Manufacturing Outlook January 2022

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PRESIDENT XI SEEKS STABILITY AMID

PAGE 12

KIVNON OVERCOMES OBJECTION TO MAGNETIC AGVS/AMRS WITH FLEXTAG PHONE APP AND GUARANTEED 2022 DELIVERY PAGE 8

FEATURE STORY: WEBSITE OUTLOOK – IS YOURS CURRENT AND FORWARD-LOOKING? PAGE 10

THE CASS TRANSPORTATION INDEX PAGE 16

THE GLOBAL PMI OUTLOOK PAGE 25

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SLOWDOWN, TENSIONS, AND TURMOIL

DECEMBER ISM PMI:

58.7%

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Manufacturing Outlook / January 2022

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TABLE OF CONTENTS Publisher LEWIS A WEISS Editor in Chief TIM GRADY Creative Director CRAIG ROVERE Contributing Writers ROYCE LOWE NORBERT ORE CHRIS KUEHL THOMAS R. CUTLER AMELIA ROY JEANNE-MARIE LOWRIE JOCELYN BRIGHT CHRIS ANDERSON LAWRENCE MAKAGON CHRISTINE CASATI KEN FANGER MIKE KOTZIAN RYAN JENNINGS

5 PUBLISHER’S STATEMENT

So Many Things Happening and/or In Flux

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Global PMI stays pu

by Royce Lowe

MANUFACTURING TIDBITS

Insights from inside manufacturing in action

8 KIVNON OVERCOMES OBJECTION TO MAGNETIC AGVS/AMRS WITH FLEXTAG PHONE APP AND GUARANTEED 2022 DELIVERY

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GLOBAL PMI OUTLOOK Disruptions Don’t Derail Expansion

by Norbert Ore

28 THE CREDIT MANAGER’S OUTLOOK Credit Managers Are Almost Cheery

by Dr. Chris Kuehl

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by Mike Kotzian

METALS OUTLOOK

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2022 May Be Better Than 2021

by Royce Lowe

FEATURE STORY: WEBSITE OUTLOOK – IS YOURS CURRENT AND FORWARD-LOOKING?

by Ryan Jennings

12 President Xi Seeks Stability Amid Slowdowns, Tensions, and Turmoil

by Christine Casati

16 CASS INDEX REPORT Cass Transportation Systems

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EUROZONE OUTLOOK Eurozone Expansion Continues

by Chris Anderson

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MANUFACTURING OUTLOOK

COVER STORY: ASIA OUTLOOK

Production Manager LINDA HOPLER

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18 ISM MANUFACTURING REPORT ON BUSINESS

34 INNOVATION OUTLOOK Accelerating The Manufacturing Renaissance With People And Robots Working Together

36 AFRICA OUTLOOK LinkMisr Expanding the North American Dealer Network

by TR Cutler

38 AEROSPACE OUTLOOK More Woes For Boeing

by Royce Lowe

40 ENERGY OUTLOOK

PMI at 58.7%

Sun, Sun, Sun, Here It Comes

by Jocelyn Bright

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NORTH AMERICA OUTLOOK

AUTOMOTIVE OUTLOOK

Continuing Expansion Despite Disruptions

by Amelia Roy

Aluminium In Autos, Then And Now

by Lawrence Makagnon

46 CYBER SECURITY OUTLOOK CMMC 1 2 Run, HERE WE GO!

by Ken Fanger

Open call for...

Contributing Writers for new and existing content. Let’s start a conversation – Contact us at info@jacketmediaco.com or visit mfgtalkradio.com/writer for more information.

48 ISSUES OUTLOOK Skills and the Labor Shortage: A Perspective

by Royce Lowe

PUBLISHERS STATEMENT

The Pandemic Didn’t Create Issues; It Amplified Weaknesses People wonder what makes manufacturing so interesting. I guess they perceive it to be a rather stoic, repetitive, mundane function of creating and shipping parts or products. At Manufacturing Outlook, we see it far differently. Let me cover a few subjects here as examples.

Reshoring – for a decade or more, many Americans have cried out for jobs and products to be returned to America.

Companies moved production work offshore to be closer to raw material suppliers and lower costs. Then the pandemic hit. Suppliers overseas either reduced their workforce or temporarily closed. It wasn’t just Tier 1 suppliers – every tier was impacted, as well as every means of transportation.

Today, 67% of U.S. companies are either strongly considering or definitely planning to move production back to the U.S. and source raw materials locally, regionally, and only internationally if no domestic source exists that can supply what is needed.

In addition, Big Pharma is also considering more domestic supply of medical devices and drugs. Chipmakers are committing to large-scale foundries in the U.S., and automakers are arranging for direct control over their chip design and production.

Once these conversions happen, they won’t be undone to capture some incremental savings overseas.

Labor – for years, leading companies had some training and apprenticeship programs to upskill their labor, but over time the number of programs dwindled. Then several forces swept across manufacturing, capped off by the pandemic. First, babyboomers began to retire at the rate of 10,000 every day across all business and industry sectors beginning as early as 1996.

While we read articles about ‘The Graying of America’ little was done to adjust for the age wave. Second, there was only a tepid response to capturing the tribal knowledge exiting industry because training is expensive, sometimes complex, and doesn’t lock in the upskilled employee. Third, the reliance on secondary and post-secondary education to provide skilled labor never materialized. Government, whether local, state or federal, provided ineffective results regardless of the money thrown at the problem. In addition, population growth in the U.S. has stopped expanding, so as more jobs are created, fewer people will be available to fill them. Even if all available labor today filled every available job in each industry, there would still be 3+ million job openings. And, although there were attempts to alter the image of manufacturing as dark, dirty, dangerous, and dull, the general perception of parents and potential employees about manufacturing hasn’t changed much.

Industry 4.0 technology – as it evolved since the turn of the Century, it was too expensive for the small and midsized companies to buy, and not mature enough to solve more problems than the implementation created. While the cost of automation and robotics began to come down, adoption was well behind the curve when the pandemic hit. Suddenly, companies not only lacked new talent, but existing labor was furloughed. Then the federal government began stimulus programs and minimum wage mandates that made a job down the street for more money more attractive, or not working at all and living off the PPP money for a while was comfortable, or people considering a total career change (the Great Resignation). As manufacturing tries to improve its appeal as a career choice, without gaining traction, it has hit the highest open jobs rate in perhaps its existence. So, it now scrambles to implement automation and robotics. The end result will be many jobs no longer available to accommodate people looking for work.

Supply Chain – due to Covid issues overseas, from raw material suppliers to subcontract manufacturers, topped off by logistics labor shortages at every step from loading dock to loading dock, the absence of workers broke the links in supply chains that were stretched too far and too thin for too long. These will be rebuilt in new ways, likely shortened and domesticated.

As you read through this issue, and listen to podcast episodes on Manufacturing Talk Radio, you may find that one idea that catapults your company forward. Thank you for reading and tuning in. n Lewis A. Weiss, Publisher Contact laweiss@mfgtalkradio.com for comments, suggestions and ideas and guest requests for MFGTALKRADIO.COM podcast or any of our podcasts.

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Manufacturing Outlook / January 2022

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MANUFACTURING OUTLOOK

JANUARY 2022

MANUFACTURING OUTLOOK GLOBAL MANUFACTURING PMI STAYS PUT. SUPPLY CHAIN DISRUPTION, RAW MATERIALS SCARCITY, AND SKILLED LABOR SHORTAGES ARE STILL MAJOR ISSUES. SLIGHT DOWNTURN IN DEMAND FOR MANUFACTURED GOODS. CHIP SHORTAGE EASING. STEEL PRICES SOFTENING GLOBALLY.

by ROYCE LOWE December saw 199,000 jobs created, and the unemployment rate fell to 3.9 percent. There were notable job gains in professional and business services (43,000), manufacturing (26,000), construction (22,000), and transportation and warehousing (19,000). The manufacturing increase was primarily in durable goods. The Bureau of Economic Analysis says the Real Gross Domestic Product increased at an annual rate of 2.3 percent in the third quarter of 2021, 0.2 percent above the “second” estimate. The real GDP increase in the second quarter of 2021 was 6.7 percent.

(MT). U.S. crude steel production for November was 7.2 MT, up 13.8 percent year-over-year. In November, China produced 69.3 MT, down 22.0 percent year-overyear; India 9.8 MT, up 2.2 percent; Japan 8.0 MT, up 10.7 percent; Russia (estimated) 6.5 MT, up 9.4 percent; South Korea 5.9 MT, up 2.7 percent; Germany 3.4 MT, down 0.3 percent, and Brazil 3.1 MT, up 2.5 percent. The EU (27) produced 12.9 MT, up 3.7 percent. The global crude steel production for the first eleven months of 2021 was 1752.5 MT, up 4.5 percent.

Primary Global Aluminum Production in November was reported at 5.497 million tons, with production in China, at 3.160 million tons, representing 57 percent of the world total.

Production was 499,000 tons in GCC; 373,000 tons in the rest of Asia; 268,000 tons in Western and Central Europe; 308,000 tons in North America and 339,000 tons in Russia and Eastern Europe.

Light vehicle sales throughout the world paint a gloomy but improving picture, with the U.S. rebounding

GLOBAL CRUDE STEEL PRODUCTION WAS DOWN BY 9.9 PERCENT YEAR-OVERYEAR IN THE MONTH OF NOVEMBER for the 64 reporting countries – which represent 98 percent of world crude steel production – to 143.3 million tons

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Manufacturing Outlook / January 2022

continued

MANUFACTURING OUTLOOK

slightly from 2020’s numbers, but still some 2 million below prepandemic years. Sales were just under 15 million for the year, up 3.4 percent from 2020. Canada sold 1.64 million light vehicles, up 6.6 percent on 2020, but was down 4.5 percent year-over-year to 102,919 units in December. China’s sales for November were off 9.1 percent to 2.52 million units, with NEV sales at 450,000 units. Western Europe saw the worst November sales since they were first collected in 1993. They were down 17 percent year-over-year to 864,119. EVs are still a bright spot.

Business conditions improved in all but four of the countries surveyed in December. Europe was the bright spot; Brazil, Mexico, Thailand, and Myanmar all contracted. Production and new orders were up for the 18th consecutive month, with new export business up for the 16th straight month, and employment up for the 14th month in a row. Companies, under delivery delays and rising production requirements, increased input buying quantities, leading to

the steepest increase in stocks of purchases since the survey began in 1998. Finished goods inventories were down for the 33rd consecutive month.

THE ECONOMIST magazine, in its latest weekly report on world economies, highlights changes in Gross Domestic Product (GDP), Consumer Prices, and Unemployment Rates for what it considers the world’s major economies. These data are not necessarily good to the present day, but are mostly applicable to at latest the past two months, and show definite trends in the world economy.

The figures are qualified as being the latest available, and with reference to a given quarter or month. The figures for GDP represent the percent change on the previous quarter or annual rate. The consumer price increases represent year-over-year changes. The unemployment figures, percent, are for the month as shown in the chart above. n

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

Manufacturing Outlook / January 2022

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MANUFACTURING TIDBITS

Kivnon Overcomes Objection to Magnetic AGVs/AMRs with FlexTag Phone App and Guaranteed 2022 Delivery

by Mike Kotzian

The holiday lights have been put away or in some cases thrown away. Most know the frustration of lights that failed to work because of a single bulb.

Finding the one defective light was time-consuming and not guaranteed.

Some 2022 AGV (automated guided vehicle) and AMR (automated mobile robot) buyers are seriously considering purchasing magnetic propulsion solutions because they are tested, established, and have worked well for more than two decades. If there is a knock or complaint on this technology, it has to do with interruptions when the magnetic strip is damaged, sort of like holiday lights.

Until recently this forced plant managers to seek tech support and on-site visits to ferret out the location of the defective or damaged magnetic guide strip or RFID navigational waypoint, and make necessary repairs. Kivnon USA has solved that concern with a new cell phone app, FlexTag. It enables the customer to repair damaged magnetic guidance strips and to replace, reprogram, or repurpose RFID navigation waypoints and can be performed without technical support or third-party visits. Removing that objection, the benefit of the magnetic AGVs/AMRs

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is that they can be ordered and delivered in 2022, whereas many of the vision-guided and SLAM (Simultaneous Localization and Mapping) trucks are seriously backlogged into 2023 and beyond.

chain has exacerbated the situation.

The best automation solution on paper means nothing if it cannot be delivered in 2022. Selling the sexy sizzle of new, clever, even remarkable AGVs means nothing if manufacturers and logistics leaders cannot take delivery of the product until 2023.

“Throughout industrial manufacturing, distribution, and logistics the lead time from many AGV manufacturers is more than a year.” -- Mike Kotzian

FlexTag App by Kivnon solves magnetic AGV limitations The FlexTag Application is the firstof-its-kind solution to create, configure, and modify magnetic navigation circuits. This innovation is a critical accessory in the AGV/AMR space along with FlexMap, management software that allows users to create, configure, and map navigation circuits. Similarly, the Smartpad Application is designed to control and move automated guided vehicles (AGVs/AMRs) via a Bluetooth connection.

That means product ordered in Q1 2022 will not be delivered until the following year. That is an absurd lead time and reflects poor planning and unnecessary supply chain constraints.

Guaranteed Delivery in 2022 So much emphasis has been placed on features, advantages, and benefits; too little attention has been paid to delivery dates. The current state of the supply continued

Manufacturing Outlook / January 2022

MANUFACTURING TIDBITS The Supply Chain Disruption: Even Fork Trucks Cannot Be Delivered Until 2023 Several years ago the decision might have been whether to use fork trucks or AGVs. The average delivery time for most new fork trucks is also 2023. Until now, the question from purchasing was which vendor could best demonstrate the fastest ROI and cost-justification.

That question is also outdated because ROI can only be calculated from the date of delivery and rapid installation.

Basic AGV Solutions Prove Best Option for 2022 One of the realities of moving materials on a production loop with many stops is that well-established tried, and trusted AGV technologies solve the problem.

Likewise, most AGVs are needed for simple A to B locations (dock to production cell) delivering raw materials or kitted solutions.

K10 One-Way: One-directional movement. Towing capacity of up to 3,000 kg/ 6,614 lbs on wheeled trolley.

Dimensions (L x W x H): Up to 1,700 x 500 x 280 mm/ 67”x 19,7” x 11” Magnetic navigation

K11 Two-Way: Bidirectional movement; Towing capacity of up to 3,000 kg/ 6,614 lbs on wheeled trolley. Dimensions (L x W x H): Up to 2,010 x 500 x 280 mm/ 79” x 19,7” x 11” Magnetic or mapping navigation “Tricked-out super-sophisticated AGVs that cannot be delivered until 2023 are useless.” -- Mike Kotzian

The Need For AGVs Is Real Years ago, the efficacy and merit of AGVs had to be explained. Some feared that fork truck drivers would be replaced. Ask any manufacturer struggling to find workers right now; experienced fork truck drivers are part of the great resignation. Plant managers, purchasing and procurement, occupational health and safety professionals, and human resource managers are tasked with automation objectives, hiring objectives, and product quality and safety process improvement; the standard ROI paradigm has shifted for 2022.

The AGV Selection Process For 2022: Delivery Commitment Guarantee AGV vendors must promise a delivery date with a guarantee* not to exceed 180 days from purchase order to delivery. Failing to provide that commitment is unacceptable. Solving the immediate challenges in production by delivering the product by Q3 2022 and mitigating the hiring constraints plaguing industrial HR managers are top priorities. *Orders placed at MODEX2022 – Booth # C5488 Atlanta March 28 – 31, or sooner are guaranteed for Q3 2022 delivery.

Sectors Driving AGV Demand Automotive With more than a decade of experience offering industrial automation solutions for the automotive industry, whether for car manufacturers (OEMs) or component suppliers (Tier I, II, and III), the high number of deployments have resulted in improved efficiency in a variety of internal logistics processes.

These automated processes include the transport of materials between various points for the supply of raw materials, semi-finished/finished product, or kitting processes. The automotive sector requires the automation of assembly lines and sequence component transport processes. Additional applications include work on robotic cells to exchange trolleys, move collaborative robots and fork truck free (FTF) implementation.

Logistics, Warehousing, And Distribution One industry that is opting heavily for process automation AGVs/AMRs is the logistics industry, including warehouses, distribution centers, and 3PLs. The result translates to cost reductions, increased productivity, and better use of the limited space available. Automated Guided Vehicles allow an endless number of applications to be automated: pallet transportation, truck loading, and unloading, and even the transport of entire shelves storing products to the picking zone (goods-to-person).

Manufacturers: Small And Large Turn To AGVs/AMRs There is an ongoing search for solutions in the industrial sector striving to improve productivity, increase profitability, and achieve greater control of manufacturing processes.

This is often driven by Lean Manufacturing initiatives and commitment to continuous process improvement.

AGVs/AMRs are flexible. These efficient systems are capable of adapting to the production circumstances at any given moment including internal logistics processes.

Author Profile:

Mike Kotzian is currently the Managing Director of Kivnon USA, a leading Automated Guided Vehicle supplier with Farmington Hills, Michigan headquarters. He has over 20 years of experience in the AGV industry in various leadership roles. He has a special interest in the history and evolution of the AGV with a passionate look to the future. Follow KivnonUSA on Twitter or contact Kotzian on LinkedIn. n

Manufacturing Outlook / January 2022

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FEATURE STORY

Website Outlook – Is Yours Current and Forward-Looking?

By: Ryan Jennings Why Industrial Manufacturing Focused Websites are So Vitally Important Today As legacy and traditional marketing continues to evolve into a new form of modern digital advertising, it has become more important than ever for those in the industrial and manufacturing industry to have access to all that modern digital marketing has to offer. Simply stated, businesses small and large in the industrial space will find themselves handicapped if they are unable to leverage the power of modern digital marketing and real-time online interaction. From promoting a major brand, offering an industrial service such as metal fabrication, to selling small and inexpensive components online, working with experienced and knowledgeable website development and digital marketing experts can have a profound impact on bottom-line profitability for almost any business.

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Website Development Tools and Services Explained another way, traditional newspaper, television and radio marketing have given way to digital marketing in terms of results-driven and cost-effective advertising for those in industry and manufacturing.

Some of the keys to consider when talking about this phenomenon includes making sure that your company has access to the latest and most innovative website development tools and services. For example, today’s modern websites must be designed so they are as easily viewable on a laptop computer as on a smart phone in a seamless and reliable way. Having a website that is functional across all platforms is required in today’s digital world.

Major Search Engines and Their Highly Advanced Algorithms Those on the cutting edge of the latest

in website design and digital marketing know that the key to success is having access to fresh, relevant, and unique content that is regularly added to a website. This is an important consideration because the major search engines and their highly advanced algorithms search out new, relevant, and engaging content on websites across the Internet. When a website proves its viability by offering this type of content, it is typically rewarded with a better search engine ranking. For example, a company trying to rank for a particular term in a particular region of the country must provide content to supports that expectation.

Social Media Advertising is Extremely Cost-Effective Along with a cross platform fully functional website and engaging, with unique and innovative content, a website must also be properly continued

Manufacturing Outlook / January 2022

FEATURE STORY marketed across today’s vast array of popular social media sites. As a matter of fact, social media is really the key when talking about promoting modern industrial and manufacturing focused websites. Social media advertising is extremely cost-effective and helps businesses to expand their brand through two-way communication with existing and potential customers and clients. It is the new standard in communication among companies and those they wish to serve. Working with an experienced and knowledgeable team of social media marketing experts is absolutely crucial to success in today’s competitive business arena.

An Online Catalog That is Well Organized and Easily Searchable Another key consideration when it comes to modern website deployment and Internet marketing for industry and manufacturing is having an

extensive and easy to navigate online catalog. Giving customers every opportunity to find exactly what they need in a quick and efficient way can have a huge impact on overall success. When a website is intuitive and its online catalog is well organized and easily searchable, the end result is better sales performance and greater customer satisfaction. Staying up-todate with the latest innovations in industry and manufacturing as it relates to digital marketing can be as easy as connecting with manufacturers across the globe. WYSIWYG Marketing prides itself at just that; they’ve built and reengineered over the past decade a very easy to use yet robust Content Management System (CMS) called CoreContent. CoreContent allows industrial manufacturing companies of any size to fully manage their own product and service offerings, and combines one of the industry’s best indexing platforms on Google today!

Time for a Website Review It is likely time for a review of your website to determine what it has, what it lacks, where it can be tweaked, and how to get it in the page one search results of the search engines for relevance and current content. With all the moving parts, from the website design, fresh content, social media engagement, pay-per-click marketing, and other promotion tactics to gain traction, your website is the digital face and first impression of your company. It is time to see if it is the best it can be.

Author Profile: Ryan Jennings, is the owner of WYSIWYG Marketing, a full service Internet marketing firm. He can be reached at Office: 816-759-2845, Cell: 816-446-5366, or ryan.jennings@wysiwygmarketing.com n

Manufacturing Outlook / January 2022

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COVER STORY

Asia Outlook

CONTINUING STABILIZATION BUT SLOWER GROWTH IN CHINA; SURPRISE TENSION AND TURMOIL IN KAZAKHSTAN by Christine Casati

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continued Manufacturing Outlook / January 2022

COVER STORY CHINA’S BELT AND ROAD INITIATIVE Amidst the developing turmoil in Kazakhstan, new rail links in Southeast Asia, and the growing global impact of China’s slowing economy, this month we are going to take a closer look at China’s ongoing BELT & ROAD INITIATIVE (BRI), first known as One Belt One Road. Think of it as a trading highway from China to Southeast Asia and through Central Asia to Europe, the Mideast, and Africa. Long in the planning and launched in 2013, this long-term strategic internal and external structural connectivity initiative is now part of China’s Constitution (2017) and due to be completed in 2049 (the 100th anniversary of the establishment of the People’s Republic of China). BRI includes both wet and dry ports, dams, roads, bridges, airports, logistics and industrial hubs, skyscrapers, and possibly military bases. It is China’s most potent diplomatic statement to the world after centuries of actual and perceived foreign hegemony. Global economists have predicted that it will add over $7 trillion annually to global GDP. (CEBR) There are two major components to BRI: the first is the land route linking China and Eurasia which basically follows and extends the ancient “Silk Road” and the updating of old colonial rail links to Southeast Asia; the second is the maritime “Silk Road” consisting of port links across the Southeast and South Asia to Africa and Europe. Once China completes its giant Arctic icebreaker project, there will also be a Polar Route. There are over 40 nations already engaged in these BRI projects, with the most recent being Eritrea and Guinea Bissau in Africa. We will focus on the land route.

a doubling in price. This has caused widespread and violent protests leading to “shoot to kill” suppression with the help of Russian troops. As of early January, the unrest has been contained but has unmasked the long-festering discontentment of its people. And, price controls were put back in place to placate the people.

KAZAKHSTAN

Why does Kazakhstan matter to China? Located between China and Russia and lying along the central strategic trans-Eurasia land route of BRI, it is the largest economy in Central Asia and the largest landlocked country in the world. Rich in natural resources, including hydrocarbons and metals, it is the world’s leading producer of uranium, its biggest exporter of oil, the 10th largest producer of coal, and the second leading miner of bitcoin.

Connecting China to Europe and the Mideast, it calls itself the “buckle” in China’s BRI. Formerly part of Russian Turkestan, it became an independent political entity in the 1930s and has enjoyed relative autonomy and stability over the past 30 years.

Governed by authoritarian ex-Soviet elites who have enriched themselves, it has maintained this stability through soviet-style unchallenged and relentless repression and by subsidizing prices of butane and propane which can be easily transported to isolated villages in the Ural mountains where over 50% of its 19 million citizens live. But on January 1, 2022, the government allowed the price of cooking fuel to freely rise leading to

The keystone BRI project is the huge KTZE-Khorgos Gateway, a “dry port” located 15km from the Chinese border in Eastern Kazakhstan, including a massive logistics and industrial hub. Requiring enormous amounts of capital to develop, it is the most unique of all BRI projects.

Operated by COSCO, China’s major shipping company, it boasts 7 giant Train Gantry Cranes “positioned to horizontally transfer both 20-and 40-foot modular containers between tracks of different railway gauges” (Standard Chinese gauge and Kazakh Soviet gauge). Estimates are that a fully loaded train can transfer its cargo to another train within 47 minutes, reducing the time to transport goods from China to Europe to 15 days. This appears to be a significant cost and time savings compared to the maritime routes, which take up to 50 days. But the real cost is over ten times the sea route due to the huge cost of operations and other bottlenecks along the way. China claims it is still the best route for “high value” goods. continued

Manufacturing Outlook / January 2022

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COVER STORY TIDBITS MANUFACTURING RECENT ACCUSATIONS This huge undertaking has not been without both political and financial setbacks. China has been accused of spreading its tentacles of power through economic domination of smaller, weaker nations, and by creative non-transparent financing of many of these trade links which are desperately needed by many developing countries. But the picture is much more complicated. For decades, China has been training engineers from Africa at its major educational institutions in China where students learn Chinese and complete five-year engineering degrees in Chinese.

China has long been involved in helping develop infrastructure, such as dams, roads, and railways in Africa, where they employ these engineers and supplement construction with Chinese labor. China claims it is not trying to take over these countries by controlling their ports and railways if they default on their BRI loans but to stimulate trade. Recently there has been greater transparency around how these BRI loans are structured.

China has also slowed down its lending due to drains on its foreign exchange reserves. China’s economy is slowing. Goldman Sachs this month has reduced its projected growth rate to 4.3% in 2022 due to the spread of the Omicron virus.

Other initiatives similar to BRI have arisen to counter China’s growing influence in developing countries.

The European Union has pledged 630 billion for infrastructure development outside the Union. And the USA is developing a counter BRI initiative called B3W (Build Back Better World). How these initiatives play out over the coming decades will no doubt change the global macroeconomic landscape and possibly drive global trade toward more worldwide synchronization.

Other Developments within China Walmart reacted to calls to respond to the alleged Xinjiang genocide by removing products suspected of being produced using forced labor there from all its shelves at supercenters in China. Other companies such as Intel have also responded. But the backlash has been significant and it is unlikely that these efforts will result in any change of government behavior.

China has retaliated by threatening to enforce 17 penalties against Walmart for violations of its cybersecurity regulatory framework, which up to now China had ignored. And Intel has been forced by its own Chinese employees to apologize. Another very complicated picture.

In the meantime, as we approach the opening of the Winter Olympics in Beijing on February 4, the Omicron Virus is spreading in China with more lockdowns and restrictions in cities and provinces close to Beijing.

All train service to Beijing has been suspended from Tianjin, a nearby city of 14 million people and Beijing’s closest port, as Omicron spreads

there. Athletes will be restricted to an “Olympic Bubble”. The Chinese are following a containment plan similar to the one Japan implemented during the summer Olympics.

China’s auto sales in October fell for a sixth consecutive month by 9.4 percent y-o-y to 2.33 million vehicles, due largely to a shortage of semiconductor chips. But NEVs increased by 135 percent to 383,000 units.

JAPAN, INDIA AND SOUTHEAST ASIA JAPAN’s PMI eased slightly from 54.5 in November to 54.3 in December. Japan saw slower increases in production and new orders, but employment was up at the fastest pace in almost four years. However, business optimism was at a four-month low.

Supply chain disruptions and material shortages continued to hinder production and sales.

The rise in new orders was sustained, particularly in the automotive sector, and the fourth quarter as a whole was strong. New export sales growth continued

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Manufacturing Outlook / January 2022

COVER STORY eased in December amid a rise in COVID-19 cases in South Korea, in particular. Rising raw material prices put pressure on cost burdens, and for some manufacturers, a lack of raw materials hindered the completion of orders.

INDIA saw strong but slower increases in new orders and production in December. Input price inflation was back to a three-month low, and selling price increases were at their weakest since October 2020.

Business confidence strengthened, but there were still concerns about supply chain disruptions, COVID-19 labor disruptions, and inflationary pressures. The PMI softened from November’s 57.7 to 55.5 in December, still in expansion.

There were higher prices for a wide range of items, including chemicals,

foodstuffs, electronic components, metals, and textiles. Employment fell slightly as pressure eased on capacity.

There were long lead times on inputs and raw materials scarcity among distributors. New export orders were up for the sixth consecutive month, albeit only slightly.

SOUTHEAST ASIA may be the next reliable low-cost labor and parts source over the next decade or two.

Although the population is considerably smaller than China or India, Indonesia, Thailand, the Philippines, and Vietnam have been improving their workforce skillset and factory capabilities steadily over the past decade as dissatisfaction with China has arisen. Companies around the world have been exploring Southeast Asia as a source of supply more aggressively since geopolitical and Covid issues have disrupted Chi-

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nese supply sources, and while these nations have similar difficulties with the virus, at some point the virus will clear or become manageable. Thus, companies preparing now for that eventuality will reap the offshoring rewards they experienced years ago as they sourced from China. This is also a windfall for Southeast Asian countries, who were competing with China with great difficulty, but are now more favored as China flexes its BRI muscles.

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

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Manufacturing Outlook / January 2022

15

CASS INDEX OUTLOOK

Cass Transportation Index Report

by CASS INFORMATION SYSTEMS, INC.

Cass Freight Index - Shipments The U.S. transportation sector delivered in time for the holidays as the shipments component of the Cass Freight Index® accelerated to 7.7% y/y growth in December from 4.5% in November.

intermodal volumes in early 2022 still demonstrate capacity constraints on freight volumes, the strong finish to 2021 shows progress as the trucking industry has begun to build driver and equipment capacity in spite of extraordinary challenges.

Though virtually unchanged m/m, the Cass shipments index jumped 4.2% from November to December on a seasonally adjusted (SA) basis, as shipment volumes held firm despite the normal holiday slowdown.

Freight Expenditures The expenditures component of the Cass Freight Index, which measures the total amount spent on freight, rose to another new record level of 4.419, up 44% y/y in December and 3.4% m/m.

Though the record backlog of 105 containerships off Southern California and sharp declines in

16

On a seasonally adjusted basis, expenditures were literally off the

chart (not to worry, the axis has been adjusted), rising 6.6% m/m in December, with a slightly larger contribution from higher volumes, and to a lesser degree from higher rates.

On a two-year stacked basis, the Expenditures component of the Cass Freight Index was up 62% in December, with shipments up 15% and rates up 41%.

This index rose 38% in 2021, after a 7% decline in 2020 and no change in 2019. Tougher comparisons in the coming months will naturally slow continued

Manufacturing Outlook / January 2022

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

CASS INDEX OUTLOOK these y/y increases, but just using normal seasonality from here, the increase in 2022 will still be about 25% at this trend level.

Inferred Freight Rates A simple calculation of the Cass Freight Index data (expenditures divided by shipments) produces a data set of inferred freight rates that explains the overall movement in cost per shipment.

The freight rates embedded in the two components of the Cass Freight Index decelerated to a 33% y/y increase in December from 38% in November.

Cass Inferred Freight Rates rose another 3.5% m/m on a seasonally adjusted basis in December, to a new record.

Significant excess miles in the freight network are persisting into 2022 as the economy faces ongoing disruptions. Chassis production improved significantly in Q4’21, but only enough to turn the direction of the chassis fleet from contraction to slight growth, and the chassis fleet remains far from what is needed to address rail network congestion.

This tight intermodal offtake capacity continues to press imports into the truckload market, particularly off the West Coast, raising the truckload length of haul (LOH) 20% y/y in December as trucking continues to take share from a challenged rail network.

These excess miles are a significant part of the 33% y/y increase in inferred freight rates, because, as noted in the calculation above, these rates are on a per shipment basis, rather than a per mile basis. Higher fuel surcharges, modal mix, and

accessorial fees are also factors which are not reflected in the Cass Truckload Linehaul Index. With a higher proportion of smaller LTL shipments in December, modal mix worked to slow the increase this month.

congestion eases over the course of 2022, a reversal to shorter length of haul will likely add upward pressure to this index above and beyond market rate increases.

For full-year 2021, Cass Inferred Freight Rates rose 23% from 2020, and heading into 2022 are up even more than that on a y/y basis, albeit likely to slow from the 33% increase in December. The data set is diversified among all modes, with truckload representing more than half of the dollars, followed by LTL, rail, parcel, and so on.

Truckload Linehaul Index The Cass Truckload Linehaul Index® fell 1.5 points in December to 148.0 from 149.5 in November, down 1.0% m/m and up just 8.0% y/y, slower than the 9.6% increase in November.

This data series trends below the 22% increase in public Q3 TL fleet rates due to a large increase in LOH resulting from rail service issues pressing longer-haul shipments onto the highways. Accessorials are also part of the difference, but likely much smaller than the mix effects from longer LOH, which reduce the rate per mile even as cost per shipment rises.

We estimate longer LOH alone (with its accompanying lower linehaul rates) lowered this index by about 3% in December.

Strong freight demand and tight capacity are continuing to press this index higher, but have been more than outweighed in the past two months by mix. As chassis capacity gradually recovers and rail

Freight Expectations The U.S. freight cycle has been on the upswing since mid-2020.

Fundamentals remain positive, with a strong consumer balance sheet and significant additional need for restocking.

While signs that an easing in the everything shortage were beginning to emerge prior to the Omicron wave, the challenges to industry capacity are worsening again as 2022 begins. Absenteeism is surging across drivers, maintenance staff, and administrative personnel at transportation companies, and the effects of the latest COVID variant on factory workers will likely slow the recovery in equipment production.

But Omicron is likely to be more needle-shaped than prior variants, and after the spike in cases, there is a silver lining that its milder symptoms may broadly reduce pandemic risks, which will have major implications for freight market dynamics.

The ACT Freight Forecast report provides monthly predictions for the truckload, LTL, and intermodal markets, including capacity, volumes, and rates, and forecasts for the shipments component of the Cass Freight Index and the Cass Truckload Linehaul Index through 2023.

In March 2021, ACT predicted a 12% increase in the shipments component of the Cass Freight Index for 2021, just two thousandths from the actual result. n

Manufacturing Outlook / January 2022

17

ISM REPORT OUTLOOK

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

ISM PMI at 58.7% for December 2021 Released January 4th

ISM PMI for the past 5 years

DECEMBER 2021 58.7%

Expanding Contracting

continued

18

Manufacturing Outlook / January 2022

ISM REPORT OUTLOOK INSTITUTE FOR SUPPLY MANAGEMENT®

Analysis by

reportonbusiness Economic activity in the manufacturing sector grew in December, with the overall economy achieving a 19th consecutive month of growth, say the nation’s supply executives in the latest Manufacturing ISM® Report On Business®.

The December Manufacturing PMI® registered 58.7 percent. The New Orders Index registered 60.4 percent, down 1.1 percentage points compared to the November reading of 61.5 percent.

The Production Index registered 59.2 percent, a decrease of 2.3 percentage points compared to the November reading of 61.5 percent.

The Prices Index registered 68.2 percent, down 14.2 percentage points compared to the November figure of 82.4 percent. The Backlog of Orders Index registered 62.8 percent, 0.9 percentage point higher than the November reading of 61.9 percent.

The 15 manufacturing industries reporting growth in December — in the following order — are: Apparel, Leather & Allied Products; Furniture & Related Products; Textile Mills; Plastics & Rubber Products; Machinery; Nonmetallic Mineral Products; Miscellaneous Manufacturing‡; Chemical Products; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Computer & Electronic Products; Food, Beverage & Tobacco Products; Transportation Equipment; Primary Metals; and Petroleum & Coal Products. The three industries reporting a decrease in December compared to November are: Wood Products; Printing & Related Support Activities; and Paper Products. ISM ‡Miscellaneous Manufacturing (products such as medical equipment and supplies, jewelry, sporting goods, toys and office supplies).

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

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

MANUFACTURING

PMI at 58.7% ®

PMI

Manufacturing grew in December, as the 2019 2020 2021 Manufacturing PMI® registered 58.7 percent, 58.7% 2.4 percentage points lower than the November reading of 61.1 percent. All five subindexes that directly factor into the Manufacturing PMI® were in growth territory. All 50% = Manufacturing Economy of the six biggest manufacturing industries Breakeven Line expanded, in the following order: Chemi43.1% = Overall Economy Breakeven Line cal Products; Fabricated Metal Products; Computer & Electronic Products; Food, Beverage & Tobacco Products; Transportation Equipment; and Petroleum & Coal Products.

Manufacturing at a Glance INDEX

Dec Index

Nov Index

% Point Change

Direction

Rate of Change

Trend* (months)

Manufacturing PMI®

58.7

61.1

-2.4

Growing

Slower

19

New Orders

60.4

61.5

-1.1

Growing

Slower

19

Production

59.2

61.5

-2.3

Growing

Slower

19

Employment

54.2

53.3

+0.9

Growing

Faster

4

Supplier Deliveries

64.9

72.2

-7.3

Slowing

Slower

70

Inventories

54.7

56.8

-2.1

Growing

Slower

5

Customers’ Inventories

31.7

25.1

+6.6

Too Low

Slower

63

Prices

68.2

82.4

-14.2

Increasing

Slower

19

Backlog of Orders

62.8

61.9

+0.9

Growing

Faster

18

New Export Orders

53.6

54.0

-0.4

Growing

Slower

18

Imports

53.8

52.6

+1.2

Growing

Faster

2

Overall Economy

Growing

Slower

19

Manufacturing Sector

Growing

Slower

19

*Number of months moving in current direction.

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

Commodities Reported Commodities Up in Price: Adhesives and Paint; Aluminum* (19); Capacitors; Corrugate (15); Corrugated Packaging (14); Diesel Fuel (12); Electrical Components (13); Electronic Components (13); Freight (14); Labor — Services; Labor — Temporary (8); Logistics Services; Lubricants; Lumber; Natural Gas*; Nylon (3); Ocean Freight (13); Packaging Supplies (13); Printed Circuit Boards (PCBs); Resin-Based Products (11); Resistors; Rubber-Based Products (5); Semiconductors (11); Silicone (2); Steel* (17); Steel — Galvanized; Steel — Stainless (14); and Steel Products* (16). Commodities Down in Price: Aluminum* (2); Crude Oil; Ethylene; Natural Gas*; Polyethylene; Propylene; Steel* (2); and Steel — Hot Rolled (2).

Commodities in Short Supply: Aluminum (2); Copper Products; Electrical Cables; Electrical Components (15); Electronic Components (13); Labor — Temporary (8); Plastic Resins — Other (10); Rubber-Based Products; Semiconductors (13); and Steel (13).

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

12

ISMWORLD.ORG Manufacturing Outlook / January 2022

continued

19

ISM REPORT OUTLOOK

ISM Report On Business ®

®

Manufacturing PMI® New Orders (Manufacturing) 2019

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

20

2020

New Orders

2021

ISM’s New Orders Index registered 60.4 percent. Thirteen of 18 manufacturing industries reported growth in new orders in December, in the following order: Textile Mills; Furniture & Related Products; Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing‡; Petroleum & Coal Products; Primary Metals; Machinery; Chemical Products; Fabricated Metal Products; Transportation Equipment; Plastics & Rubber Products; and Computer & Electronic Products.

60.4%

52.8% = Census Bureau Mfg. Breakeven Line

Production (Manufacturing) 2019

2020

Production

2021 70

59.2%

52.1% = Federal Reserve Board Industrial Production Breakeven Line

The Production Index registered 59.2 percent. The 10 industries reporting growth in production during the month of December — listed in order — are: Furniture & Related Products; Plastics & Rubber Products; Textile Mills; Paper Products; Chemical Products; Machinery; Computer & Electronic Products; Food, Beverage & Tobacco Products; Transportation Equipment; and Miscellaneous Manufacturing‡.

Employment (Manufacturing) 2019

2020

Employment

2021

54.2% 50.6% = B.L.S. Mfg. Employment Breakeven Line

ISM’s Employment Index registered 54.2 percent. Of 18 manufacturing industries, eight industries reported employment growth in December, in the following order: Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Machinery; Fabricated Metal Products; Chemical Products; and Computer & Electronic Products.

20

Supplier Deliveries (Manufacturing) 53.1% 2019

2020

2021

64.9%

80

Supplier Deliveries The delivery performance of suppliers to manufacturing organizations was slower in December, as the Supplier Deliveries Index registered 64.9 percent. Fourteen of 18 industries reported slower supplier deliveries in December, in the following order: Apparel, Leather & Allied Products; Textile Mills; Nonmetallic Mineral Products; Furniture & Related Products; Miscellaneous Manufacturing‡; Paper Products; Plastics & Rubber Products; Fabricated Metal Products; Primary Metals; Food, Beverage & Tobacco Products; Machinery; Computer & Electronic Products; Chemical Products; and Transportation Equipment.

Inventories (Manufacturing) 2019

2020

2021

54.7%

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

‡Miscellaneous

The Inventories Index registered 54.7 percent. The 10 industries reporting higher inventories in December — in the following order — are: Apparel, Leather & Allied Products; Machinery; Miscellaneous Manufacturing‡; Chemical Products; Furniture & Related Products; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Plastics & Rubber Products; Transportation Equipment; and Computer & Electronic Products.

Manufacturing (products such as medical equipment and

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

20

Inventories

Manufacturing Outlook / January 2022

continued

ISM REPORT OUTLOOK

ISM Report On Business ®

®

Manufacturing PMI®

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

Customer Inventories (Manufacturing) 2019

2020

Customers’ Inventories

2021

31.7%

ISM’s Customers’ Inventories Index registered 31.7 percent. No industries reported higher customers’ inventories in December. The 14 industries reporting customers’ inventories as too low during December — listed in order — are: Printing & Related Support Activities; Nonmetallic Mineral Products; Textile Mills; Paper Products; Fabricated Metal Products; Machinery; Electrical Equipment, Appliances & Components; Transportation Equipment; Miscellaneous Manufacturing‡; Computer & Electronic Products; Chemical Products; Wood Products; Furniture & Related Products; and Food, Beverage & Tobacco Products.

Prices (Manufacturing) 2019

2020

2021

68.2%

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

Backlog of Orders (Manufacturing) 2019

2020

Prices The ISM Prices Index registered 68.2 percent. In December, 16 industries reported paying increased prices for raw materials, in the following order: Apparel, Leather & Allied Products; Textile Mills; Furniture & Related Products; Paper Products; Primary Metals; Miscellaneous Manufacturing‡; Machinery; Computer & Electronic Products; Chemical Products; Food, Beverage & Tobacco Products; Nonmetallic Mineral Products; Fabricated Metal Products; Transportation Equipment; Wood Products; Electrical Equipment, Appliances & Components; and Plastics & Rubber Products.

Backlog of Orders

2021

62.8%

ISM’s Backlog of Orders Index registered 62.8 percent. The 11 industries reporting growth in order backlogs in December, in the following order, are: Apparel, Leather & Allied Products; Textile Mills; Petroleum & Coal Products; Transportation Equipment; Machinery; Fabricated Metal Products; Chemical Products; Miscellaneous Manufacturing‡; Primary Metals; Food, Beverage & Tobacco Products; and Computer & Electronic Products.

New Export Orders (Manufacturing) 2019

2020

New Export Orders

2021

53.6%

ISM’s New Export Orders Index registered 53.6 percent. The six industries reporting growth in new export orders in December — in the following order — are: Plastics & Rubber Products; Food, Beverage & Tobacco Products; Computer & Electronic Products; Miscellaneous Manufacturing‡; Chemical Products; and Transportation Equipment.

Imports (Manufacturing) 2019

2020

2021

53.8%

‡Miscellaneous

Imports ISM’s Imports Index registered 53.8 percent. The six industries reporting growth in imports in December — in the following order — are: Furniture & Related Products; Petroleum & Coal Products; Computer & Electronic Products; Food, Beverage & Tobacco Products; Machinery; and Chemical Products. n

Manufacturing (products such as medical equipment and

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

Manufacturing Outlook / January 2022

21

NORTH AMERICA OUTLOOK

JANUARY 2022

NORTH AMERICA OUTLOOK

by Amelia Roy Continuing Expansion Despite Disruptions IHS Markit’s remarks on U.S. manufacturing for December show the PMI figure easing slightly from November’s 58.3 to 57.7 in December.

A deterioration in vendor performance contributed to lifting the PMI. Firms

registered a slower upturn in new orders, and a marked rate of cost inflation, despite its easing to the softest since June. Backlogs increased at the slowest pace in ten months. There was a further subdued upturn in production, and the softest increase in new orders for a year, along with a further substantial deterioration in vendor performance

amid severe material shortages.

Cost burdens increased significantly, but selling price increases were hindered by lower demand. Material shortages, port congestion, and the lack of availability of trucking and shipping containers led to a substantial deterioration in vendor performance.

continued

22

Manufacturing Outlook / January 2022

NORTH AMERICA OUTLOOK Thus a sharp rise in backlogs of work.

Production expectations for the year ahead strengthened to their highest since November 2020. Optimism stemmed from hopes of reduced supply disruption and greater availability of suitable workers.

The JP MORGAN GLOBAL MANUFACTURING PMI – a composite index produced by JPMorgan and IHS Markit in association with ISM and IFPSM (International Federation of Purchasing and Supply Management) – was unchanged from November’s 54.2.

Rates of increase in production, new orders, and employment accelerated.

Price and supply chain pressures remain high. There is optimism for increases in production over the coming year.

All three sub-sectors showed growth,

with investment goods producers the fastest, offset by a weaker expansion in consumer and intermediate goods industries.

CANADA saw a solid increase in production, new orders, and employment, with pre-production inventories rising at a survey-record rate. Companies are optimistic, but the Omicron variant is a concern for workforce stability. Material shortages and delivery delays were constraining Canada’s manufacturing sector. The PMI for December at 56.5, was slightly off from November’s 57.2.

There is strong demand for Canadian manufactured goods, but staff shortages and delays in receipts of materials are holding back growth to some extent.

With production increases, firms hired extra staff, but there is not enough skilled labor to take care of a rise in backlogs. Exports rose during December. Firms are optimistic regarding the next twelve months.

DesRosiers Automotive Consultants says Canadian auto sales were down 13.9 percent in November from a year earlier as vehicle shortages caused by semiconductor supply issues continue to weigh on the industry. The consultancy estimates light vehicle sales totaled 110,448 for the month.

The SAAR for November fell to Amelia Roy, Staff Writer

1.45 million. n

Manufacturing Outlook / January 2022

23

EUROZONE OUTLOOK

GLOBAL OUTLOOK

EUROZONE

by Chris Anderson Eurozone Expansion Continues IHS Markit’s Eurozone Manufacturing Composite Purchasing Managers’ Index (PMI), eased from 58.4 in November to 58.0 in December. There was a further easing of the supply chain crisis, with average lead times lengthening to the softest extent since February. Thus firms added to their inventories at the fastest rate ever recorded in the survey.

But production growth remained low, in fact, the second-weakest month since July 2020. New orders increased at the weakest rate since January 2021. The improvement in supplier lead times is manifested by the average lead times lengthening to the weakest extent since February.

Lead times lengthened to lesser degrees in all monitored Euro-area countries

24

Manufacturing Outlook / January 2022

except Italy. In turn, Eurozone manufacturers increased purchases of raw materials and other semi-finished items at a sharp pace. These two factors combined allowed companies to stockpile inputs, with inventories increasing at a rate not seen in 24 years of data collection.

The selling rate for cars in Western Europe plunged even lower in October to 9.0 million units per year, in large part due to the ongoing semiconductor shortage. It may be that sales for 2021 may not even eclipse the result for 2021 (10.79 million units.) The UK PMI eased to 57.9 in December from 58.1 in November.

The upturn continues at the end of 2021, with production, new orders, and employment all rising. New export sales were down for the fourth consecutive month. Selling price inflation was up at a record high.

There was a slight easing of supply chain delays, hence a softening of input price increases. There were still logistic disruptions and staff shortages hurting the overall pace of expansion. The strengthening was in the domestic market, with consumer, intermediate and investment goods all seeing production increases.

Employment was up for the 12th consecutive month, with the rate of job growth similar to November’s three-month high. December saw further substantial increases in average input prices, with the inflation rate among the highest in the survey history. There were higher costs for chemicals, electronics, energy, food products, metals, timber, and wood. Freight, shipping, and air transportation costs also rose.

Two-thirds of firms felt positive about the next twelve months, with only six percent Chris Anderson, Staff Writer pessimistic. n

GLOBAL PMI OUTLOOK

GLOBAL PMI OUTLOOK

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

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

Prices Soaring Inflation Looming December 2021 Business Survey Insights The December Survey Insights presents some hefty challenges for manufacturing. Prices for inputs are rising and they are outpacing manufacturers’ ability to recapture all of the costs from customers.

Wages are spiralling upward in an environment where labor relations

and labor shortages are driving costs up. Inflation is looming; no doubt food and energy costs are putting pressure on the consumer. However, consumers still benefit from fixed costs such as mortgages, long-term leases, service contracts, and other costs that are based on longer-term pricing. According to our scatterplot,

six economies recorded ExpandingStrengthening; an additional nine reported Expanding-Weakening; and one reported Unchanged from the prior month. The clustering in the middle indicates global economies share a lot of common characteristics and there are ten surveys above 55 this month, another positive for the first quarter month.

continued Manufacturing Outlook / January 2022

25

GLOBAL PMI OUTLOOK ISM U.S. Manufacturing PMI™ In December, the U.S. Manufacturing PMI (58.7, -2.4) continued to indicate significant growth as a leader in the global recovery. The table below exhibits the year-to-date strength for each of the PMI components.

The 12-month performance for the PMI components depicts growth in output, weak employment, and insufficient inventory replenishment across a broad spectrum of products.

We look for these trends to remain in place during 2022.

A PMI reading above 43.1 percent generally indicates an expansion of the overall economy. Therefore, the Manufacturing PMI in December indicated the overall economy grew for the 20th consecutive month following a contraction in April 2020. According to the ISM press release, “the past relationship between the Manufacturing PMI® and the overall economy indicates that the Manufacturing PMI® for December (58.7 percent) corresponds to a 4.4-percent increase in real gross domestic product (GDP) on an annualized basis.” This performance could be stronger if supply chain disruptions (i.e. labor disincentives, component shortages, school closures, skill mismatches, high inflation) were less impactful.

Manufacturing activity in December, continuing the growth experienced so far this year. Supplier Deliveries (64.9, -7.3), a contrarian in that it signals slower delivery times above 50.0 as economically bullish, are still stretched. An encouraging indicator is the Inventories Index which has averaged 55.9 for the past four months and significantly better than the 49.8 average for the first 7 months of 2021.

There is still a long way to go in terms of inventory replenishment, but the data is showing movement in the right direction.

New Orders Minus Inventories: This key spread rose from +4.7 to +5.7, signaling New Orders are slowing and Inventories are growing; a source of necessary replenishment. We like to see New Orders typically outpace Inventories by an average of 6-8 points. The outlook for supply chains

is more promising than experienced in the second half of 2021.

Customers’ Inventories: The index (31.7, +6.6) for raw materials, components, and finished goods was “too low” for the 63rd consecutive month. The index set a new low in July (25.0) and has been under 40 percent for the past 17 months.

From the ISM report, there were no industries reporting higher customers’ inventories in December.

Prices: The Manufacturing Prices Index remains at a lofty level (68.2, -14.2) in December, but we find some encouragement in the Commodities Down in price list: Aluminum*; Plastic Resins*; Polypropylene; Steel*; and Steel — Hot Rolled*. (* indicates reports of both increases and decreases in market pricing which we interpret indicates a turning point in the market).

Drivers: New Orders (60.4, -1.1), Production (59.2, -2.3), and Employment (54.2, +0.9) boosted

continued

26

Manufacturing Outlook / January 2022

GLOBAL PMI OUTLOOK A Quick Word On Capacity Thirteen industries are still operating below their pre-pandemic capacity utilization levels in the U.S., contributing to output limitations. Looking at the relative importance, these thirteen groups comprise 64% of industrial production. n

Manufacturing Outlook / January 2022

27

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 If one is a big fan of roller coasters this has been the year for you.

The economic swings have been both frequent and extreme and for the most part they have been unpredictable as well. This is the second year in a row for issues like a pandemic or supply chain collapse to confuse the issue. Every time the signals suggest a strong rebound there is a setback and every time it seems the issues are too overwhelming to recover from there is a surge of consumer activity that pushes growth again. This month’s iteration of the Credit Managers’ Index is another in a long line of trend reversals. The end of the year was expected to be something of a disappointment as retailers struggled to get inventory in place and consumers were confronted with yet another wave of the virus.

As it turns out the year ended in far better condition than expected with a solid GDP number and some good readings from the CMI. Not

that everything was performing satisfactorily but the situation at the start of 2022 is better than had been anticipated.

The combined reading for the CMI was back up to 58.9 from the 57.4 noted in November. This is better than the performance in October when the reading was at 58.0. The only point where the readings were higher was in the spring (March was at 59.3, April came in at 60.6 and May was at 59.8). The readings for the favorable factors were also improved – going from 66.4 to 69.1. The last time these numbers were that high was in January of 2021. The readings for the unfavorable factors improved but not all that dramatically as they edged up from 51.3 to 52.1 (but that is still back to the levels seen in September and October).

The sales numbers jumped from 70.3 to 71.8, not the highest readings seen in the past year but better than many months when the data

sank into the 60s. The data on new credit applications improved quite a bit as it moved from 65.4 to 67.6 (highest level since July). The dollar collections numbers also improved a great deal with a reading of 64.4 as compared to 60.4 in November.

This is the highest level seen since March of this year. The amount of credit extended data also improved significantly with a reading of 72.3 and that is the highest number all year.

The data from the unfavorables was not as impressive but the trend is in the right direction. There was a slip in the rejections of applications data and that can be a little worrying in light of the increase in applications.

It suggests that there are more applications from those that are not quite creditworthy. The reading this month was 51.8 and last month it was at 53.2. The accounts placed for collection data stayed stable with a reading of 52.4 compared to continued

28

Manufacturing Outlook / January 2022

CREDIT MANAGER’S OUTLOOK November’s 52.1. The disputes data slipped a bit deeper into contraction territory and that is not a good sign either. It was sitting at 49.0 in November and is now at 48.1. There was a major improvement in the dollar amount beyond terms data as the reading went from 49.1 to 55.0.

This is the highest reading since May of this year and a dramatic escape from the contraction zone.

The dollar amount of customer deductions improved but stayed in the contraction zone as the reading moved from 48.5 to 49.4. This marks the third month in a row for

the data to be in the 40s. The filings for bankruptcies slipped a bit but remained firmly in the 50s with a reading of 55.9 compared to 56.0 last month. The bottom line is that the unfavorables are still showing distress in some circles even as the overall data has been improving.

continued Manufacturing Outlook / January 2022

29

CREDIT MANAGER’S OUTLOOK Manufacturing Sector The manufacturing sector has been truly whipsawed by the events of the last year – wild swings from the positive to the negative and back again. The good news was that consumers cut off from their usual service sector spending elected to spend on things instead and that boosted demand for manufacturers.

The bad news was that supply chains broke down and products were delayed or unavailable. The labor shortage was bad before and seriously worsened. Even with all this the year ended on a decent note.

The combined score for manufacturing improved from 56.9 to 58.6 and that was the highest reading since May of this year.

The index of favorable factors also improved but not quite as dramatically – going from 66.6 to 67.2 (just about the same level as reached in October). The index of unfavorable factors made a nice recovery however as it went from

50.4 to 52.8 and back to levels seen in September. The supply chain issues were the major inhibition for manufacturing but inflation started to play a role by the end of the quarter.

Sales dropped a bit from 72.3 to 67.7 and that is lowest level seen in a year. The majority of the concern here revolves around the broken supply chain as the demand from consumers remains high for a wide variety of manufactured products.

The new credit applications reading improved a bit as it reached 64.5 after notching a 63.0 last month.

The dollar collections data reached 65.0 after hitting 62.7 in November.

There was a bit more distress in the unfavorable categories. The rejections of credit applications shifted down a little from 53.3 to 52.2 and that is a bit of a concern given the rise in applications. This often signals that applications are coming from companies that are

getting desperate and may not be good risks. The accounts placed for collection data improved a bit as it went from 53.8 to 54.8 and that is getting these readings solidly in the mid-50s. the disputes numbers started to climb out of the contraction hole but they have not returned to expansion territory.

The reading last month was 46.3 and the lowest in two years but this month the data improved to 48.6 and that is back to levels seen in the last few months. The data for dollar amount beyond terms made a major jump and left contraction territory dramatically. Last month the reading was 48.3 and this month it hit the highest level seen since March with a 56.5 mark. The data on dollar amount of customer deductions is still languishing in the contraction zone but has shown some improvement as it has gone from 45.0 to 48.2. The filings for bankruptcies remained stable as this month’s reading s 56.5 as compared to 55.6 in November.

continued

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Manufacturing Outlook / January 2022

CREDIT MANAGER’S OUTLOOK

n Author profile Dr. Christopher Kuehl (PhD) is a Managing Director of Armada Corporate Intelligence and one of the co-founders of the company in 1999.

He has been Armada’s economic analyst and has worked with a wide variety of private clients and professional associations in the last ten years. He is the Chief Economist for the National Association for Credit Management and is on the Board of Advisors for their global division – Finance, Credit and International Business. He prepares NACM’s monthly Credit Managers Index. He is the Economic Analyst for the Fabricators and Manufacturers Association and writes their bi-weekly publication, Fabrinomics, which details the impact of economic trends on the manufacturer.

Chris is the chief editor for the Business Intelligence Briefs, distributed all over the world by business organizations and he is one of the primary writers (with Keith Prather) for the Executive Intelligence Briefs. He also makes close to a hundred presentations each year to business and industry associations in the US and overseas. He is on the Board of the Business Information Industry Association in Hong Kong and serves as a resource for the media and for many trade publications. Chris has a doctorate in Political Economics and advanced degrees in Soviet Studies and Asian Studies and was a professor of international economics and finance for over 15 years prior to starting Armada.

Manufacturing Outlook / January 2022

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METALS OUTLOOK

JANUARY 2022

METALS OUTLOOK

by Royce Lowe 2022 May Be Better Than 2021 The year just past was a bumper year for metals. If you were in steel, aluminum, or nickel, for example, you saw high prices you hadn’t seen for quite a while, if ever. You also saw an awful lot of forecasts on how long this was going to last, or when the crash was coming, particularly in the steel business.

This past September saw the price of hot-rolled coil in the U.S. and Canada stretching to $2,000 per ton, almost four times what it had

32

been a year earlier. Domestic steel mills were having a field day, sure it was going to last. Steel buyers were tearing their hair out, many of them wondering why they had refused to pay $1,300 per ton in March 2021.

From $1960 per ton in early October, the price started to slide, and in late December it reached a more sane figure of $1500 per ton, although two years ago it was $440 per ton.

There were similar swings in Europe and South East Asia, but not as

drastic as those in North America.

The question, of course, and it is an important one, is where do we go from here?

MEPS International, a steel data analyst, who has been keeping an eye on this information for decades, has come up with figures for both steel production and steel pricing for the near future. It is forecasting a slight increase in global steel production from 1.94 billion tons (2.138 billion tons) in 2021 to 1.97 billion tons (2.17 billion tons) in 2022. This figure is continued

Manufacturing Outlook / January 2022

METALS OUTLOOK The order books are quite full, both with domestic and overseas suppliers.

European flat product prices are forecast to move up early in the new year, particularly cold-rolled coils. Inventories are up for most grades and sizes, which together with reduced demand is expected to restrict the level of price increases that stainless steel buyers will be prepared to accept during this period.

forecast to increase to 2.055 billion tons (2.265 billion tons) by 2026.

These figures may be reassuring in that they suppose the world’s steel business will continue to grow.

The pricing is a different story. Many buyers are concerned about a collapse in the coming months, pointing to the COVID-19 Omicron variant.

North American pricing on flat coil products is expected to decline in the coming months, with buying activity falling amid rising inventory levels at service centers. Domestic U.S. steelmakers are expected to offer discounts to boost sales. There will also be a higher volume of imported steel entering the U.S. and Canada early in 2022.

Stainless Steel The past year was an exceptional one for the global stainless steel industry.

The Omicron variant, inflation, and ongoing supply constraints will continue to challenge business operations in the new year. Buyers

have been increasingly cautious in recent months. The MEPS European average type 304 cold-rolled coil base is now at the all-time high, recorded in January 2007. European flat products are forecast to move up in early 2022. MEPS predicts the pricing on Asian flat products will fall in the immediate future, with a modest seasonal price revival expected in the Spring. In the U.S., it is at the highest level in 14 years.

Things are turning somewhat pessimistic, particularly for coil products, but no crash in prices is expected. Prices are expected to decline more slowly than they increased in the past twelve months.

The picture is similar in Asia, where an anticipated drop in raw material costs and seasonal low demand (lunar new year) will put negative pressure on selling prices, but production cuts will likely limit the price drop.

Further increases in North American base values are expected to be restrained by purchasing activity.

One star performing metal of late has been nickel, that very essential ingredient in stainless and heatresisting steels and alloys, and of late in EV batteries. Quarter four in 2021 saw the mid-October price of the metal at almost $21,000 per ton. Nickel prices remain strong and are expected to stay in the region of $20,000 per ton in the near future.

Aluminum took a huge leap in 2021, and this pattern is forecast to continue, with the price taking on another six percent in 2022. The World Bank is looking at a price above $2,500 per ton in 2022. There was a significant movement in the price of non-ferrous metals in December. The price of aluminum rose from $1.20 per lb in late November to $1.29 per lb in late December. Copper moved from $4.35 per lb in late November to $4.43 per lb in late December. Nickel moved up from $9.20 per lb in late November to $9.41 per lb in late December.

Zinc went from $1.50 per lb in late November to $1.63 in late December.

Author profile:

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

Manufacturing Outlook / January 2022

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INNOVATION OUTLOOK

ACCELERATING THE MANUFACTURING RENAISSANCE WITH PEOPLE AND ROBOTS WORKING TOGETHER ARM (Advanced Robotics for Manufacturing), a Manufacturing USA® institute, accelerates the advancement of transformative collaborative robotic technologies and education to grow U.S. global manufacturing competitiveness.

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

Technology Focus Area ARM’s mission is to accelerate the use of industrial robots to drive growth in the U.S. manufacturing sector. The institute seeks growth sectors that are ripe for rapid adoption of robotics in manufacturing, with a focus on advancing these operational aims: versatile robotic systems capable of performing multiple tasks; rapid deployment and re-purposing of robots; collaborative robots; and safe, cybersecure, and cost-effective solutions.

Approach to Innovation and Collaboration

LEARN MORE

+

CONNECT WITH ARM Pittsburgh, Pennsylvania 412-681-3960 Membership@arminstitute.org arminstitute.org

ARM brings together a national consortium of experts from manufacturing, government, robotics, research, workforce development and academia to provide access to shared capabilities and develop and deliver robotics solutions. ARM focuses on preparing the U.S. workforce to work collaboratively with robotic solutions in a safe, high-satisfaction environment, impacting everyone from students and young adults to displaced workers.

This work involves: Technology and education and workforce development roadmaps to create a robust and innovative national manufacturing ecosystem Regional Collaboratives to facilitate connections and demonstrate innovative solutions Industry-led applied R&D project collaborations to make robots safe, cost effective, versatile, and collaborative Education and workforce project collaborations for apprenticeships, virtual and augmented reality simulations, and the creation of a national standard for certifying top-tier robotics curricula and credentials

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

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continued Manufacturing Outlook / January 2022

COLLABORATIVE PROJECT EXAMPLES “ARM connects our company with leading manufacturers that need automation, and with top research facilities that are creating new tools and technologies for industrial robots.”

– Roger Christian, Motoman Robotics Division, Yaskawa America Inc.

SMART COMPANION ROBOT FOR AUTOMOTIVE ASSEMBLY: Clemson University is partnering with Siemens, BMW, and Yaskawa to demonstrate the viability of an intelligent mobile manipulator robotic system, the Smart Companion Robot (SCR), to assist and augment human associates in automotive final assembly, where intensive manual manipulation remains the mainstay. The SCR is intended to: 1. provide cognitive assistance by delivering the right part and tool at the right place at the right time, eliminating the risk of incorrect parts being assembled, and enhancing quality in high-mix assembly environments; and 2. provide physical assistance by helping the transport of medium-heavy parts from subassembly areas to reduce worker fatigue/repetitive injuries.

SMART MANUFACTURING AND ADVANCED ROBOTICS TRAINING: The Robotics Academy, a subsidiary of Carnegie Mellon University, is partnering with community colleges, the FIRST® robotics program, and state labor departments to create a SMART Certified Apprenticeship Program and a series of micro-certifications that will train and certify thousands of students per year. These programs will be adapted to the adult population so that unemployed, underemployed, and incumbent workers will have opportunities to obtain robotic preparation skills.

“As a New York City-based manufacturer of underwater drones, Duro UAS requires highly specialized talent to stay competitive. ARM’s workforce development leadership and support have been essential to successfully navigating this challenge.

By helping U.S. companies to compete and lead in advanced manufacturing and developing workforce programs that create the manufacturing talent of the future, ARM is making a tangible difference in our business and in the industry.”

– Brian Wilson, President, Duro UAS

“We are going to see automation and robotics move from a caged and isolated environment to the aisle-ways and even traveling to different locations, with a continued high emphasis on collaboration with humans.”

– Joel Reed, CEO, IAM Robotics Advanced Manufacturing National Program Office, NIST | www.ManufacturingUSA.com | 301-975-2830 | amnpo@nist.gov

Manufacturing Outlook / January 2022

35

AFRICA OUTLOOK

JANUARY 2022

AFRICA OUTLOOK

by TR Cutler

LinkMisr Expanding the North American Dealer Network Two years ago, Lew Weiss, publisher of Manufacturing Outlook, and I met at the last MODEX Atlanta material handling tradeshow. Two years later, MODEX 2022 (March 28-31, 2022) will once again bring many global manufacturers to the event. Nearly 800 exhibitors and 40,000 attendees will respect COVID health and safety protocols while learning about much-needed solutions from a variety of global manufacturers.

MODEX, located at Georgia World Congress Center, is sponsored by MHI, an international trade association that has represented this industry since 1945. MHI members include material handling and logistics equipment and systems manufacturers, integrators, consultants, publishers, and third-party logistics providers. The association also sponsors ProMat, showcasing the products and services of its member companies and educating industry professionals on the productivity solutions provided through material handling and logistics.

Last month, Manufacturing Outlook launched a new, premiere section in this widely-distributed digital magazine called Africa Outlook, highlighting the increasing role of the continent’s impact on the global stage. For the first time, there is an African company exhibiting at MODEX: LinkMisr International.

LinkMisr International, a leading industrial company specialized in manufacturing shelving and racking systems, is now serving North America.

Recently, Simon Armanious, currently based in Canada, shared more about the Egyptian company and why the timing for growing the North American distribution channel is ideal.

LinkMisr History Simon shared that LinkMisr was established in Egypt in 1993 and now has four factories. In nearly thirty years, the company has grown significantly and sustained its position as the market leader in Egypt and other countries in the Middle East, Africa, and North America. LinkMisr owns

and manufactures its products in 4 plants with a total area of 28,000 sqm (more than 300,000 sq. ft.) using the most modern equipment.

The manufacturing facilities include an automatic shelving roll forming line, powder coating painting line, and uprights and beams roll forming line.

LinkMisr’s Commitment to the Environment Simon said, “We seek to minimize the environmental impact of our activities through the prevention of pollution, minimizing waste, promoting good environmental management practices, using an environmental management system which is externally audited through ISO 14001.”

The company is committed to preventing pollution while complying with relevant environmental legislation and other requirements. Adopting Lean Manufacturing principles, the company reduces the production of waste while recycling and managing the effective continued

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Manufacturing Outlook / January 2022

AFRICA OUTLOOK disposal of waste. In keeping with other global green initiatives, LinkMisr minimizes the actual and potential environmental impacts associated with all production activities.

food products and keeping perishable items fresh is best accomplished with high-density solutions such as Mobile Pallet Racking, Pallet Drive-In, or Pallet SAT.

Health and Safety LinkMisr is committed to high standards of health and safety, providing safe working conditions. Continuous improvement in health and safety performance is achieved using robust management systems and practices in accordance with ISO 45001. The company ensures the highest levels of services and products externally assessed through ISO 9001.

Simon said, “LinkMisr is keen to continue the company’s distinguished march in the field of modern and advanced warehouse equipment manufacturing among the specialized companies in this field. This is why 2022 at MODEX is such an important time to expand our dealer network throughout North America.”

Dense storage reduces the amount of space required to chill, reducing operating costs. Automated solutions to reduce picking time in chilled areas provides an opportunity to reduce the footprint of food storage areas.

North American Material Handling Experts Simon will select approximately thirty North American material handling experts in 2022. Because top quality is essential, strategic partners must understand the key benefits of a variety of warehouse racking and pallet storage systems. Only with reliable expertise can a top-quality manufacturing processes be achieved.

LinkMisr food and beverage customers report up to 60% less floor space is required than conventional racking.

Automotive

“Flexibility is the hallmark of recommended solutions tailored to suit customers’ warehouse pallet racking requirements. Pallet racking systems are fully adjustable within design specifications to fulfill any changing storage requirements,” according to Simon.

Sectors Served Food & Beverage The challenges faced by the food and beverage industry require the maximization of available space, managing different storage temperatures, and responding to a high turnover of stock, while maintaining regulatory compliance of hygiene levels and product lot traceability. LinkMisr’s North American dealers must have a thorough understanding of the key factors involved with storage, flexibility, stock rotation, and efficient pick rates.

With this expertise, North American food and beverage companies can best leverage storage capabilities.

Bespoke storage solutions work across the entire food and drink sector supply chain. Palletized food and beverage on adjustable racking is standard even in state-of-the-art warehouses. The versatility of this pallet racking system ensures that it can be assembled in a single configuration to fit specific storage needs.

Frozen food storage with maximum space utilization is particularly vital in cold storage warehouses. Storing frozen

system for the various automotive accessories including storing exhaust pipes, windscreens, and automotive body parts requires a solution that is space-efficient, secure, and makes picking easy.

The various shapes and sizes of automotive parts, from exhaust pipes to fragile windscreens, make automotive storage a special challenge.

Automotive workshop solutions integrate the various storage accessories for different components into a single storage solution that corresponds with automotive OEM and distribution needs.

For larger scale automotive situations, such as a central warehouse for spare parts and automotive accessories, the ability to configure in different ways such as multi-tier versions or placed on mobile bases will best optimize space.

The automotive industry has a large variety of boxes and small parts that require handling and storing efficiently.

Shelf adaptability with storage bins and a variety of different movable shelf dividers are needed.

Several car parts are bulky and oddly shaped and not made for conventional storage. For this reason, special solutions are needed. The storage

While LinkMisr is the first Africanbased manufacturer at an MHI event, it will not be the last. At a time when supply chain disruptions continue from other regions of the globe, it is little wonder why leaders from Africa are capturing market share and mindshare.

Material handling experts who wish to be considered by LinkMisr should contact Simon Armanious at Simon.

Armanious@linkmisr.com or call (647) 884-3624.

Author Profile:

Thomas R. Cutler is the President and CEO of Fort Lauderdale, Floridabased, TR Cutler, Inc., celebrating its 23rd year.

Cutler is the founder of the Manufacturing Media Consortium including more than 9000 journalists, editors, and economists writing about trends in manufacturing, industry, material handling, and process improvement. TR Cutler, Inc. launched two new divisions focusing on Gen Z and the African manufacturing sector. Cutler authors more than 1000 feature articles annually regarding the manufacturing sector. Over 5000 industry leaders follow Cutler on Twitter daily at @ThomasRCutler. Contact Cutler at trcutler@trcutlerinc.com. n

Manufacturing Outlook / January 2022

37

AEROSPACE OUTLOOK

JANUARY 2022

AEROSPACE OUTLOOK

by Royce Lowe More Woes for Boeing Boeing’s recently announced problems with titanium and aluminium parts for the 787 Dreamliner have been tracked to Italy. Italian prosecutors ordered the seizure of components intended for production of 787s they said failed to meet the technical specifications required by the customer. The titanium and some aluminum parts were seized by Finance police: the components were produced by MPS (Manufacturing Process Specification) and - now bankrupt - Processi Speciali, both sub-contractors to aerospace and defense group Leonardo SpA, Boeing’s supplier.

Those ubiquitous “people familiar with the situation” said that the defective parts included titanium spacers, brackets and clips used in sections of the carbon-composite airframe. Leonardo said earlier it had dropped MPS as a supplier. Nobody was available for comment. In what is beginning to look like an Agatha Christie novel, and according to CNBC, eight unnamed individuals are under investigation for fraud and actions threatening the safety of air transportation. Italian prosecutors say over 4,000 flawed parts were supplied

by MPS for the 787 program. Some

were supplied via Leonardo, others through Spirit Aerosystems, a U.S.based contractor. Not all the defective parts made it into an aircraft.

Boeing and the FAA have established that non-conforming parts were installed into 35 787s. Boeing says there is no immediate threat to air safety.

Some members of the U.S. House Transportation and Infrastructure Committee, already questioning the FAA’s inspection program, will no doubt start to dig a little deeper into this issue. continued

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Manufacturing Outlook / January 2022

AEROSPACE OUTLOOK The whole scenario brings up the question as to how the defective parts got through Boeing’s Quality Control system in the first place. It also brings up the question of what looks like an ongoing “quarrel” between the U.S. House and the FAA. Regardless of what the Italian prosecutors conclude, there is no doubt that Boeing’s quality procedures will be under constant scrutiny for some time to come, which is good news for those who fly, and a warning to anyone thinking of skimping on quality control.

Boeing’s reputation has taken a few beatings in the past couple of years.

Without wishing to add to the pain, it should be noted that Peter Robison, a Bloomberg journalist, recently published a book entitled “Flying Blind: The 737 Max Tragedy and the Fall of Boeing.”

Boeing’s woes may have been good news for Airbus, who picked up a recent order from Air France - KLM for 100 narrowbody jets.

One bit of bright news for Boeing of late was an order from UPS for 19 767 cargo jets, or freighter planes, worth $4.2 billion. It’s possible that with port

backlogs and advancing E-commerce, there will be an increasing demand for such planes. These are scheduled to be delivered between 2023 and 2025. The order comes following recent orders for 80 wide-body freighters and over 80 conversions to freighters.

flights. The wait-and-see that the world’s airlines are taking on the present travel demand means it is pretty certain that the size of a commercial aircraft will go no further than that of the 787-A350 capacity, at least for the foreseeable future.

There’s a bit of bad news for Airbus too, in the form of an issue with Qatar Airways and the Airbus A350, on 21 of the 53 purchased. Cracking paint is the issue, and it goes further than Qatar Airways, but the Doha airline is claiming $618 million from Airbus, who are fighting the claim, saying the issue, which to date has not been resolved, does not affect safety. And Airbus recently delivered its last A380 super jumbo to Emirates, following a decision to end its production, based on the fact that the idea just didn’t work in the end. With a passenger capacity of just over 850, the A380 was effectively a long-haul aircraft for a plane filled near capacity. Most operators failed to fill the planes, and Airbus decided in 2019 to terminate its production. Emirates bought about half the 250 or so A380 planes produced and will continue to use them on its long-haul

The aerospace outlook for 2022 will doubtless continue to focus on Boeing’s ongoing discussions with the FAA, but also with its successes in selling more planes. There will doubtless be news regarding advances in the Chinese aviation industry. And we will stay up to date on any technical advances on aircraft production materials. At some point, the James Webb telescope might tell us what happened all those billions of years ago.

Perhaps we can learn from history. n Author profile: Royce Lowe, Manufacturing Talk Radio, UK and EU International Correspondent, Contributing Writer, Manufacturing Outlook.

Manufacturing Outlook / January 2022

39

ENERGY OUTLOOK

JANUARY 2022

ENERGY OUTLOOK

Sun, Sun, Sun, Here It Comes

by Jocelyn Bright Solar power is hardly new, and Forbes Magazine recently quoted an international team of researchers who determined that if every available rooftop was equipped with solar panels, this could, theoretically, generate enough electricity to power the world. A team led by energy researchers at University College Cork in Ireland calculated a figure for the

40

Manufacturing Outlook / January 2022

total surface area of all the rooftops in the world: some 0.2 million square kilometers - an area almost the size of the U.K. The authors of this research then calculated that if all this surface area was covered with solar photovoltaic panels, they could generate a total of 27 petawatt hours of electricity per year - more than the combined electricity consumption

of the world in 2018. A petawatt, incidentally, is a quadrillion watts, or10 to the fifteenth power.

In any event, that’s a lot of power. But the authors, who are led by Siddarth Joshi, a Ph.D. student at University College Cork in Ireland, aren’t necessarily recommending covering all of Earth’s rooftops with panels. continued

ENERGY OUTLOOK Imagine, for example, the probably impossible physical and logistical obstacles to such an operation. Further to this are the huge variations in solar costs from region to region. Just as importantly, as McKinsey has forecast, electricity consumption could almost double in decades to come, dwarfing the total power consumption seen today.

The report shows, however, how rooftop solar can best be deployed to help nations rapidly - and relatively cheaply - decarbonize and decentralize their power grids. The research leader explains, “Rooftop solar has two unique attributes that set it apart from other forms of renewable energy generation: fast deployment, and decentralized citizen-driven uptake.

These attributes lend it specific advantages over other renewable generation technologies.” Rooftop solar therefore “brings significant

advantages in terms of broad participation of society in the energy transition to a low carbon future, due to the use of residential and public buildings as the locations where the technology will be deployed.”

Joshi and his colleagues show that the cost of rooftop solar varies from $40 to $280 per megawatt hour (MWh), depending on the region.

(These can be compared to sample calculated global levelized electricity prices, which suggest a cost of $36 per MWh for utility-level solar, $40 for onshore wind, $112 for coal, and $164 for nuclear power, in 2020.) The researchers state that the lowest costs for rooftop solar can be attained in densely populated regions in China and India - the world’s two most populous nations, which face huge challenges in simultaneously cutting carbon emissions while providing increasingly more energy for their

people. At a price of $66 per MWh in India and $68 per MWh in China, rooftop solar in these countries is costcompetitive. In addition, rooftop solar has the advantage of both reducing local air pollution - where it replaces conventional fossil fuel-based energy generation - and reducing transmission network loads by decentralizing electricity supply. And, unlike almost any other form of energy generation, it can do all that without impacting the land and ecosystems, as it is installed exclusively on existing buildings.

But to achieve rooftop solar’s full potential, certain necessary conditions would have to be met. Since solar power, by definition, can only generate power during the day, the deployment of storage in the form of batteries and smart grids that can coordinate supply and demand will be necessary. These findings emerge in the context of what may be described as the beginning of a bright future for renewable energy. According to the International Renewable Energy Agency (IRENA), between 2010 and 2020 the costs of generating electricity from utility-level solar fell a very significant 85%. As previously reported by Forbes, some researchers believe the falling costs of renewables could push fossil fuels out of electricity generation altogether by 2035.

That’s really the way it has to be. Under the net-zero emissions scenario developed by the International Energy Agency (IEA), which the agency says is the pathway the world needs to take to limit global temperature rise to 1.5 degrees Celsius, wind and solar continued Manufacturing Outlook / January 2022

41

ENERGY OUTLOOK

power will need to provide at least 70% of total electricity generation by mid-century. Right now, the IEA says, 25 million rooftops around the world already have solar PV installed. To get to net-zero emissions, “the number increases to 100 million rooftops by 2030 and 240 million by 2050.”

This ought to be feasible. So far, 80 nations have ratified the International Solar Alliance (ISA) framework agreement, which aims to coordinate efforts between “solar-resource-rich countries” to increase the deployment of solar energy technologies “in a safe, convenient, affordable, equitable and sustainable manner.” ISA says its member nations are aiming to

Bloomberg brings us down to earth somewhat on the subject. There are obstacles in the solar sector, in the form of rising material costs, forced labor accusations, and a worsening trade war all coming simultaneously.

Thus the prices of panels are up for the first time in years, with some manufacturers asking buyers to delay purchases where possible. And although annual installations are still on the increase, a slowdown in expansion is highly likely if the problems persist.

expected to be largely resolved by the end of 2022 when new solar factories will help ease supply chain issues. But any obstacles to the sector’s advance will have lasting effects, with the emissions from the fossil fuels burned instead trapping heat in the atmosphere for decades. Solar provided just 3.3% of the world’s electricity in 2020.

BloombergNEF estimates that to be on target for net-zero by 2050, the world needs to add 455 gigawatts of solar every year through 2030. Last year was a record - and it only added 144 gigawatts. Again, a determined effort is required on the part of all the nations involved.

These setbacks may only be temporary, with delays in installations

Coincident with these efforts and problems comes news from The

contribute $1 trillion in investments by 2030 to achieve this.

continued

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Manufacturing Outlook / January 2022

ENERGY OUTLOOK Guardian that the biggest power company in the U.S. is pushing policy changes that would hamper rooftop solar power in Florida, delivering legislation for a state lawmaker to introduce, according to information obtained by the Miami Herald and Floodlight. Florida Power & Light (FPL), is lobbying to render net metering ineffective. Net metering is a policy that lets Florida homeowners and businesses offset the costs of installing solar panels by selling power back to the company.

There are lots of political shenanigans involved in this business, which we won’t go into, but an FPL spokesman said the company does not oppose net

metering but that the law should be revised so rooftop solar users are not subsidized by other customers who continue to buy electricity and pay to maintain the power grid. FPL argues that rooftop solar could cost Florida utilities about $700m between 2019 and 2025, according to documents submitted to state regulators. Only about 90,000 Florida electricity customers, or some 1%, sell excess energy back to the grid. But the arrangement has driven significant rooftop solar expansion. The proposed legislation could seriously curtail that growth.

Nationwide, power companies are feeling pressured by the rise of

distributed renewable energy. Rooftop solar, while critical to fighting climate change, is a threat to the traditional utility business model. Electricity companies such as FPL make money from the things they build, large power plants, and transmission lines that bring energy to customers. They don’t make money from solar power generated from rooftops. This looks like a tough situation, with a power company that doesn’t want solar panels courting the politicians who accede to the company’s wishes.n Jocelyn Bright, Staff Writer

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Manufacturing Outlook / January 2022

43

AUTOMOTIVE OUTLOOK

JANUARY 2022

AUTOMOTIVE OUTLOOK

by Lawrence Makagnon

Aluminum in Autos, Then and Now The use of aluminum in the auto industry is not new. It dates back to 1889. In the mid-twentieth century, it was found in such noble makes as Bugatti, Ferrari, BMW, Mercedes, and Porsche. Its use in automobile production undergoes continuing growth, and is expected to reach 514 pounds per vehicle by 2026, or up by 12 percent from 2020 levels.

44

Aluminum sheet is used in closures (hoods, doors, etc), body in white (BIW) - or the stage in car production where the body’s frame has been joined together, that is before painting and integration of major components into the structure - and chassis applications, which represents one of the key growth areas in automobile manufacture. Structural soundness

is the most important requirement for car bodies, but lightweight, and economy of production - for example ease of joining- and corrosion resistance, are equally important. The metal must also be capable of taking a good surface finish.

Aluminum is relatively easy to hot and cold work, to heat treat, to cast, continued

Manufacturing Outlook / January 2022

AUTOMOTIVE OUTLOOK Ford meanwhile, whose sales tumbled 7 percent in 2021, will double up on its F-150 Lightning production. It says it has some 200,000 pre-orders for the model.

GM is bringing out its own electric pickup truck, the battery Silverado, priced to compete with Ford’s.

forge and extrude; all processes performed on aluminum before it is used in automobiles. The metal is quite difficult to weld, but improved techniques have made joining easier.

Aluminum alloys are widely used in automobile construction, where alloying additions to the base metal, in conjunction with lightweight, lend to the development of strength, fatigue resistance, formability, abrasion resistance, and the ability to be precipitation hardened and extruded.

The properties and versatility of aluminum and its alloys augur well for its continued and growing use in the automotive industry. It is already well established in the EV industry, and its use will grow along with the increasing worldwide acceptance of electric vehicles. Light trucks, such as the Ford F-150 Lightning, contain an average of almost 550 pounds of aluminum; luxury sedans such as the Tesla Model S and sports cars such as the Acura NSX contain over 800 pounds of aluminum. Audi, Lexus, and Mercedes are marrying a carbonfiber body tub to aluminum chassis subframes.

Toyota, bowing to comments made by other nations at the recent COP26 summit regarding climate change, criticism from Greenpeace, and an urge to get up there with VW and Tesla, has vastly increased its commitment to its EV business. It had tended to concentrate more on hybrids than on battery electric vehicles but has now pledged to up its ante, and more to the point has put dates and amounts upfront. The world’s leading auto company said it will produce 3.5 million EVs per year by 2030 and is putting $35.2 billion in the pot to make this happen. It will bring out 30 electric models by 2030. It will invest $13.7 billion in battery production for both hybrids and EVs. This all sounds like a commitment.

Toyota recently took first place in sales in the U.S. from GM., the first time in 90 years that GM has been toppled. Toyota’s sales were up 10.4 percent to 2.3 million, GM’s down 12.9 percent to 2.2 million. Toyota told Reuters this was no big deal, that being first in sales “is never a focus or a priority.”

Rivian, the company profiled last month in Manufacturing Outlook (Dec 2021 issue), announced plans to build a second plant, east of Atlanta, that will employ 7,500 workers and cost $5 billion. The plant is scheduled to begin commercial production of its next generation of electric vehicles by 2024. Production at the new plant is forecast at 400,000 units per annum, double the maximum projected production of the first plant, in Normal, Illinois.

There will be a shortfall in the company’s 2021 production target, and there is as yet no certainty that pre-orders promised for the end of 2023 will be supplied by that date.

With a recent IPO, the company, with hardly any sales, and doubts about further short-term production, is valued at $90 billion, more than GM, Ford, and Stellantis. But it just lost out on an order for Amazon from Stellantis. This is not a big blow for Rivian, which is not big enough, in any event, to supply all Amazon’s upcoming needs for delivery vans.

And finally, Tesla is opening a showroom in China’s Xinjiang region. It’s obviously looking to win a popularity contest. The company ended 2021 by selling almost a million vehicles, - some 940,000 - quite a lot over Lawrence Makagon, analysts’ forecasts. n Staff Writer

Manufacturing Outlook / January 2022

45

CYBER SECURITY OUTLOOK

JANUARY 2022

CYBER SECURITY OUTLOOK CMMC 1 2 Run, HERE WE GO!

By Ken Fanger The new CMMC 2.0 has been released and is scheduled to take effect later this year. Now there are only 3 levels instead of the original five, and Level 1 and some of Level 2 are self-assessments. This means that it will be easier and far less expensive to obtain certification for acquiring or continuing with government contracts.

All of this is good news, but there is still the question of “How do I get started?” I am going to try and help

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Manufacturing Outlook / January 2022

you to start your CMMC journey without the panic or fear that you may currently be feeling. It will be hard, but not completely painful to move in this direction - in fact, the companies that we have worked with have realized that they were at greater risk without having CMMC compliance.

This process has helped our clients realize just how vulnerable they were to having a catastrophic failure in their organization.

So, let’s start with the How-To-Start Checklist for CMMC: 1. Breathe - I have found that many companies are dealing with the overwhelming fear of what it will take to get CMMC-certified. It will be harder than what most of us are doing today, but there are many ways to move forward and save some money. Being in a panic only helps companies like mine to make more money and does not help you. A calm mind makes much better decisions. continued

CYBER SECURITY OUTLOOK 7. Train – Plan for keeping everyone trained in the process. Make sure that your team knows what they need to do, and stakeholders understand what impact you will face.

8. Certify – If you are doing Level 1 or self-assessing Level 2, you will file your compliance documents with the government. If you need to get Level 2 third-party assessment, this would be the time that you would begin preparing for auditors.

2. Confirm Stakeholders - Remember to find the primary people in your company that must be onboard. If you are a small manufacturer and the owner does not think you need CMMC, then it is going to be hard to get there. A good list of who could stop your company from becoming CMMC-certified is vital.

3. Check for CUI - Look at your government contracts. Do you have CUI (Controlled Unclassified Information)?

The best way to find this out is to ask your government contract agent or prime contractor. CUI should be labeled by the government, but that is not always the case. a. Why is this important? The level of CMMC is based on having CUI to protect. If you do not have CUI, then you can self-certify at Level 1. b. If you have CUI, then you need to implement Level 2.

4. Self-Assessment - You need to be brutally honest about this. It is expected that you will have a low score to begin with. That is not to punish you or make you feel foolish; it is to get a baseline. Many companies have not taken any steps regarding cybersecurity because they have not needed to, which is not a failing in any way.

Like going to the doctor, if you don’t

tell the truth, it could hurt you later if something does happen.

5. Create a Plan - At this point, start to build your plan to move forward.

For most of our clients, we need to increase their cybersecurity and resilience before we start the journey towards CMMC. Many times, there are old systems and outdated equipment that need to be updated. Understand and respect that it is required to make these updates to facilitate you on your CMMC journey. Check out my article “If It Ain’t Broke, Better Fix It” in the November issue of Manufacturing Outlook for more information on outdated technology.

6. Go Slow – It does no one any good to go bankrupt trying to implement security. Find the low-hanging fruit— the easier decisions—and start there.

Just remember to never stop moving forward. It is always easy to rationalize things off by telling yourself something like, “I was planning on implementing password policies, but the line went down, and I just never got to it.” The government is going to be looking to make examples of people that do not follow through with their plans.

CMMC 2.0 is coming for Department of Defense contractors first, but it is expected to be implemented for all government contracts after they have shown that it is effective. Level 1 is a very good way to run your business from a security/risk standpoint. By taking these basic steps, your company will be better positioned to survive a cyber-attack, and those are truly on the rise. It is never entirely fun to have to do cybersecurity, but it is better to have the government require something from you than to have the hackers take something from you.

If you need assistance with these 8 CMMC steps or improving your cybersecurity, contact us at On Technology Partners by emailing info@ontechpartners.com or visiting our website, https://ontechnologypartners.com. n Author profile:

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

Manufacturing Outlook / January 2022

47

ISSUES OUTLOOK

JANUARY 2022

ISSUES OUTLOOK

by Royce Lowe

Skills and the Labor Shortage: a Perspective The skills gap and the labor shortage are ongoing issues in the U.S. economy, and their improvement has been a hot topic for government bodies, company executives, and academics alike. Some progress has been made, but the problem - and problem it is - was highlighted by the COVID-19 pandemic. Companies in the manufacturing sector, when questioned about their biggest problems over the past year, listed primarily the difficulties in the supply of raw materials, and their cost, but in many instances the availability of labor, both skilled and unskilled.

There is no doubt that the pandemic itself is responsible, in large part, for the lack of available labor and there is also little doubt that this lack will continue for some time. Long-term efforts to alleviate this chronic shortage have had some effect, but more effort

and more coordination are required before the U.S. can honestly say it has an ample supply of labor that is conducive to the ongoing manufacture of products of good quality at marketable prices.

We will not repeat what we have already said on many occasions, namely that education and training leave a lot to be desired, rather what shall be done about the problem from here on in. Where is the impetus for people in certain age groups to take up careers in manufacturing, and what can be done to encourage those already in the sector who are dissatisfied with their lot? And why are they dissatisfied with their lot?

Data gathered in 2020 suggest that Gen Z people, those under 24 years of age, make up some 24 percent of the workforce. These candidates, surveys state, are largely ambitious, and spend

their own time learning new skills for career advancement - more than any other generation. They thus expect to be financially rewarded for their efforts, and some 26 percent of Gen Z workers are leaving their jobs because of poor pay. Almost one candidate in three is turning down jobs due to a company’s negative social impact. They work hard too, as witnessed by a 2019 study of 3,400 Gen Zers in 12 countries. They must, however, be inspired, respected, and given training, flexibility, and mentorship.

There is much more to a candidate and a worker than ambition and competence. Studies have shown that 50 percent of those in internship and one third of those working full-time are only ‘moderately” optimistic about their professional future. This generation feels it must overcome anxiety (34%), lack of motivation (20%), and low continued

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Manufacturing Outlook / January 2022

ISSUES OUTLOOK self-esteem (17%) before success comes at work. In-person manager feedback and recognition, team communication, and co-worker respect are all important yardsticks for the majority of Gen Z workers. Less than half of Gen Zers credit their high school or college education for preparing them to enter the world of work.

Such figures are all well and good, but until the worlds of government, business and academia get together and decide how serious the labor shortage is, they count for very little. Until the message gets out, loud and clear, that manufacturing, at varying levels of employment, is a path to good living, without necessarily a four-year college degree, nothing much will change.

Well-paying manufacturing jobs are in reach even for adults without traditional four-year degrees.

According to a Deloitte analysis, the fastest-growing manufacturing jobs often require no formal postsecondary education. Which is a way of saying it’s all about on-the-job training, which brings us again to the magic word “apprenticeship,” which has been shown time and time again to be effective, particularly in Europe, but also in the U.S. when people have taken steps to put the necessary measures

in place. The effectiveness of on-thejob training, the practice, combined with part-time college, the theory, has yielded positive results. But apparently not often enough. The labor shortage was aggravated by the pandemic, not caused by it.

boomers are retiring from the U.S. workforce and there are not enough U.S.-born workers to take their place.

What to do? In today’s climate employers must go looking for candidates willing to join the manufacturing community, since these same individuals may not consider themselves to be candidates. Once they’ve found them, trained them, put them on the right career path, told them how they’re doing, and treated them with the respect they merit, they’ll have a workforce that will do them proud and reciprocate that respect.

Another source of labor, one that will become more and more important, is the immigrant community. There has been a relaxation of immigrant restrictions under the Biden administration, including Afghans.

The average year sees one million legal immigrants coming to the U.S., of whom some 750,000 go into the workforce. Census data tell us that immigrants already account for about 17 percent of the total U.S. workforce, and some 19 percent of the workers in manufacturing are immigrants. Baby

The U.S. Census Bureau says the population projections show that immigration will become the primary driver of the U.S. population by 2030, mostly because of rising deaths and lower birth rates in the U.S.-born population. There are immigration organizations into which employers can tap. The immigrants may have only a rudimentary knowledge of English but can be trained to do a job.

They will doubtless learn English.

The U.S. Chamber of Commerce says more visas and green cards should be authorized to help fill skilled job openings.

An additional source of labor is formerly incarcerated workers, who have for some time been put into the manufacturing lineup. There are also programs being run for ex-inmates, who had received some training while incarcerated. All these resources are possible solutions for labor. n Author profile: Royce Lowe, Manufacturing Talk Radio, UK and EU International Correspondent, Contributing Writer, Manufacturing Outlook.

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