Machine Tool/Manufacturing Industry Insight (Fall 2023) 

Machine Tool/Manufacturing Industry Insight (Fall 2023) 

This insight focuses on a number of topics that pertain to the machine tool/manufacturing industry as a whole, including myths about the industry, the fourth “industrial revolution”, ways in which the industry can combat the labor deficit, and fears among autoworkers regarding the transition to electronic vehicles. It also includes a brief commentary on the outlook for the manufacturing industry.

Hot Topics 

Myths About U.S. Manufacturing: There are several widely-held views about manufacturing, especially in the U.S., which don’t stand up to scrutiny. The sector has long been thought to be dying, but reports of such death have been greatly exaggerated. Rather, the industry is expected to play a pivotal role in the 21st-century economy. Five prevalent myths about the industry are as follows: 

Myth 1: Manufacturing is a Dying Industry – While it is true that the share of manufacturing jobs in the U.S. has steadily declined, this trend did not start in the 70’s or 80’s, but rather just after WWII. Though manufacturing’s share of nominal GDP has also declined, its share of real GDP has remained at a near-constant 12%

Myth 2: The U.S. Isn’t Competitive Globally – Another long-standing myth is that the U.S. isn’t competitive, especially in terms of labor costs. This is looked upon as the main reason manufacturing jobs are sent to lower-cost countries, like Mexico, China, or Vietnam. The belief that U.S. manufacturing has been effectively outsourced abroad is used as “supporting evidence” for its decline. Although there is some truth to this, the reality is more complicated. While much low-value manufacturing has departed the U.S. and is unlikely to return, high value-added manufacturing where processes are more complex or automated and require highly skilled labor to manage, has actually increased in recent years. In fact, according to the World Economic Forum and the UN’s Competitive Industrial Performance Index, the U.S. is often ranked at the top in global competitiveness. 

Myth 3: Sunk Costs are Too High – Many manufacturers are unwilling to invest in automation because they have been burned by the marketing of “autonomous” manufacturing for many years, where the promise did not live up to the hype. As a result, many companies are hesitant to purchase newer equipment. However, such reluctance to invest in sensor technology and AI is certain to put the U.S. at a competitive disadvantage. 

Myth 4: AI is just a Parlor Trick – When it comes to revolutionizing technology, many have heard the AI hype before, and are justifiably cynical after years of false starts. Nonetheless, in today’s world the most relevant revolution is in machine learning, and it is happening at an unprecedented pace. What was once “pie-in-the-sky” claims are quickly becoming business-as-usual. Manufacturers left doubting the potential impact are at risk of losing their competitive edge, as this trend will only accelerate. 

Myth 5: Automation Will Replace Everyone –  No matter the level of automation, highly skilled personnel are required to ensure that all systems continue to run smoothly and optimally. Without continuing to invest in people and their training, companies risk being left behind in the race for talent. It is more difficult and costly to repurpose outdated manufacturing equipment than it is to educate or retrain motivated employees. That is partly why McKinsey views up-skilling as a definitive force in the future of manufacturing and sees the share of manual labor dropping over 25% between 2016 and 2030. The bottom line is that manufacturing must become more efficient, autonomous, and increasingly dependent on AI and machine learning. Only through the deployment of advanced automation technology will workers get away from mundane tasks and allowed to reach their full potential. 

Industry 4.0: The Fourth Industrial Revolution: Industry 4.0, also known as the Fourth Industrial Revolution, began in the early 21st century. It is characterized by digitalization, innovation, and the adoption of advanced technologies which are leading to increased automation, more efficient production processes, and the creation of new products and services. The goal of this movement is to develop more agile, responsive, and customer-centered manufacturing industries. With its potential to revolutionize the production of goods and services, it aims to also transform the global economy. 

The Fourth Industrial Revolution is also driving significant changes in society and the economy, including greater connectivity and access to information, the rise of the sharing economy, and new forms of work, such as remote and gig work. However, it also raises important ethical and social issues, such as privacy, cybersecurity, and the impact of automation on employment. 

Specific technologies driving Industry 4.0 are as follows: 

Blockchain – Blockchain is a distributed and decentralized digital ledger that allows and records digital transactions to be completed in a secure, transparent, and immutable manner. 

Artificial Intelligence – AI has revolutionized Industry 4.0 by making it possible for machines to analyze data and learn from them, make decisions, and take on their own actions that typically require human intelligence. This can lead to enhanced efficiency, productivity, and quality. 

Virtual Reality – VR is a technology that allows users to simulate and visualize complex products and processes, identify potential issues early in the design process, and make more informed decisions. It can also be used by workers for training and skills development and to collaborate with each other in shared virtual environments. 

Digital Twin – A digital twin is a virtual copy of a physical product or system used to simulate, monitor, and optimize its performance. In Industry 4.0, digital twins are used to create virtual representations of physical manufacturing systems and to gain real-time insights into the performance of their physical systems. 

Robotics – In Industry 4.0, robotics can be used to automate and perform a wide range of tasks such as welding, painting, and assembly. They work fast, accurately, and tirelessly, making them perfect for repetitive or hazardous jobs. Robots can also collaborate with human workers, creating more flexible and efficient production processes. In addition, they can sort and move packages in warehouses, making the supply chain faster and more reliable. 

Cloud computing – Cloud computing is a critical technology used to store, process, and analyze vast amounts of data from machines, sensors, and other sources in a cost-effective and scalable way. In Industry 4.0, it is mostly used for data storage and management, analytics and machine learning, remote monitoring and control, and collaboration and communication. 

Internet of Things – IoT is a technology that connects physical objects and devices to the internet and allows them to send and receive data. It is being used to connect machines, sensors, and other devices to create more efficient and integrated manufacturing processes. 

Cybersecurity – Cybersecurity presents a critical concern for Industry 4.0. The use of interconnected devices and systems creates more attack pathways for cybercriminals to exploit. To address these challenges, manufacturers must develop effective cybersecurity strategies and stay up-to-date with the latest cybersecurity threats. 

Overall, Industry 4.0 has brought significant improvements to the manufacturing industry. Despite concerns about the potential impact of new technologies, with the right approach, the Fourth Industrial Revolution can continue to drive progress and innovation while also fostering a more equitable and inclusive society. 

Overcoming Workforce Challenges: The labor shortage in the U.S. is affecting every industry, but manufacturing has been among those hardest hit. As of June, there’s a shortage of almost 600,000 stable manufacturing jobs waiting to be filled nationwide. With older employees retiring, the labor shortage has become a pressing concern for manufacturers, employees, and investors, as it can affect both productivity and growth. Businesses should see this as an opportunity to reevaluate their strategies and implement measures to attract and retain top talent. Below are some ways in which companies can combat the labor deficit, create a positive work environment that values their employees and ensure the long-term prosperity of everyone involved. 

Create an attractive Workplace Culture – A positive workplace culture is essential for attracting and retaining unskilled, mid-skilled and skilled labor. Employers must prioritize employee satisfaction and provide a supportive and inclusive environment that celebrates diversity, promotes collaboration, and facilitates work-life balance. Most important is communication; manufacturing leaders should know how to talk to a brand-new apprentice and to present reports in the boardroom. Businesses can increase employee morale, productivity and loyalty by cultivating a culture of respect and appreciation where, after they’re trained, workers can earn more than the living wage for their valued skilled labor, in addition to receiving a benefits package that allows them to stay healthy and happy. 

Prioritize Training – In manufacturing, where occupational accidents loom, training is crucial. The more you take care of your people, the happier and more productive they are, and providing the opportunity to learn new skills is just one way manufacturing executives can achieve that. Right now, there is a skill divide between the younger and older generation, and it’s up to industry veterans to bridge that gap by upskilling low- and mid-skilled workers to make room for entry-level employees. The best way to attract candidates who might not possess all the required qualifications is by providing training opportunities and skill development courses to help grow their careers. Long-time employees know the business inside and out, and promoting from within is a great way to ensure operations run smoothly.  When businesses develop a highly competent workforce from within, it not only shows their belief in their employees’ abilities but also provides evidence of the company’s dedication to the long-term success of its workforce. 

Consider Adopting Technology – One way to upskill employees is by investing in new technology. This serves two purposes: In the short term, companies can mitigate the effects of the labor shortage. In the long term, they can increase output and productivity by eliminating repetitive manual tasks. By incorporating sophisticated tools and software, businesses can streamline operations, boost productivity, and reduce reliance on manual labor. This strategy enables employees to constantly improve themselves to concentrate on more strategic duties while maximizing productivity despite limited resources. 

Establish Partnerships with Educational Institutions – The manufacturing community can address the shortage of trade schools by forming partnerships with higher educational institutions, technical schools, and local high schools to teach necessary skills in a real-world work environment. By partnering with these institutions, businesses can contribute to developing relevant curricula so trade schools know what to teach based on real-world demand. This would also lead to new internships and apprenticeship opportunities, allowing more young people access to the manufacturing industry. 

In summary, companies can take a proactive approach to overcoming the labor shortage by fostering a positive workplace culture to attract top talent, investing in training and development, embracing technology, providing flexible work arrangements, and collaborating with educational institutions.  These strategies will enable manufacturers to develop a strong workforce, survive in a highly competitive environment and reach their key performance objectives. 

United Autoworkers Fear Transition to EVs: The United Auto Workers’ historic strike does not seem likely to let up anytime soon and the support lent by President Biden will surely increase the pressure placed on the major automakers. While the UAW strike is certainly a labor story, it’s also a climate story and whatever the outcome, it could help determine what role blue-collar workers will play in the country’s climate adaptation and energy transition efforts being dramatically moved along by the Biden administration. 

Beyond UAW’s demands for higher wages and better hours, a key issue in autoworkers’ gripe with the Big Three carmakers is the accelerating shift to electric vehicles. Lawmakers have supercharged government investment, consumer sales are revving up, and manufacturers are rapidly introducing new product lines. The future associated with these changes is not guaranteed to offer the same kinds of middle-class jobs and robust benefits that unionized autoworkers currently enjoy in many states. 

For one thing, electric vehicles supposedly require fewer assembly-line workers than internal-combustion and hybrid models. On top of that, much of the money for new auto and car-battery plants, along with assistance in transitioning old fossil-fuel and automotive facilities into hubs for zero-emission technology, is going to red states hostile to unions. Union workers rightfully fear that this evolving landscape may well exclude them, which is why the current strike’s demands include employment protections related to plant closures, boosts to retirement benefits, and new restrictions on the use of temp workers in factories. 

Manufacturing Industry Outlook 

In September, U.S. manufacturing took a further step toward recovery as production picked up, employment rebounded and prices paid for inputs by factories fell considerably. The third straight month of improvement reported by the Institute for Supply Management (ISM), strengthened economists’ expectations that economic growth accelerated in the third quarter, despite higher interest rates. That sentiment was reinforced by a Commerce Department report showing construction spending was solid in August, driven by the construction of houses and factories. 

The continued resilience of the economy raises hope that a recession can be averted in the near term.  The ISM said that its manufacturing Purchasing Managers’ Index (PMI) increased to 49.0 last month, the highest reading since November 2022, from 47.6 in August. Still, September marked the 11th straight month that the PMI remained below 50, which indicates contraction in manufacturing. That is the longest such stretch since the 2007-2009 Great Recession. However, September’s rise pulled the PMI above the 48.7 level that the ISM believes over time indicates an expansion of the overall economy. Growth estimates for the third quarter are as high as a 4.9% annualized rate, up from the 2.1% pace in the second quarter. A survey from S&P Global also struck a fairly optimistic note on manufacturing. While the PMIs and other business surveys have painted a grim picture of manufacturing, which accounts for 11.1% of the economy, so-called hard data have suggested that the sector continues to chug along. 

Facebook
Twitter
LinkedIn