Ernst and Young Industrial Products Survey

Ernst and Young Industrial Products Survey

The 2018 EY Industrial Products Survey was conducted among 500 Industrial Products (IP) executives whose businesses yield over $1B in annual revenue. These surveys are coming in with similar results. You can look at the results and say “Wow, almost half of executives at these companies see innovation as important, or see technology as important” or “How can half of all executives surveyed not see how important innovation is”.

I’ve had experience in manufacturing and marketing leadership and have studied it for many more years—and I lay most of the problems with manufacturing business squarely with (lack of) managerial leadership. I see these results and think that there will be many winners and just as many losers in the coming years.

The study surveyed executives from a variety of sectors including, aerospace and defense, industrial and mechanical components, machinery and electrical systems, chemicals and base materials, packaging and paper and wood. The survey was conducted between February 22, 2018 and March 22, 2018. The purpose of the study was to evaluate where IP companies fall on their journey towards continuous innovation.

Move over R&D: IP companies see digital technology and innovation as their path to success

  • 48% Percentage of respondents who view innovation as quite/extremely important for company success
  • 43% Percentage of businesses who are learning from and/or following the technology industry to influence innovation at their company
  • 67% Percentage of companies who plan to make significant levels of investment in innovation past traditional R&D over the next three years
  • 52% Percentage of businesses that say the adoption of emerging technologies will be quite important or critical to the success of their business in the next three years

Additional results from the survey include:

Facing a culture crisis: The perception of the IP industry is hindering the talent search

  • 67% agree/strongly agree that the image of the industrial products industry hurts when recruiting for needed skills
  • 38% that difficulty competing with tech-first companies for top talent is a leading barrier in filling the skills gap
  • 25% say that attracting/retaining top talent is one of the biggest drivers of their company’s technology investment
  • 64% agree/strongly agree that the IP industry needs to change their culture to thrive

IP is looking for outside inspiration. While the tech industry is the leading source, IP has a ways to go

  • 43% of respondents are learning from and/or following the technology industry to influence innovation at their company
  • Only 29% of business say they are extremely or quite innovative compared to close competitors
  • 82% of respondents have made minimal or no investment in AI today
  • 22% are learning from and/or following the automotive industry to influence innovation at their own company
  • 21% are learning from and/or following the consumer products industry to influence innovation at their own company

Robotics, mobile and big data, oh my! What is getting the largest share of investment attention?

  • 63% of respondents say that technology investments have driven measureable returns in agility to a significant/meaningful extent
  • 46% are making substantial or major investments in robotics and 56% predict they will in the next three years
  • 31% of businesses are increasing investment in emerging technologies in response to US tax reform
  • 31% says that big data/analytics will be most influential on their business over the next three years

Not a matter of if but when disruption will hit. IP companies are staying nimble in order to prepare

  • 49% of businesses say that preparation for disruption will be quite important or critical to the success of their business in the next three years
  • 52% of businesses say that flexibility to adapt to trends will be quite important or critical to the success of their business in the next three years
  • 53% of businesses say that access to specialized skills for emerging tech will be quite important or critical to the success of their business in the next three years
Purchasing Manager’s Index Still Looking Strong

Purchasing Manager’s Index Still Looking Strong

We have a new manufacturing sector economic activity report from the Institute for Supply Management—The Purchasing Manager’s Index—showing continued solid growth in the segment.

I also received an analysis from PwC’s Bobby Bono. His remarks are interesting including events in Washington that could change the rules of the game.

Long experience tells me that little that goes on in Washington significantly affects the economy. Presidents run for election on the economy, and are sometimes elected on it, but most of the time market forces and technology changes render their efforts dead on arrival. An exception, as Bono points out, could possibly be a trade war instigated by Trump. So far, all his tweets seem to be more geared toward getting people to the negotiating table (his forte, I guess), than in any unilateral action. Regardless, the underlying economy still looks strong. We can only hope.

In brief:

  • New Orders, Production, and Employment Growing
  • Supplier Deliveries Slowing at Slower Rate; Backlog Same
  • Raw Materials Inventories Growing; Customers’ Inventories Too Low
  • Prices Increasing at Faster Rate; Exports and Imports Growing

The report:

Economic activity in the manufacturing sector expanded in March, and the overall economy grew for the 107th consecutive month, say the nation’s supply executives in the latest Manufacturing ISM Report On Business.

The report was issued today by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management (ISM) Manufacturing Business Survey Committee:

The March PMI registered 59.3 percent, a decrease of 1.5 percentage points from the February reading of 60.8 percent. The New Orders Index registered 61.9 percent, a decrease of 2.3 percentage points from the February reading of 64.2 percent. The Production Index registered 61 percent, a 1 percentage point decrease compared to the February reading of 62 percent. The Employment Index registered 57.3 percent, a decrease of 2.4 percentage points from the February reading of 59.7 percent. The Supplier Deliveries Index registered 60.6 percent, a 0.5 percentage point decrease from the February reading of 61.1 percent. The Inventories Index registered 55.5 percent, a decrease of 1.2 percentage points from the February reading of 56.7 percent. The Prices Index registered 78.1 percent in March, a 3.9 percentage point increase from the February reading of 74.2 percent, indicating higher raw materials prices for the 25th consecutive month. Comments from the panel reflect continued expanding business strength. Demand remains robust, with the New Orders Index at 60 or above for the 11th straight month, and the Customers’ Inventories Index at its lowest level since July 2011. The Backlog of Orders Index continued a 14-month expansion with its highest reading since May 2004, when it registered 63 percent.

Consumption, described as production and employment, continues to expand, with indications that labor and skill shortages are affecting production output. Inputs, expressed as supplier deliveries, inventories and imports, were negatively impacted by weather conditions; Asian holidays; lead time extensions; steel and aluminum disruptions across many industries; supplier labor issues; and transportation difficulties due to driver and equipment shortages. Export orders remained strong, supported by a weaker U.S. currency. The Prices Index is at its highest level since April 2011, when it registered 82.6 percent. In March, price increases occurred across 17 of 18 industry sectors. Demand remains robust, but the nation’s employment resources and supply chains are still struggling to keep up.

Of the 18 manufacturing industries, 17 reported growth in March, in the following order: Fabricated Metal Products; Plastics & Rubber Products; Computer & Electronic Products; Paper Products; Printing & Related Support Activities; Nonmetallic Mineral Products; Transportation Equipment; Petroleum & Coal Products; Wood Products; Machinery; Chemical Products; Textile Mills; Electrical Equipment, Appliances & Components; Furniture & Related Products; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; and Primary Metals. The only industry reporting a decrease during the period is Apparel, Leather & Allied Products.

Bobby Bono, PwC’s U.S. Industrial Manufacturing Leader, offers the following analysis.

The PMI manufacturing index decreased 1.5 points, but remains high at 59.3; prices reached their highest level in 7 years ahead of a potential trade war

The ISM Purchasing Manager’s Index (PMI) for manufacturing survey dropped 1.5 points to 59.3 for the month of March 2018.  While a significant drop from last month’s 60.8, last month was the highest the PMI reached in the last 14 years and March remains above the 90th percentile of PMI reports since 2000.

The continued positive economic environment has led to supply constraints and a buildup in the price index, which now stands at 78.1, its highest level in 7 years.   Price increases occurred across 17 of 18 industry sectors in March as New Orders also dropped 2.3 points.  While the full impact of tariffs and a potential trade war have not set in, some companies are beginning to see signs across select commodity prices and concern around overall global demand rise.

But with any change in rules, businesses need to learn what those rules are, how they will impact their business, and then how to adjust. Most manufacturers already build locally. There have been so many changes already in American regulations that they long ago realized it’s best for their business to build for American sales in North America, and to build for European sales in Europe to meet demand. It’s not 100% local but it’s heavily weighted. Manufacturers want to be close to their customers.

How businesses adapt to the new regulations will speak to their inherent strategy.  If they weren’t as flexible as they should have been, this may be a challenge. Commodity prices often move more than 10% in a year, so this tariff is not that different from that. It’s actually more predictable.

ThomasNet Survey Shows Business Trending Up For Manufacturers

ThomasNet Survey Shows Business Trending Up For Manufacturers

Here is a “good news / bad news” report. While manufacturing business looks good right now, we have yet another fearful article about getting a new generation of engineers. For a little context, here is an article I wrote about milennials. This press release is from ThomasNet.

North America’s manufacturing sector is on an upward trajectory. However, a shortage of young talent, compounded by Baby Boomers’ negative perceptions about Millennials, could impact its continued expansion, according to ThomasNet’s latest Industry Market Barometer (IMB) research.

The annual survey of product and custom manufacturers shows continued growth for this sector. Companies are hiring, increasing production capacity, and investing for more growth to come. More than half (58 percent) grew in 2013, and 63 percent expect even more gains by the end of 2014.

Positive indicators are everywhere. Manufacturers are getting more business from their existing markets, and their average account values are rising. Nearly eight out of 10 (76 percent) are now selling overseas, and one-third expect that business to increase. In anticipation of what’s ahead, they’re investing in capital equipment, optimizing operations, upgrading their facilities, and retraining their people. More than half (52 percent) expect to add staff in the next several months, up from the 42 percent who planned to hire last year. Respondents’ companies are looking for trained, experienced people—manufacturing/production management, line workers, skilled trade workers and engineers—to keep up with current and future demand.

Troublesome Trends

A deeper look under the hood raises questions about whether the manufacturing industry can continue its current momentum. “For the industry to sustain its steady climb, all the fundamentals need to be in place, and one of them is missing—a robust pipeline of talent,” said Mark Holst-Knudsen, President of ThomasNet.

Last year’s IMB called attention to the “ticking biological clock” in manufacturing—the disruption that’s coming as Baby Boomers leave the workforce without people primed to replace them. This year’s survey depicts the “ticking” turning to an alarm. Nearly half of this year’s respondents (49 percent) are 55 and older. Moreover, thirty-eight percent plan to retire in one to ten years, and most (65 percent) lack any succession plan.

One solution is in plain sight—the Millennial generation (ages 18-32)—who can take the time to learn the business before their predecessors retire. Yet, most manufacturers (62 percent) say Millennials represent a small fraction of their workforce, and eight out of ten (81 percent) have no explicit plans to increase those numbers.

However, companies are making headway in the area of apprenticeships, which provide opportunities to bring in entry-level employees and career changers. For manufacturers where these programs are applicable, 51 percent now have them in place, and 23 percent plan to do so. They’re teaching apprentices trades such as machining, CNC milling and turning, and welding while increasing their staff.

“We need new talent everywhere—on the plant floor, in the field, and in management—and getting young people to look at manufacturing isn’t easy,” said Karen Norheim, Executive Vice President, American Crane & Equipment Corporation, Douglassville, Pa. “To ensure our company’s success, our employees have become brand ambassadors for manufacturing. We’re bringing our children to our plants, looking at new internship programs, and reaching out to local colleges and trade schools. By making a local footprint, we’re helping to address a national problem.”

Baby Boomers’ Perceptions of Millennials

This year’s data shows that the manufacturing industry increasingly aligns with Millennials’ value systems and technology expertise. The research demonstrates that Millennials have an opportunity to make a social impact working with sustainable and green technologies, solar energy, and wind power. In addition, respondents cite innovations in design and manufacturing software, automation/robotics, and 3D printing as intrinsic to today’s jobs.

But 46 percent of respondents say that a larger issue is at work – younger people still perceive manufacturing as “blue collar” work.  And Baby Boomers’ perceptions of Millennials exacerbate the challenge. Forty-three percent of respondents believe that this generation lacks the work ethic and discipline to succeed.

“At a time when the American manufacturing sector is poised for a comeback, the talent shortage is the elephant-in-the-room that could impede progress. It will take the concerted effort of every manufacturer to reach across generational lines, and bring in the people who are critical to the industry’s continued success,” said ThomasNet’s President Mark Holst-Knudsen.

Manufacturing IT Event Plans Unveiled

Manufacturing IT Event Plans Unveiled

MESA International

MESA International

Just in from MESA International regarding its 2015 conferences. Yes, that’s plural. MESA has partnered with Industry Week magazine for several years in order to participate with the IndustryWeek Best Plants Conference & Expo.

The thinking goes along the lines that this venue attracts attendees whose positions include plant manager to director of manufacturing. These are the people most interested in the direction of the company’s Manufacturing IT direction and implementation.

The Americas Board-of-Directors for MESA International announced its North America events include plans to co-locate its annual conference within the IndustryWeek Best Plants (IWBP) Conference & Expo. The MESA conference will be held at the Charlotte Convention Center in Charlotte, North Carolina, USA, May 4 – 6, 2015. Registration for the MESA community will open mid-December 2014.

The theme of the MESA North American Conference is “Advancing. Manufacturing. IT.” and will focus on highlighting the business value of solving plant and enterprise-level manufacturing challenges with Information Technology (IT)-based solutions.

The MESA event consists of one dedicated track of speakers within the IWBP schedule-of-events, an exhibitors’ pavilion (the MESA ‘Manufacturing Meets IT’ Pavilion) within the IWBP Expo hall, and several MESA unConference sessions in Monday’s IWBP pre-conference workshops.

Commenting on the decision to co-locate with IWBP, Dennis Brandl, Chairman of MESA’s Americas Board, said, “The business leaders who read IndustryWeek want to know how modern Information Technologies, when properly understood and utilized in their operations, can change their manufacturing business for the better. I encourage them to join us in North Carolina to learn how leading companies are using advanced manufacturing IT solutions and to interact with others on the same journey to improved operations.”

Future Process Industry Plans

MESA is currently looking for the right venues and locations in the second half of 2015 that address the diverse makeup of its members. Brandl added, “Batch and continuous processes are equally important to MESA as is discrete manufacturing. Many companies have combinations of all of these processes, and supporting the right events that represent the breadth of these processes is the right way to cement and advance the MESA community.”

Commenting on the events plans in North America for 2015, Mike Yost, MESA President, said, “Everyone has a ‘Manufacturing-IT Strategy’. If it’s not clear to everyone in your organization – including the business value of your approach – you need to know the industry professionals that make up the MESA community. So, mark your calendar for May and stay tuned for more details about a fall event.”

3D Printing–The Future of Manufacturing is Here?

One potentially disruptive technology rapidly developing beyond the hobbyist stage is 3D printing. It has been around for a while, but new developments in printers and materials pop up at least weekly.

Most manufacturing has been subtractive–take a hunk of iron or steel or plastic, put it in a mill, lathe, machining center, and do like the famous artist who, when asked how he sculpted the statue said, “I just chip away all the marble that didn’t look like the statue.”

We also mold in various ways. My second manufacturing position was at an operation that included vacuum forming parts from plastic sheets. Later, I was involved with blow molding and injection molding.

3D printing, or additive manufacturing, works by laying down a thin layer of the material, followed by another layer, and so on until the final part is manufactured. It is possible to do complex parts that could never be machined or molded. The possibilities for product designers are exciting. And the prices are dropping enough and the reliability improving enough so that maybe you, too, could start a manufacturing business in your garage.

Here’s an advance I just read about.

Stratasys Ltd., a manufacturer of 3D printers and materials for personal use, prototyping, and production, has announced the launch of the “ground-breaking” Objet500 Connex3 Color Multi-material 3D Printer, it claims to be the first and only 3D printer to combine colors with multi-material 3D printing.

From the release, “A game-changer for product design, engineering and manufacturing processes, the Objet500 Connex3 Color Multi-material 3D Printer features a unique triple-jetting technology that combines droplets of three base materials to produce parts with virtually unlimited combinations of rigid, flexible, and transparent color materials as well as color digital materials – all in a single print run. This ability to achieve the characteristics of an assembled part without assembly or painting is a significant time-saver. It helps product manufacturers validate designs and make good decisions earlier before committing to manufacturing, and bring products to market faster.”

Revolutionize manufacturing

“Stratasys’ goal is to help our customers revolutionize their design and manufacturing processes,” says Stratasys CEO David Reis. “I believe our new Objet500 Connex3 Color Multi-material 3D Printer will transform the way our customers design, engineer and manufacture new products. In general and with the Connex technology in particular, we will continue to push the envelope of what’s possible in a 3D world.“

Engineers at beta user Trek Bicycle in Waterloo, Wisconsin are using the Objet500 Connex3 Color Multi-material 3D Printer for assessment and testing of accessories like bike chain stay guards and handlebar grips prior to actual production. “The Objet500 Connex3 Color Multi-material 3D Printer changed the way we manufacture at Trek, augmenting our traditional, time-consuming CNC processes with fast, iterative and realistic prototyping and functional testing,” says Mike Zeigle, manager of Trek’s prototype development group.

“Now we produce bicycle parts that look and feel like production parts. We are particularly excited about 3D printing our models directly in color. This gives our designers the ability to graphically display color contact pressure map data on rider contact parts like seats and grips. We are also working on doing the same with FEA & CFD stress data on structural bike components,” adds Zeigle.

Similar to a 2D inkjet printer, three color materials – VeroCyan, VeroMagenta and VeroYellow – are combined to produce hundreds of vivid colors. These color materials join Stratasys’ extensive range of PolyJet photopolymer materials including digital materials, rigid, rubber-like, transparent, and high temperature materials to simulate standard and high temperature engineering plastics.

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