by Gary Mintchell | Dec 13, 2016 | Commentary, News
Well, we have a new US President coming into power in January. What impact will President Trump along with a Republican House and a Republican Senate have on manufacturing? Even at this point with a month until inauguration, we are getting a glimpse, but it’s still a guessing game. Trump and Congressional leaders are not on the same page on all matters of policy, so this will be interesting to see play out.
Robert McCutcheon, Partner, US Industrial Products Leader, with PwC called yesterday to discuss a paper he has written—Five post-election topics on the mind of domestic manufacturers . This paper, part of a broader series of research and reports from the firm, looks specifically at five areas of policy that will impact manufacturers. These are Tax, Infrastructure, Military, Regulation, and Trade.
Of these, McCutcheon told me that manufacturers are most interested not surprisingly in Tax and Regulation policies. These can have quick and direct impact on manufacturers’ bottom lines. A close third is Trade policy. I’m watching the dance that Trump has started around China—both the Taiwan issue and the Trade Pact (where the US stands to lose influence in all of Asia). So I was curious especially for McCutcheon’s analysis on these.
What follows are taken directly from the paper. If anyone wants to share their wishes or concerns specifically about manufacturing policies (not about politics in general), the comments are open.
Five Post-Election Manufacturing Topics
Undoubtedly, there will continue to be significant questions about the future of domestic manufacturing post-election. With Republican control of both the White House and Congress, one thing seems clear: Change is coming. Here are the five key policy discussions that could have significant implications for domestic manufacturing over the next four years:
Tax
The results of the 2016 election will have significant impact on the direction of tax reform over the next four years. President-elect Trump has stated that one of his top priorities is comprehensive tax reform to significantly lower individual and business tax rates. Under his proposed plan, the top individual tax rate would be lowered from 39.6 percent to 33 percent, and the US corporate tax rate would be lowered from 35 percent to 15 percent. Owners of partnerships, S corporations, and other “pass-through” business entities could elect to be taxed on their pass-through business income at a flat rate of 15 percent, rather than under the regular individual tax rates. US-based manufacturers also would be allowed to elect full expensing of plant and equipment (with no deduction for interest expense). President-elect Trump also has proposed a 10 percent “deemed” repatriation tax on the foreign earnings of US-based companies.
President-elect Trump’s call for action on comprehensive tax reform is expected to receive strong support from Republicans in Congress, but the divisive nature of the 2016 elections could mean there will be no “honeymoon” period for the new president. House Republicans have been drafting statutory language to advance the tax reform “blueprint” that they released earlier this year, which differs in some important respects from Trump’s tax proposals. House Speaker Paul Ryan (R-WI) has said a Republican-controlled Congress could advance tax reform in 2017 by using “budget reconciliation” procedures that allow legislation to be approved in the Senate with a simple 51-vote majority, instead of the 60 votes generally needed to advance legislation.
Infrastructure
President-elect Trump has made it clear that there will be significant infrastructure investments that will undoubtedly bring benefits to the manufacturing industry in the engineering and construction sector, especially now that Trump has announced his plan to spend $1 trillion over the next decade to upgrade the nation’s roads, bridges and waterways. Lawmakers on both sides of the aisle are now hopeful they could reach agreement on at least one bipartisan matter. His plan vows to reduce bureaucracy and government red tape and to rely principally on public-private partnerships and private financing supported by the use of federal tax credits for private financiers. We should also see upstream benefits in the supply chain as infrastructure spending generally results in a significant increase in economic activity from the materials, goods and services consumed in these projects.
Trade
Trade was one of the cornerstones of Trump’s campaign, promising a radical trade agenda, and vowing to withdraw from the Trans-Pacific Partnership trade deal and renegotiate with the North American Free Trade Association. This has led many of America’s top manufacturers to urge President-elect Trump to scale back on his trade initiative and pursue a more nuanced approach to trade with China and Mexico. In an open letter to Mr. Trump, chief executives from more than 1,100 US companies warned of “an urgent need to restore faith in our vital economic and government institutions.” Many of these business leaders have expressed concerns about economic uncertainty and trade threats.
Some industries, however, may feel that a change in the US position around trade will benefit them. The steel industry, for instance, has been hit hard with anti-dumping and “unfair trade” cases for many years. A new stance on trade tariffs could significantly benefit domestic steel producers. The question regarding the ramifications of these changes, and how they will not only impact imports and exports, but also overall trade relations, remains.
Military spending
We anticipate an impact for the aerospace and defense sector as a result of the proposed increase in military spending. Plans include an increase in the Army’s active force to 540,000 troops, the Navy building a 350-ship fleet and the Air Force increasing the fighter fleet to 1,200 combat-coded aircraft. Estimates vary, but these proposals could increase the defense budget by hundreds of billions of dollars over the next four years, impacting defense contractors as well as their supply chains.
Regulation
President-elect Trump’s plans include asking all department heads to submit a list of every wasteful and unnecessary regulation, reforming the entire regulatory code in an effort to keep jobs and wealth in America, declaring a temporary moratorium on new agency regulations that are not compelled by Congress or public safety, and canceling hundreds of existing executive orders.
The US has already undergone a shale revolution which positively impacted the manufacturing sector including, but not limited to, the chemicals industry. By lifting some of these regulations, we may see more economic activity in the manufacturing sector overall. The President-elect’s pledge to reduce regulation could lead to exploration and new development as well as new pipeline projects that could not only benefit the oil and gas industry but also the downstream industries that consume much of this output as feedstock into their manufacturing processes. This could contribute to a more cost competitive domestic manufacturing environment.
Final Word
There is a lot of uncertainty around how the election results will ultimately affect domestic manufacturing. No doubt the new Trump administration, with Republican control of Congress, will result in change. We will continue to monitor policies as they develop across all five of these categories over the coming months. Stay tuned as we assess the potential impact on jobs and growth for industrial products companies in the US.
by Gary Mintchell | Oct 10, 2016 | Automation
Last Friday, October 7, was National Manufacturing Day. Pointing toward that recognition, I participated in a Twitter Chat with PwC (Bob McCutcheon) and The Manufacturing Institute (Jennifer McNelly). I have participated on several of these. It’s pretty interesting. You can search #MFGTalent on Twitter and see the thread.
That same week, Moira Gunn interviewed Dan Mote, president of the National Academy of Engineering, on her NPR radio show TechNation Radio. You can find the podcast on iTunes or other podcatchers.
During the interview, Mote pointed out, “The key to engineering is being creative, not necessarily the math. You must care about solutions.”
I’ve heard it said that engineers are problem solvers. Most of the math I have studied was only partially about manipulating symbols. It was more about logical thinking and solving problems. For an engineer, math is a tool. Logic is life.
Twitter Chat
Here is a transcript of part of the chat we had to give you a flavor. It gets more interesting as people share links and facts.
Gary Mintchell @garymintchell Welcome to Tweet Chat concerning manufacturing talent. Please chime in. Now for the first question. Q1 Where do you see a manufacturing skills shortage? Or, would you argue that there is none? #MFGTalent #MFGDay16
Bob McCutcheon @MccutcheonBob A1 As opposed to a skills shortage, we see that there is currently a shift in skillset in the manufacturing workforce #MFGTalent
Jennifer McNelly @Jmcnellynam A1 There is a shortage w/ production workers & high-skill employees. 2/3 see talent shortage worsening in next 3 years. #MFGTalent #MFGDay16
TheMfgInstitute @TheMfgInstitute A1 By 2025, 3 million #mfg jobs will need to be filled and 2 million will go unfilled due to skills gap. #MFGTalent #MFGDay16
Bob McCutcheon @MccutcheonBob A1 Factories are getting smarter and the reality is, the next gen of the manufacturing workforce needs to keep up. #MFGTalent
Bob McCutcheon @MccutcheonBob A1 In fact, high percentage of manufacturers are embracing measures to grow & train a workforce that can keep pace with new tech #MFGTalent
Steve Minter @sgminterIW Do estimates of mfg job shortages account for technology changes? #mfgtalent
Jennifer McNelly @Jmcnellynam .@sgminterIW More than 1/3 of manufacturers said that investing in advanced technology will create jobs. #MFGTalent #MFGDay16
Bob McCutcheon @MccutcheonBob Bob McCutcheon Retweeted Steve Minter Industry 4.0 and tech advances are creating a shift in skillset, meaning the type of jobs manufacturers need will change #MFGTalent
Gary Mintchell @garymintchell Following up, Q2 is this just numerical change in jobs or a qualitative change? #MFGTalent
Bob McCutcheon @MccutcheonBob A2 It’s a qualitative change as advanced technology is changing job requirements and descriptions #MFGTalent #MFGDAY16
TheMfgInstitute @TheMfgInstitute A2 Qualitative change! Manufacturers will need skilled workers for advanced manufacturing technologies. #MFGTalent #MFGday16
Shannon Schuyler @ShannonSchuyler We all must work together to create education and training opportunities beyond the classroom for workers to retool their skills #MFGTalent
Jennifer McNelly @Jmcnellynam A2 There will be a change in the type of jobs – high-tech, innovative, and computerized. #MFGTalent #MFGDAY16
Jennifer McNelly @Jmcnellynam .@sgminterIW We need strong public-private partnership. Efforts like WIOA help advance collaboration #certification #Mfgtalent #MFGDay16
Bob McCutcheon @MccutcheonBob We need continued investment in STEM & training development programs in local communities – what are your thoughts @sgminterIW? #MFGTalent
Mike Dillon @mikedillonsf Worth noting – Diverse companies outcompete those lacking diversity & they make better decisions. Promote #workforce #diversity #MFGTalent
In reply to Bob McCutcheon Steve Minter @sgminterIW Most successful co’s I’ve seen taking initiative and forging strong ties w/ local schools, community colleges, etc @MccutcheonBob #MFGTalent
Bob McCutcheon @MccutcheonBob Q3 The focus will be put on jobs tied to #Industry40, with skills based on STEM
In reply to Bob McCutcheon Gary Mintchell @garymintchell @MccutcheonBob Bob, STEM knowledge is essential, but I think we miss the mark if it’s not combined with art, music, literature. #MFGTalent
Gary Mintchell @garymintchell Building on Bob and Steve, Q6, how can mfrs attract these STEM students?
Jennifer McNelly @Jmcnellynam A6 Offer work-based learning like internships & apprenticeships and engage young employees as ambassadors. #MFGTalent #MFGDay16
TheMfgInstitute @TheMfgInstitute A6 Showcase the diverse roles manufacturing can offer! There’s a place for everyone in #mfg. #MFGTalent #MFGDAY16
Bob McCutcheon @MccutcheonBob A6 Having a strong relationship w/ educational institutions / universities to introduce the many facets of mfg will be key #MFGtalent
Bob McCutcheon @MccutcheonBob A6 Manufacturers can recruit STEM students directly from graduation, attend job fairs and provide well-crafted internships #MFGTalent
Jennifer McNelly @Jmcnellynam A6 Check out this Ambassador toolkit to help engage early career leaders @TheMfgInstitute #Mfgtalent #MFGDay16 http://ow.ly/yKld304QKDF
Steve Minter @sgminterIW A6 Manufacturers should also pay attention to onboarding and early career development #mfgtalent
Gary Mintchell @garymintchell As we wrap up, what excites you about the future of manufacturing, technology, and new talent? #MFGTalent
Jennifer McNelly @Jmcnellynam A career in modern #mfg means great pay, challenging opportunities, the ability to lead and learn for a lifetime. #MFGTalent #MFGDay16
In reply to Gary Mintchell
Bob McCutcheon @MccutcheonBob @garymintchell The new, exciting products that our manufacturing floors could produce with the help of tech and talent #MFGTalent
TheMfgInstitute @TheMfgInstitute The future of #manufacturing holds the opportunity to change the world with innovative products! #MFGTalent #MFGDay16
And that seemed to be the best summary. Let’s go change the world.
by Gary Mintchell | Sep 29, 2016 | Uncategorized
Join me along with representatives of PwC and The Manufacturing Institute for a Twitter Chat next Tuesday at 1 pm EDT. #MFGTalent
How does all this digital technology we talk about affect manufacturing jobs? What will the future look like.
by Gary Mintchell | Jun 9, 2016 | News, Productivity, Workforce
Industry and manufacturing leaders recognize the trend to the next step in the evolution of enterprise effectiveness and success. The industrial digital revolution is an overnight sensation that has been 30 years in the making. We began with digital controls then adding human interface and then information handling.
Internet of Things with its proliferation of sensors and other smart edge devices, IP networking, data science, and advanced analytics (business intelligence) combined take us to a whole new level of enterprise effectiveness.
The trite question from marketing people often goes, “What’s keeping our customers awake at night?”
Well, are executive worried about the capability of technology?
Two research reports just came my direction recently from a couple of my go-to sources for what’s happening with the thinking in the industrial/manufacturing executive suite. One is from PwC, What’s Next in Manufacturing: Building an Industrial Digital Ecosystem, and the other from Accenture Digital Skills Gap Slows Manufacturers’ Push to Build Digital Factories.
No, it’s not technology that worries them. First it’s people and culture. Are there sufficient people with digital skills? Will the culture make the transition? Then, of course, they worry about how large the investment might become and what the return will be. It’s people and economics.
PwC Digital Industrial Survey
In this report, PwC shares results from a survey of global industrial products companies, shedding light on what manufacturers are doing now to build out their digital operations and what bottom-line benefits they expect to yield through those efforts.
Buying into digital: manufacturers plan to ramp up investments
In the last two years, US manufacturers invested an average 2.6% of their annual revenue in digital technologies. In the next five years, they expect to lift that investment to 4.7% of revenue—for an estimated $350 billion in investments in digital operation technologies across automotive, industrial production and manufacturing industries alone.
Venture capital funds flowing, too
Since 2011, some $3.6 billion has poured into VC-backed start-ups across a selection of digital technology sub-sectors, with investment rising at a 47% clip–more than double the annual growth of total VC funding (18%) in all sectors over the same period.
“Digital deals” have comprised 15% of all US M&A activity since 2012
According to a PwC/Strategy& analysis, more than $6.0 billion has been invested on “digital deals” in North America alone since 2012, comprising some 15% of all M&A deals over that period.
The greatest challenge to a “digital vision” is cultural
In the context of embracing digital operations technology, three of the top 10 challenge areas identified by surveyed companies relate to organizational readiness and financial concerns. Some companies anticipate high investment requirements with unclear return on investment, and lack of digital standards and issues related to data security and intellectual property are also noted.
Monetizing digital operations sought through cost reductions, revenue generation
Nearly two-thirds of manufacturers expect that adopting digital manufacturing technologies will translate into lowering operating costs by at least 11% mostly via efficiencies through automating processes and production. Meanwhile, over half of these manufacturers expect such adoption to boost revenues by at least 11%.
How digital technologies drive bottom-line results Manufacturers are just scratching the surface of monetizing digital manufacturing. Some key drivers to achieving cost-cutting and revenue uplift from digitization with the introduction of smart, connected manufacturing technologies and products and services include:
- Lowered “price of variability” across production and processes
- Moving from analogue products to “connected, digital products”
- Manufacturing data…and new business models
- Software-enabled upgrades to products
- Pay-as-you-go model
Building a digital manufacturing strategy
Building a digital strategy requires a thorough self-assessment to determine a company’s “current state” of its digital evolution—and, just important, defining its “target state”. This means tailoring digital operations solutions to a business’ assets and making the right moves at the right time—from ramping up data analytics capabilities, to monetizing product data to considering a “digital deal”.
PwC concludes, “The future of digital manufacturing holds many “what-ifs”. But, if it unfolds as dramatically as our survey indicates, most all manufacturers will be altered to some degree. And, for every “what if”, there are choices manufacturers ought to consider.”
Accenture Researches Industrial Digital
Take a look at some of the results of Accenture’s research. Although the majority ofmanufacturers have implemented digital platforms, more than half (51 percent) lack the skills to operate digital factories. The more successful manufacturers have advanced talent strategies in place to digitally enable the workforce of the future.
Cracking the Code on the Digital Factory, a report based on a global study of 450 manufacturers, found that a growing skills gap is one of their biggest concerns – a situation that has worsened in recent years as manufacturers have transformed their operations using new technology, analytics and mobility capabilities.
Fifty-five percent of manufacturers, up from 38 percent in 2013, reported a skills gap among skilled trades laborers, who need to operate increasingly advanced digital machinery and equipment, such as 3D printers or modeling and simulation tools on the plant floor. Likewise, 60 percent of manufacturers, up from 31 percent in 2013, cited a shortage of maintenance workers skilled in the use of predictive maintenance analytics that leverage data from embedded sensors in a machine-to-machine environment.
“For manufacturers to realize the full potential value of digital factories, they need to redesign their workforce to include new manufacturing skills, such as analytical reasoning and data-driven decision support,” said Russ Rasmus, managing director, Accenture Strategy. “Developing a comprehensive talent strategy inclusive of new digital skills is an imperative for today’s manufacturers.”
Digital Factory Leaders
The research identified a small group of manufacturers (8 percent) that outperformed their peers by increasing production and profitability by more than 10 percent since 2013. These “leaders” are more likely than their peers to understand which new skills they need for future growth and success, and have a more effective strategy to attract, develop and retain this new breed of manufacturing talent.
A majority of these leaders (73 percent) more frequently reported already having the requisite digital skills, as compared to 49 percent of other manufacturers, and they were nearly 50 percent more likely to report a higher degree of visibility into what skills they needed. That has allowed most of the leaders (81 percent) to achieve greater internal workforce mobility in roles involving digital, enabling them to match employees with managers who need those skills.
Barriers to Success
While these digital factories are enabled with rapidly developing technology innovations, the technological aspect of their implementation is not the top barrier to success. Seventy-five percent of the deployment challenges cited by survey respondents are related to skills, organizational change or structure, and the talent within the organization.
Chief obstacles that hinder manufacturers’ digital adoption.
“Manufacturers must aggressively manage these non-technical barriers as they deploy their digital factory capabilities. These include the ability to create new processes, lead teams made up of workers and machines, and constantly update training programs,” said Rasmus.
by Gary Mintchell | Apr 14, 2016 | Technology
We all expect 3D Printing, also known as Additive Manufacturing, to be a disruptive. Or is it everyone who expects it? Will 3D Printing become the next technology to collapse layers in manufacturing just like the software and communications layers I’ve been discussing?
PwC just reported on its 2015 survey of manufacturers’ experiences and attitudes toward the technology. The results are somewhat mixed, as you would suspect given how new the technology is and how rapidly it is gaining acceptance.
PwC’s Robert McCutcheon posted a blog on LinkedIn introducing the latest results. I’m quoting the post here:
There are many different types of technology that are at the fingertips of manufacturers looking to become the next Factory of the Future. But there’s still that hesitation, there’s still the question: Is 3D printing (3DP) just hype?
According to PwC’s recent study, it’s not. In fact, it’s become quite clear that the technology, also known as additive manufacturing, is crossing from a period of experimentation to one of rapid maturation. Industrial 3D printers, once almost exclusively used for prototyping, are now on some of America’s factory floors and being rolled out on production lines.
How do we know?
Two years ago, PwC tested the waters to figure out to what extent U.S. manufacturers were adopting 3DP into their operations and how they expected the technology to play out in the future. In our latest report, we share what’s changed and the three most significant shifts that have emerged:
- More “doing,” less experimenting: Fewer manufacturers (17% versus 29% two years ago) are simply experimenting with 3DP to figure out how to use the technology. Now, just over half are using it for prototyping and final-products versus 35% two years ago.
- Greater expectations: Two years ago, just 38% of manufacturers expected 3DP to be used for high-volume production over the next 3-5 years. Now, 52% do. Interestingly, we saw a drop from 74% to 67% in the number of manufacturers that expect 3DP to be used for low-volume, specialized products.
- 3DP is still disrupting, though how it’s disrupting continues to evolve: Twenty-two percent say it will be disruptive to restructuring supply chains. The same percentage say it will threaten intellectual property.
Eighteen percent believe it will change relationship with customers. Two years ago, the primary concern was how it would disrupt the supply chain.
In “3D Printing comes of age in US industrial manufacturing“, we dive further into these three shifts and uncover sentiment from 2014 versus today. What’s clear is that the growth in 3DP and the range of ways it’s being implemented is demonstrating 3DP will be an important discussion to how manufacturers are assessing, shaping and expanding their businesses.
However, no matter where one is on the adoption scale, there are questions that must be addressed.
