuclear power at 11%, hydroelectric power at 16%, solar, wind, geothermal, and biomass sources at 6%, and oil burning at 4%. World electrical energy consumption tops 18 Terawatt hours (TWh) or 1,800 GWh, and growing. The outlook is that it will be several decades before the balance of power shifts from fossil fuels to renewable sources to any great degree as energy demand outpaces energy supply. Manufacturing Outlook / October 2019

GLOBAL PMI OUTLOOK

by NORBERT ORE, DIRECTOR, HEAD OF INDUSTRIAL SURVEYS, STRATEGAS RESEARCH PARTNERS In our monthly survey analysis, we always look at the depth and breadth of the survey data. In September’s ISM Manufacturing PMI®, we see a weak reading indicating very shallow depth and an even weaker indication of breadth as 15 of 18 industries are contracting. On the other hand, the ISM Non-Manufacturing NMI® has held up as the depth is at a solid level and the breadth reveals 13 of 18 industries growing. We believe Manufacturing is in a cyclical correction after 35 months of growth while Non- Manufacturing continues to grow. Political and financial challenges continue to add to existing supply chain concerns. The scatterplot below illustrates global weakness as 10 of 18 indexes are under 50.

Manufacturing Outlook / October 2019

Eurozone: The Eurozone PMI (45.7, -1.3) is contractionary for the eighth consecutive month. In September, EZ growth was found in Greece (53.6, -1.3), Netherlands (51.6, unch), and France (50.1, -1.0). Germany (41.7, -1.8) continued to decline, averaging 44.8 YTD. The remaining EZ countries averaged 47.3 in September. United Kingdom: The UK/CIPS PMI (48.3, +0.9) improved in September from a seven-year low in August. Another reading below 50 is consistent with the high degree of political and economic uncertainty that abounds. China: China’s Official Report, the CFLP PMI (49.8, +0.3) remained below the mid-point while the Caixin Manufacturing PMI (51.4, +1.0) posted a second month of growth. Currency movements apparently contributed to a renewed rise in average input costs. New Export Business declined (as would be expected) given the challenges in global trade. India: India’s PMI (51.4, unch) was expansionary for the 26th consecutive month. India’s Manufacturing PMI has averaged 52.5 YTD.

GLOBAL PMI OUTLOOK South Korea: The PMI (48.0, -1.0) remained in contractionary territory in September. The PMI posted a reading below 50 for a fifth consecutive month.

The Metals and Machinery industries, the third largest user, accounted for 10 percent of total demand in 2018 at 43,500 units.

North America: Canada’s PMI (51.0, +1.9) has averaged 50.5 YTD. Mexico’s PMI (49.1, +0.1) has averaged 50.0 YTD. Both indexes indicated little change in the overall manufacturing sector for our major North American trading partners. In September, the U.S. manufacturing ISM PMI® (47.8, -1.3) contracted for the second time since August 2016. It was only a year ago the PMI reached an impressive rate of growth at 60.8. Then the PMI began a slow deceleration, averaging one point per month prior to falling below the mid-point in August. The past relationship between the PMI and the overall economy indicates that the PMI for August (47.8) corresponds to a 1.5 percent increase in Real GDP on an annualized basis, according to the press release. The industrial robot has for some time been a fact of life, a conversation piece, and a great economizer of time, effort and money, once the initial cost has been overcome. It is an industry that is expected to grow to unimagined proportions with time. The worldwide industrial robotics market reached a record $16.5 billion in sales in 2018, according to the International Robotics Federation, which stated that 422,000 industrial robots were shipped worldwide in 2018, up 6 percent over 2017’s figure. Shipments in 2019 are expected to decline, before rebounding with 12 percent growth per year between 2020 and 2022. The guestimate for 2022 is 584,000 units. Japan is, by far, the world’s largest manufacturer of industrial robots, delivering 52 percent of global supply in 2018. China is, by far, the largest user of industrial robots, and in 2018 installed 154,000 units, compared with 55,200 units in Japan, 40,400 units in the U.S., 37,800 units in South Korea, and 26,700 units in Germany. These five countries represent some 80 percent of global usage of industrial robots.

The Industrial Robot density, i.e. the number of robots per 10,000 employees, is highest by far in Singapore (831) and South Korea(774), with Germany at 338, Japan at 327 and the U.S. at 217. China’s figure is 140. No discussion of this topic would be complete without a mention of the cobot, or collaborative robot, which is generally understood as one that is intended to work alongside and/or directly interact with humans in a shared space. In terms of absolute quantity, the number of cobots represents a small percentage, with a 3.24 percent share of the 2018 total of 422,000 units. It should be stated however that the number increased from 11,100 in 2017 to just under 14,000 in 2018, up 23 percent. The progress of cobot installations in the near future bears watching. One additional note : the outlook is that robots and cobots will eliminate some jobs while creating others in what is referred to as creative destruction where existing practices are greatly disrupted to make way for new ways of doing things. It is the inevitable evolution of progress.

By industry, and not surprisingly, the automotive industry is the largest user of industrial robots, with 30 percent of annual sales going to this industry. Five markets account for 79 percent of sales to the automotive industry, with China, in 2018, at 39,351 units; Japan at 17,346 units; Germany at 15,673 units, the U.S. at 15, 246 units and South Korea at 11,034 units. The electronics industry saw a substantial sales decrease in 2018, with sales of industrial robots to this industry down 14 percent to 105,000 units. This industry is thought to have been the most affected by the U.S.-China trade war.

Manufacturing Outlook / October 2019

EUROZONE OUTLOOK

GLOBAL OUTLOOK

EUROZONE by ROYCE LOWE

For purposes of a clear understanding, The European Union (EU) is a political and economic alliance of 28 member countries primarily located in Europe. The Eurozone, often abbreviated as the EZ, is a group of countries in the EU that have adopted the euro as their common currency. 19 of the 28 EU member countries have adopted the euro. IHS Markit’s Eurozone Manufacturing Composite Purchasing Managers’ Index (PMI) continued in contraction with the ongoing manufacturing slump. August’s PMI was at 47.0; September’s is at 45.7, its lowest level since 2012. Production, new orders and purchasing all fell sharply during September. Input costs declined at the joint-sharpest rate since April 2016. Conditions in Germany deteriorated further. It is the German results, being the largest GDP producer, that are pushing the PMI to its low levels. Car registrations were up in Europe in September. The year-over-year results reflect the hit that sales took in September 2018, coincident with the introduction at the time of the WLTP (Worldwide harmonized Light Vehicle Test Procedure). German registrations were up 22.2 percent year-over-year; France was up 16.6 percent; Italy was up 13.4 percent and Spain up 14 percent. IHS Markit’s PMI for the UK ticked up a little from 47.4 in August to 48.3 in September. Production, new orders and employment fell further, but purchasing and input stocks rose as Brexit preparations restarted. The contraction was shallower than in August.

Manufacturing Outlook / October 2019

UK car registrations were up a mere 1.3 percent in September, with diesels down 20.3 percent, but full EVs up 236.4 percent year-over-year. EVs represent just 1.3 percent of the market. The outlook for the EU is for a continued slump that may become two consecutive quarters of negative GDP, defined as a recession, in comparison to PMI numbers below 50 that may only signal a contraction. Contractions do not always lead to recessions, and may only be a cooling off period before the next expansion.

ASIA OUTLOOK

GLOBAL OUTLOOK

ASIA OUTLOOK by ROYCE LOWE

CHINA saw a modest improvement in overall operating conditions in September. Production and new orders were up at quicker rates than in August, despite the continuing downturn in new export business. In fact, new orders saw their quickest upturn since March 2018. Buying activity and inventories were also up. The PMI for September rose to 51.4 from August’s 50.4. ChinaU.S. trade relations continue to cause worries regarding future output. China’s sales of sedans, SUVs, minivans and multipurpose vehicles were down 9.9 percent in August to 1.59 million units. Although China typically reports GDP in the 6% range, it is questionable how they are measuring that growth since their economy has slowed significantly, and readings from either PMI survey do not translate into a consistent +6% GDP or higher.

pace in 18 months. There was subdued domestic and export demand, leading to lower production and reduced inventories, with attendant cut-backs in input buying. Business confidence retreated to one of its lowest levels in two-and-a-half years. The PMI was unchanged from August’s 51.4 reading. The outlook for Asia is consistent with other world economic regions of slowing growth with contraction in many countries. However, some of the precursors to a recession are not present in contracting economies at present.

JAPAN saw weak demand in September, hence cuts in production and reduced inventories. Firms continued to cut selling prices in efforts to stimulate sales. Business confidence continues to fall, inflation is at a three-year low and firms continue to hire additional workers. The PMI for September retreated from August’s 49.3 to 48.9. INDIA saw its production grow at the joint-slowest Manufacturing Outlook / October 2019

SOUTH AMERICAN OUTLOOK

GLOBAL OUTLOOK

SOUTH AMERICA by ROYCE LOWE

BRAZIL saw manufacturing growth at a one-anda-half year high in September, with a significant increase in new orders - mostly domestic - and growth in production. Jobs increased at the quickest rate in seven months. There was a solid increase in input buying, and in fact operating conditions improved at the fastest rate in 22 months. The PMI in September, at 53.4 was up from August’s 52.5. 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) – improved very slightly from August’s 49.5 to 49.7 in September. Global manufacturing production is in contraction. International trade volumes have weakened with an attendant fall in new orders. Business optimism remains at its lowest level since first tracked by the survey in July 2012. There are some signs of stabilization even though the PMI is still in contraction, as it rises globally for the second consecutive month, to 49.7.

There are continued downturns in the intermediate and investment goods sectors, both seeing contraction in new orders and production. Consumer goods, conversely, saw production and new orders move up. New export orders fell for the thirteenth consecutive month. For the fifth month, September saw a further slight decrease in global manufacturing employment.

Manufacturing Outlook / October 2019

Employment is a leading indicator. Steeper declines or extended contraction that shift hiring to layoffs would begin to indicate serious headwinds for any country, region or zone. The fourth quarter of October, November and December will begin to set the stage for 2020. Purchasing Manager’s Indexes in the high 40’s would signal continued contraction. Mid-to-low 40’s would set up a likely recession. However, these indicators could shift back into the low-tomid 50’s during the 4th quarter and extend the current expansion of 123 positive GDP months going into 2020. At this stage, the outlook is one of cautious optimism for a continuing low-ebb expansion with GDP running between 1.0 and 2%. Manufacturing will continue to produce goods but not invest heavily in CAPEX. When GDP is above 2.0, then CAPEX can usually be justified for a manufacturer, if an expansion is likely, which then favors an reasonable ROI. At this point, after the longest expansion in U.S. history, there isn’t enough data to forecast anything, but a contraction with the potential for a recovery because conditions are absent any of the economic triggers that overheat an expansion and result in a recession, such as deregulation that leads to loose lending practices, loss of business or consumer confidence, high interest rates, asset bubbles, deflation, stagflation, or irrational exuberance in the housing or stock market.

SIMPLIFYING ORGANIZATIONAL STRATEGY

SIMPLIFYING ORGANIZATIONAL STRATEGY AN INTROSPECTIVE

BY ANDREA BELK OLSON

Strategy is an often misunderstood and underutilized thing. More frequently than not, strategy becomes either a list of goals or a conglomeration of tactics called “a strategy”. I’ve heard organizations say that strategy is a waste of time. I’ve also heard that it’s “too complicated” or that “it doesn’t add value, as things change all the time”. These are terrible reasons not to develop a strategy. Creating a true strategy is hard, and many organizations often take the time to slog through tons of data analysis, only to lose steam when they reach the “strategy” part. The outcome simply becomes a big report with a list of goals, which is then presented as “here is our strategy”. The big-picture role of organizational strategy is to set direction. While you might feel that should already be clear, it’s frequently the case that organizations don’t align on this front. Most companies look at the product or services they sell, identify more areas on where they can sell it, and examine other areas of the organization where they can reduce costs. Simple as that. However, a strategy is the difference between status quo and significant growth. It’s the biggest

catalyst to transformative change. It ensures everyone is rowing the boat in the same direction together - and spurs innovation in the process. It helps shape and supports your organizational purpose. It enables you to compete and innovate more effectively. It can be both the compass and the driver for growth. The problem is that too many strategies are garbage. Too tactical, too ethereal, too vague, too narrow, or just plain unwieldy. It’s not that a strategy is bad, it’s how we go about creating an organizational strategy that needs to change - dramatically. It’s not about using a template or having it all on 2 or 3 pages, but about approaching strategy creation in a clearer and more digestible way. A clear organizational strategy should truly utilize just 6 simple components: Six areas of focus, maximum. No organizational strategy should have 227 components. At that point, it’s a confusing, muddled and worthless wish list. People need something clear, concise and simple to digest. Manufacturing Outlook / October 2019

SIMPLIFYING ORGANIZATIONAL STRATEGY

Define the CATEGORIES you want to focus on. This shouldn’t be all about your P&L, but the big picture challenges your target audiences face. This can include things like education, innovation, sustainability, social responsibility, safety, productivity and more. Define a specific, high-level problem each CATEGORY addresses. If you plan to “be a leader in x”, why is that important for your audiences and what does it solve for their industry/category as a whole? Develop high-level strategic focus statements for each category. These statements should be short and contain two parts - the “action” and the “target area”. In essence, the action you’ll take, followed by a target segment of the category. Start the statements with action words, such as “develop”, “grow”, “invest”, or “be”. These set an aspirational and achievable tone for your strategic elements. End the statements with your area of focus within the category. For example, you may “Lead the Nation” (action) “in Computer Science education” (target area). Keep it at a high level. Don’t get into the weeds with

Manufacturing Outlook / October 2019

goals or numbers, here. The objective of the strategy is to establish focus, not jump to tactics. This framework then provides each and every one of your employees a clear direction for where the organization is going and it’s high-level objectives. Each department can align and contribute to support those strategic pillars, in their own unique way. While we might feel that the organization’s goal is to sell more products/services to new or existing customers, this is simply the function of any and all businesses. Your strategy goes higher than that - it should address the bigger picture challenges your audiences and industries face. When you have a true strategy instead of simply a laundry list of tactical goals, you can discover new opportunities and create innovation where others can’t. About the Author: This introspective essay was previously published on LinkedIn.com by Andrea Olson. In addition to writing and consulting, Andrea Olson speaks to leaders and industry organizations around the world on how to craft effective customer-centric organizations. More information is available on pragmadik.com or thecustomermission.com.

MANUFACTURING DAY

National Manufacturing Day is an opportunity for manufacturers to open their doors and showcase the dynamic, diverse and digital nature of modern manufacturing in cooperation with educational institutions, students, parents, teachers and community leaders. In 2012, then-Governor Chris Christie of New Jersey proclaimed the first official Manufacturing Day at the state level. President Barack Obama signed the first Presidential Proclamation in 2014 at the federal level. Each year, the current president signs an official proclamation declaring the first Friday in October as National Manufacturing Day. Manufacturing Talk Radio, with hosts Lew Weiss and Tim Grady, has broadcast live from Manufacturing Day events each year, beginning in 2014. This year, over 3,000 events were held at

manufacturers or educational institutions to further build awareness of manufacturing as a desirable career path for high school or college students. College graduates in the sciences have known for decades that manufacturing is where ideas and innovation are brought to life, and many high school students have been interviewed on the show. Aircraft and automobile manufacturers employ thousands of graduates who develop ways to make the next iteration of a part or assembly more effective, efficient, longer lasting or safer as these industries evolve. Big Pharma offers careers in medical devices and drug research to improve the quality of life for millions of people around the world. Other manufacturers with careers involving research and invention include food safety, food processing, cosmetics, skin care, health and wellness products, the broad spectrum of other consumer products, plastics, chemicals, petroleum products, computers, electronics, rubber, paper, wood, glass â&#x20AC;&#x201C; it is almost a limitless Manufacturing Outlook / October 2019

MANUFACTURING DAY array of career opportunities in R&D. But, it is also largely unsung. Manufacturers quietly toil away at their efforts without the pomp and circumstance to gain notoriety common in more visible or glamourous careers, although that is beginning to change. They don’t take the risk of prematurely talking about their latest innovation, or take the time to tout it when they are engrossed in its proof of concept stages or full production implementation. They are doer’s, not touter’s. For the past 5 years, Manufacturing Talk Radio has been interviewing employees and owners of manufacturing companies, industry thought leaders, academics, aligned non-profit executives, elected politicians, government agency officials, industry-focused economists – literally hundreds of people in and around the manufacturing space to report on the evolution from the dark, dirty and dangerous 1900’s-type manufacturing operations to the modern manufacturing companies of the 21st Century that are embracing and benefitting from technological change. Manufacturing Day is a cornerstone event each year providing manufacturers with a common cause to showcase their industry and their operations within their sector to middle school and high school students, and in some cases, even elementary school students, so these students understand this exciting industry from the inside, instead of the commonly-held perspectives from history books. There is incredible satisfaction when someone can hold or point to a physical, physiological, pharmacological, medical, industrial or consumer product and know they were a part of, or even instrumental in, developing it for everyday use. Manufacturing touches everyone’s lives in many overlooked ways, from what we stand or walk upon, sit on, lay on, interact with, put on, pick up and use, get into or on to move from one place

Manufacturing Outlook / October 2019

to another, light, cool and warm homes and workplaces, read, see with, use to consume food or feed others, fix injuries or ward off illnesses – we are all surrounded by things that were manufactured, which will also be upgraded or replaced. There are exciting fields in recycling manufactured goods to lessen the burden on landfills or develop the output into new products for tomorrow. There is an endless cycle of opportunity in modern manufacturing, from concept and creation to beneficial destruction and re-creation, to improve the lifecycles of flora and fauna while reducing the adverse impacts on Mother Earth. Ideas that have sat on the shelf gathering dust for years are being revisited as technology and bright minds make the formerly impossible now possible. One can postulate many things, but actually producing it and making it useful or helpful is almost an experience with magic. Leonardo da Vinci imagined many things, including flight. Now, the flying capabilities of the Iron Man suit are moving off the drawing board and into reality. The Tricorder, a pretend medical device from a sci-fi TV show in the 1960’s able to capture and compute patient data with a simple handheld appliance passed over the patient is being developed by three competing companies

MANUFACTURING DAY

and beginning to move out of the prototype stage. There are literally thousands of examples of new products or new ways of doing or making things with technology in modern manufacturing which is changing the world around us – rapidly. We can measure almost anything, from nanoparticles on an infinitesimal scale to climate change on a global scale, and use that data to hypothesize the next iteration in a field called generative design that is creating and refining prototypes in software to make it ready for physical production. The ability to analyze data to predict outcomes or test actual parts is pushing new boundaries in medicine and many other fields. Some paralysis conditions are being overcome, while others are augmented to give the person a way towards mobility using both robotics and electronics. Humans are contemplating travelling to other planets and even colonizing them with inventions that one day need to be made in physical form for transport, assembly and use on faraway lands. There are endless examples of how modern manufacturing can change, improve and expand our horizons. This is the present and future of modern manufacturing, and the purpose of each National Manufacturing Day, so that bright young minds can see the possible career paths before them and give serious consideration to the diverse options in manufacturing. It is like being offered a thousand pieces of different candy – which one to you start eating first? With Manufacturing Day, students can have the opportunity to taste test a few of them, and ask their friends or social media contacts which ones they tried, and their opinion about that ‘flavor’. As always, Manufacturing Talk Radio will continue to report on the many facets of this transforming dynamic, diverse and digital industry, and hope readers will get involved with every National Manufacturing Day the first Friday of each October. Manufacturing Outlook / October 2019

ISM REPORT OUTLOOK

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

BREAKING NEWS

ISM PMI at 47.8% for September ISM PMI for the past 5 years

Manufacturing Outlook / October 2019

ISM REPORT OUTLOOK

ISM® REPORT ON BUSINESS®

MANUFACTURING E

conomic activity in the manufacturing sector contracted in September, and the overall economy grew for the 125th consecutive month, say the nation’s supply executives in the latest Manufacturing ISM® Report On Business®. The September PMI® registered 47.8 percent. The New Orders Index registered 47.3 percent, an increase of 0.1 percentage point from the August reading of 47.2 percent. The Production Index registered 47.3 percent, a 2.2-percentage point decrease compared to the August reading of 49.5 percent. The Employment Index registered 46.3 percent, a decrease of 1.1 percentage points from the August reading of 47.4

SEPTEMBER 2019 Analysis by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management® Manufacturing Business Survey Committee

percent. The Supplier Deliveries Index registered 51.1 percent, a 0.3-percentage point decrease from the August reading of 51.4 percent. The Inventories Index registered 46.9 percent, a decrease of 3 percentage points from the August reading of 49.9 percent. The Prices Index registered 49.7 percent, a 3.7-percentage point increase from the August reading of 46 percent. The New Export Orders Index registered 41 percent, a 2.3-percentage point decrease from the August reading of 43.3 percent. Of the 18 manufacturing industries, three reported growth in September: Miscellaneous Manufacturing ‡; Food, Beverage & Tobacco Products; and Chemical Products.

PMI @ 47.8% ®

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

MANUFACTURING AT A GLANCE Sep Index 47.8 47.3 47.3 46.3 51.1 46.9 45.5 49.7 45.1 41.0 48.1

Aug Index 49.1 47.2 49.5 47.4 51.4 49.9 44.9 46.0 46.3 43.3 46.0

% Point Change -1.3 +0.1 -2.2 -1.1 -0.3 -3.0 +0.6 +3.7 -1.2 -2.3 +2.1

Slower

Trend* (months) 2 2 2 2 43 4 36 4 5 3 3

OVERALL ECONOMY

Growing

Slower

125

Manufacturing Sector

Contracting

Faster

Index PMI New Orders Production Employment Supplier Deliveries Inventories Customers’ Inventories Prices Backlog of Orders New Export Orders Imports ®

Direction Contracting Contracting Contracting Contracting Slowing Contracting Too Low Decreasing Contracting Contracting Contracting

Rate of Change Faster Slower Faster Faster Slower Faster Slower Slower Faster Faster

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

PMI 2017

50% = Manufacturing Economy Breakeven Line 42.9% = Overall Economy Breakeven Line

2018

2019

47.8%

PMI® Manufacturing contracted in September, as the PMI® registered 47.8 percent, a decrease of 1.3 percentage points from the August reading of 49.1 percent. This is the lowest reading since June 2009, the last month of the Great Recession, when the index registered 46.3 percent. The PMI® contracted for the second straight month. The contraction continues six straight months of softening in manufacturing. Only one of the PMI® subindexes (Supplier Deliveries) registered at a level associated with expansion.

COMMODITIES REPORTED Commodities Up in Price: Natural Gas; and Precious Metals. Commodities Down in Price: Aluminum (6); Base Oil; Corrugated Boxes (4); High-Density Polyethylene; Nylon; Pulp (2); Scrap; Steel (3); Steel – Hot Rolled (2); and Steel Products (9). Commodities in Short Supply: Castings; Electronic Components (2); and Helium (3).

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

OCTOBER 2019

Manufacturing Outlook / October 2019

ISM REPORT OUTLOOK

ISM Report On Business ®

manufacturing

September 2019 Analysis by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management ® Manufacturing Business Survey Committee

New Orders (Manufacturing) 2017

2018

2019

New Orders ISM’s New Orders Index registered 47.3 percent. Of 18 manufacturing industries, three reported growth in new orders in September: Miscellaneous Manufacturing‡; Food, Beverage & Tobacco Products; and Chemical Products.

52.5% = Census Bureau Mfg. Breakeven Line

47.3%

Production (Manufacturing) 2017

2018

2019

Production ISM’s Production Index registered 47.3 percent. The three industries reporting growth in production during the month of September are: Chemical Products; Computer & Electronic Products; and Miscellaneous Manufacturing‡.

47.3%

51.7% = Federal Reserve Board Industrial Production Breakeven Line

Employment (Manufacturing) 2017

2018

2019

Employment ISM’s Employment Index registered 46.3 percent. Of 18 manufacturing industries, four reported employment growth in September: Miscellaneous Manufacturing‡; Textile Mills; Food, Beverage & Tobacco Products; and Chemical Products.

50.8% = B.L.S. Mfg. Employment Breakeven Line

46.3%

Supplier Deliveries (Manufacturing) 53.1% 2017

2018

2019

51.1%

Supplier Deliveries The delivery performance of suppliers to manufacturing organizations slowed. The nine industries reporting slower supplier deliveries in September — listed in order — are: Textile Mills; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing‡; Primary Metals; Paper Products; Computer & Electronic Products; Plastics & Rubber Products; Machinery; and Chemical Products.

Inventories (Manufacturing) 2017

2018

2019

Inventories The Inventories Index registered 46.9 percent. The four industries reporting higher inventories in September are: Nonmetallic Mineral Products; Wood Products; Primary Metals; and Chemical Products.

44.3% = B.E.A. Overall Mfg. Inventories Breakeven Line

‡Miscellaneous

46.9%

Manufacturing (products such as medical equipment and

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

Manufacturing Outlook / October 2019

ISM REPORT OUTLOOK

ISM Report On Business ®

manufacturing

September 2019 Analysis by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management ® Manufacturing Business Survey Committee

Customer Inventories (Manufacturing) 2017

2018

2019

Customers’ Inventories ISM’s Customers’ Inventories Index registered 45.5 percent. The five industries reporting customers’ inventories as too high during the month of September are: Nonmetallic Mineral Products; Textile Mills; Miscellaneous Manufacturing‡; Electrical Equipment, Appliances & Components; and Fabricated Metal Products.

45.5%

Prices (Manufacturing) 2017

2018

2019

Prices The ISM’s Prices Index registered 49.7 percent. Five of the 18 industries reported paying increased prices for raw materials in September: Petroleum & Coal Products; Textile Mills; Miscellaneous Manufacturing‡; Food, Beverage & Tobacco Products; and Computer & Electronic Products.

49.7% 52.5% = B.L.S. Producer Prices Index for Intermediate Materials Breakeven Line

Backlog of Orders (Manufacturing) 2017

2018

2019

45.1%

Backlog of Orders ISM’s Backlog of Orders Index registered 45.1 percent. None of the 18 industries reported growth in order backlogs in September. The 11 industries reporting a decrease in order backlogs during September — listed in order — are: Apparel, Leather & Allied Products; Textile Mills; Electrical Equipment, Appliances & Components; Wood Products; Furniture & Related Products; Transportation Equipment; Computer & Electronic Products; Primary Metals; Chemical Products; Machinery; and Fabricated Metal Products.

New Export Orders (Manufacturing) 2017

2018

2019

New Export Orders ISM’s New Export Orders Index registered 41 percent. The two industries reporting growth in new export orders in September are: Food, Beverage & Tobacco Products; and Miscellaneous Manufacturing‡.

41%

Imports (Manufacturing) 2017

2018

2019

Imports ISM’s Imports Index registered 48.1 percent. The two industries reporting growth in imports during the month of September are: Petroleum & Coal Products; and Nonmetallic Mineral Products.

48.1% ‡Miscellaneous

Manufacturing (products such as medical equipment and

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

Manufacturing Outlook / October 2019

ENGINEERS: THE PRACTICAL LIAISONS OF INDUSTRY 4.0

ENGINEERS: THE PRACTICAL LIAISONS

OF INDUSTRY 4.0 BY CARIEN VISWAT

The automotive industry is most proficient in seeking manufacturing improvement through automated, efficient, and effective processes. Automotive companies and their suppliers need to carry out lean manufacturing and assembly operations by handling a wide variety of components carefully and cost efficiently. The deployment of automated material handling (AMH) equipment prevents damage to automotive parts, reduces the cost of unproductive labor hours by efficiently handling inventory, and maximizes storage capacity within available floor space. The automotive sector has taken the lead in AMH equipment usage – such as Automated Guided Vehicles (AGVs), automated storage and retrieval systems (AS/RS), automated conveyors,

Manufacturing Outlook / October 2019

cranes, and robots – to fulfill these requirements. In a mature automotive industry, continuous process improvement is not dead; there are cost efficiencies that have not yet been exploited. The Internet of Things (IIoT), Big Data, and Industry 4.0 initiatives enable most of the world’s most successful automotive manufacturers and parts producers to drill ever deeper into operational improvement. Efficient AMH in the automotive industry – in particular, the elimination and utilization of Fork Truck Free (FTF) environments –harvest significant savings. The costs associated with a forklift typically exceed $200,000 per truck per year, and labor costs exceed $180,000 per

ENGINEERS: THE PRACTICAL LIAISONS OF INDUSTRY 4.0

truck per year for a three-shift operation. Truck acquisition costs can average $30,000+ per year, and maintenance costs (including damage repairs) can average $3,000â&#x20AC;&#x201C;$8,000 per truck per year. Additional expenses must also be considered, including energy (battery/electricity or LPG), which can run up to $5,000 per truck per year. Finally, safety administration (training, checklist management, accident investigations) usually exceeds $1,000+ per truck per year. Besides forklifts, the costs associated with labor, equipment, and maintenance of any powered truck (manual tuggers, manual carts) and conveyors are high, whereas AGVs provide more safety, flexibility, less damage, as well as an ondemand system.

Driverless AGVs and FTF initiatives start with safety, cost efficiency, and 24/7 flexibility. With a lean manufacturing environment pioneered in the automotive sector, there is little wonder why the cost/waste inherent to fork trucks is being eliminated by AGVs and mobile robots. Forklift Driver Training In many countries, powered truck operators must be trained and certified to operate the trucks. With labor shortages and limited numbers of trained powered truck operators, AGVs are much preferred, particularly in the automotive manufacturing sectors. Forklift training in the U.S. is governed federally by OSHA. The standard requires employers to develop Manufacturing Outlook / October 2019

ENGINEERS: THE PRACTICAL LIAISONS OF INDUSTRY 4.0

and implement a training program based on the general principles of safe truck operations, the types of vehicles being used in the workplace, the hazards of the workplace created by the use of these vehicles, the general safety requirements of the OSHA standard, and workplace evaluations to check operator competence. These timeconsuming evaluations are never needed with self-driving vehicles, and similarly, refresher training courses are never needed to ensure the safe operation of AGV trucks.

Safety Regulations Forklift safety is subject to a variety of standards worldwide. The most important standard is the ANSI B56 standard, which covers safe truck and forklift operations (with drivers and driverless) â&#x20AC;&#x201C; of which stewardship has now been passed from the American National Standards Institute (ANSI) to the Industrial Truck Standards Development Foundation (ITSDF) after multi-year negotiations. Other forklift safety standards have been implemented by the U.S. Occupational Safety and Health Administration (OSHA), VDI in Germany, the U.K. Health and Safety Executive (UK HSE), and EN norms in Europe. Bridging the Gap: How Engineers Enable CEOs to Integrate Industry 4.0 Initiatives with Plant Floor Crisis Management Given the rapid adoption of Industry 4.0 initiatives by automotive and C-suite executives, there is still a disconnect with crisis management often experienced on the plant floor. Second-shift

Manufacturing Outlook / October 2019

ENGINEERS: THE PRACTICAL LIAISONS OF INDUSTRY 4.0 supervisors fail to show up, conveyor systems fail, and poor delivery timing interfere with effective material flow. engineers appease both the C-level executives (who are insisting on implementation of new Industry 4.0 strategies) and the supervisors and manufacturing managers who are dealing with the real-world urgent production realities of the plant floor. Analytics help automotive manufacturers reduce costs and rethink engineering standards. They help enforce best practices in forklift safety, leading to an 80 percent reduction in accidents and damage costs. Whether or not companies are fully or partially FTF, utilizing IIoT analytics provides key performance indicators (KPIs) for multiple safety metrics, including the rate of impact events per vehicle motion time, the rate of vehicle lockouts due to critical safety issues, and the rate of vehicle lockouts due to failure of operators to complete safety checklists. Analytics are then used by engineers who drilldown from an enterprise view, through site data, all the way to detailed statistics regarding individual operators. This allows automotive management to identify the safest (and least safe) operations, as well as targeting training and disciplines where they are needed most. Engineers develop manufacturing output analyses, inventory storage layout, material flow spreadsheet calculations, and material flow simulation modeling. Additionally, Industry 4.0 imperatives require detailed material flow analysis to ensure that all manufacturing elements are delivered at the right place at the right time, every time. One of the cornerstones of a successful AGV system is an accurate calculation of how many vehicles will be required to perform the maximum flow for a peak hour. An accurate analysis of the material flow starts with detailed knowledge of what materials must be moved to support operations. Material pickup locations, drop-off locations, required timing, and frequency are all critical factors that determine whether automated material delivery systems will adequately support automotive and manufacturing needs. Also, the flexibility in which production equipment and processes can be laid out in a factory are critical factors to enhance process efficiency.

AGV engineering studies help manufacturers evaluate current and future goals to develop an automation plan that will maximize returns on investment (ROIs). Leveraging persistent installation success includes many applications that use standard and custom vehicle types across key industry segments. engineers analyze production data to accurately define material storage and flow requirements, as well as to review facility layout, in order to recommend process improvements. Working with experienced AGV vendors with strong engineering teams ensures a comprehensive evaluation of potential vehicle types, distances, speeds, and battery-charging strategies to develop an accurate vehicle count and supporting system for achieving the material handling goals. Estimating systems throughput, by using sophisticated computer models, allows complex manufacturers to simulate system operations. engineers understand that the required AGV space must include an analysis of logistical flows and layout, dynamics and analytical mechanics, prototype and high-volume mechanical design, as well as embedded software architecture and development. Additional engineering includes, mechanical, and electrical fabrication. engineers are well-versed in the interface used in factory infrastructure systems (stations, sensors, fire alarms, door, and material flow). The benefits of Industry 4.0 must be integrated with AGV user interface, system integration, and testing (including process automation). Author Profile: Carien Viswat holds a masterâ&#x20AC;&#x2122;s degree in civil engineering from the Delft University of Technology in the Netherlands. She is a senior sales consultant for the AGV division of Oceaneering International, Inc. Carien Viswat uses her extensive engineering experience gained in nearly 20 years of logistics work to manage and assist with the bid process and execution of projects. She provides technical expertise to ensure a smooth integration of Industry 4.0 and practical AGV solutions. Manufacturing Outlook / October 2019

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