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Manufacturing Industry Challenges & Opportunities in 2021: The COVID-2019 pandemic has taken its toll on the manufacturing industry and it appears that 2021 is going to get even more challenging. Seven of the manufacturing challenges companies are expected to battle throughout the remainder of the year are as follows:

1. Skilled Labor Gap. With a skilled generation entering retirement, manufacturing is witnessing an impending labor shortage. By 2025, there will be up to 3.5 million open positions. However, thanks to the advent of new technology, companies find themselves in need of fewer employees. They now require workers with top-tech skill sets who are proficient in mathematics and have an analytical mind. The desire for an unskilled, trainable workforce is slowly shrinking as innovation takes over.

2. Machine Intelligence. A majority of firms either have already implemented the Internet of Things machines or are on the verge of implementing them to assist in improving productivity and implementing predictive maintenance. However, most of the companies that already have such machines don’t have the system to analyze and extract the information being captured by the system. In this particular sense, the industry is missing out on a very vital opportunity.

3. Customer Self-service Application. Most manufacturing companies are focused on the timely delivery of products and maximizing their profits and revenue. However, customer self-service has fallen by the wayside as most clients in need of information are forced to contact the manufacturer by phone. This has been frustrating for clients, especially in this digital age. Manufacturing industry customers have unique needs, requirements, and concerns. With isolated partner and end-customer portals connected to a significant source, manufacturers will be able to offer quality customer service in a timely manner.

4. System Usability. Internal system users prefer self-service platforms in the form of updated systems that offer flexibility, greater insight, and speed to allow them to perform their tasks more efficiently and effectively. However, the AS/400 systems that most manufacturing firms currently utilize can’t provide the desired user experience. There are, however, numerous available solutions that firms can acquire to resolve this problem.

5. Project Management. For manufacturers, all projects are about cost, time, and quality. Those that fail to meet deadlines are always at greater risk of losing millions of dollars in potential profit and revenue. Such rigidity and tight control mean that companies have less ability to make adjustments as new data emerges or requirements change. This can be challenging and frustrating for a team that anticipates producing quality products. Deadlines always handcuff them.

6. Trade War Effects. Small profits are a significant concern for all manufacturers. This can be made worse with continued trade wars that generally affect all industry sectors. Manufacturing is not an exception since finished products and raw materials are sourced and sold across the globe. To ease the impact of trade wars that are always heating up, the industry is considering strategic changes for 2021, mainly in the supply chain.

7. Need for Supply Chain Visibility. To meet the soaring client demand for more transparency, manufacturers must ensure visibility on a real-time basis throughout the entire supply chain. They must be aware of every detail, including when products delay reaching the market. Being updated on such situations will give them an upper hand to adjust or to rectify the problem.

The above challenges will be widespread within the industry in 2021, and manufacturers can’t ignore them if they wish to continue enjoying the industry’s resurgence.

Congested Ports and Supply Chain Woes Hit U.S. Factories and Stores: The cold snap that gripped the U.S. in February not only caused chaos in Texas and the southwest, it also triggered a shortage in plastics that has disrupted a supply chain already under strain from a lack of microchips and growing congestion at ports due to the pandemic. As a result, factories have had to shut their doors and consumers are feeling the crunch. At Toyota, a petrochemicals shortage affected production at plants in Kentucky, West Virginia, and Mexico. Consumers are also being affected. Nike sales of shoes and sportswear are being affected by congestion at ports around the country. The problems in the plastics sector are the latest glitch in the supply chain.

In mid-February, freezing temperatures paralyzed Texas and Louisiana, home to many of the factories that transform oil into polyethylene, which is used to make plastic bags, shampoo bottles and toothpaste tubes, polypropylene, used for the hard plastic of car dashboards or refrigerators, and PVC, which is used to make pipes and window frames. While they are used to weathering hurricanes, these plants rarely experience low temperatures. At the height of the cold snap, more than 70% of ethylene production capacity and at least 62% of polypropylene production were down. With the freeze, the plastics supply shortages are likely to result in a supply-constrained market for at least a few weeks and possibly into late spring.

The ports in this country are facing a period of frenzied activity. “We are in the seventh month of an unparalleled import surge, driven by unprecedented demands by American consumers,” said Gene Seroka, executive director of the Port of Los Angeles. While the lockdowns were occurring, people were ordering goods in large quantities. These disruptions are being closely watched by the Federal Reserve, whose chairman stressed that the gradual reopening of the economy could push up prices, particularly if supply belt bottlenecks limit how quickly production can respond in the near term. That could push price hikes, delivery delays and logistical difficulties, said Gregory Daco of Oxford Economics. But, he added, “they do not represent a significant brake on economic activity, especially in this period of strong growth.”

GM Cuts Production in North America Due to Global Chip Shortage: On March 24. General Motors extended production cuts in North America due to a worldwide semiconductor chip shortage that has impacted the auto sector. The U.S. automaker said its Wentzville, Missouri, assembly plant would be idled during the weeks beginning March 29 and April 5. It will also extend down time at its plant in Lansing, Michigan, which has been idled since March 15, by two weeks. The action was factored into GM’s prior forecast that it could shave up to $2 billion off this year’s profit. GM did not disclose how much volume would be lost by the move, but said it intended to make up as much lost production as possible later in the year.

The chip shortage came as North American auto plants were shut for two months during the COVID-19 pandemic last year and chip orders were canceled, and as demand surged from the consumer electronics industry as people worked from home and played video games. That’s now left carmakers competing for chips. Semiconductors are used extensively in cars, including to monitor engine performance, manage steering or automatic windows, and in sensors used in parking and entertainment systems. Vehicles affected by the GM production cuts include the mid-sized pickup trucks, the Chevrolet Colorado and GMC Canyon in Missouri, and the Cadillac CT4 and CT5 and Chevy Camaro cars in Michigan. Meanwhile, GM said its San Luis Potosi, Mexico, assembly plant, idled since February 8, will resume production with two shifts beginning the week of April 5.

Last week, GM said it was building certain 2021 light-duty full-size pickups without a fuel management module, hurting their fuel economy performance by one mile per gallon. Worsening the shortage is a recent fire at a Renesas Electronics chip plant in Japan, the impact of which is currently being assessed by GM.

Metal Manufacturers Group Urges President to Rescind Tariffs: The Coalition of American Metal Manufacturers and Users (CAMMU) recently sent a letter to President Biden requesting the immediate termination of the Section 232 tariffs on steel and aluminum imports enacted under the Trump administration. According to CAMMU, these steel and aluminum tariffs have damaged U.S. consuming industries that employ more than 6.8 million workers, compared to 140,000 in the U.S. steel industry. The tariffs, imposed almost three years ago, also contribute to current steel supply shortages and high prices at a time when U.S. manufacturers face significant challenges due to the COVID-19 pandemic.

In its letter, CAMMU urged the President to consider how, “the Trump steel tariffs have hurt small, family-owned manufacturers” while also, “fracturing relations with overseas trading partners.” The letter also emphasized that the tariffs interfere with U.S. manufacturers’ ability to compete globally. CAMMU, which represents more than 30,000 U.S. manufacturers and more than one million U.S. workers, noted the damage the Section 232 tariffs have caused to the U.S. manufacturing sector regardless of where the company’s source their steel and aluminum.

“President Trump’s steel tariffs simply allowed domestic producers to raise prices on their products by effectively placing an added tax on competing imports. As a result, even manufacturers who only buy steel from domestic producers are unable to obtain the steel they need because of the domestic industry’s capacity, or cannot purchase steel at a competitive price, placing them at a growing disadvantage with overseas competitors who pay lower global market prices for these materials.” “By jeopardizing the ability of businesses to access the steel and aluminum they need, the Trump tariffs have made it more difficult for American manufacturers to compete with finished products imported from overseas.” The letter concludes, “It’s time for the U.S. to leave counterproductive trade policies in the past. We ask that you move at once to terminate the Section 232 steel and aluminum tariffs and focus instead on re-engaging with our trading partners on a coordinated response to address the root cause of global oversupply in steel and aluminum: excess capacity in China.”

Opportunities & Challenges Faced by Women in Manufacturing: Women are more likely to quit jobs in manufacturing than in other industries, reflecting a history of sexual harassment, unequal pay and denied opportunities. According to a new study by the American Association of University Women (AAUW), they are also more likely than men to leave manufacturing jobs. The findings provide insight into the challenges faced by women in male-dominated industries, and suggest that manufacturers can help themselves and build a more competitive workforce by addressing these longstanding issues. “Not only will women and their families gain from having access to these well-paying jobs, but the industry will benefit richly from the skills, talents and diversity that more women can bring,” said Kim Churches, AAUW’s chief executive officer. “Our findings are a call to action for employers to increase the presence and power of women in the manufacturing world.” Since the 1970s, blue-collar women have been hard hit by a retrenchment in factory jobs, and those with less education have suffered the most. The AAUW findings were based on a survey of 214 women who work in manufacturing, along with an analysis of employment and wage trends over the past two decades.

U.S. manufacturing lost 4.4 million jobs between 2000 and 2020, mostly in the earlier years. However, women, who hold about one in three manufacturing jobs, have been hit harder than men, losing 31% of their jobs during that period, compared with 23% for men. Manufacturing tends to offer above-average pay and benefits, making these losses especially painful. Women’s share of manufacturing jobs has remained stagnant, even as the sector started to come back before the pandemic. This is unfortunate, not only for women but for manufacturing employers who have difficulty finding the skilled workers they need to stay competitive. In the AAUW survey, blue-collar women cited several reasons they find it difficult to thrive in the male-dominated sector. These included workplace cultures that too often tolerate sexual harassment; gender-based gaps in pay and opportunities to advance; and lack of support when they must juggle work and family responsibilities. Women of color said they often felt isolated due to both race and gender.

To address these serious obstacles AAUW recommends that manufacturers:
1. Take firm steps to prohibit sexual harassment.
2. Ensure equality in pay and promotions.
3. Improve family-friendly policies.
4. Support training and re-skilling.

The AAUW advances gender equity for women and girls through research, education, and advocacy. The nonpartisan, nonprofit organization has more than 170,000 members and supporters across the U.S., as well as 1,000 local branches and more than 800 college and university members.

Manufacturing Industry Outlook

Based on its latest forecast, the Institute for Supply Management (ISM) believes that Manufacturing will expand in 2021 as the sector continues to recover from the COVID-19 pandemic. “I think we’re back to a growth cycle,” said Timothy R. Fiore, chair of the group’s Manufacturing Business Survey Committee. “Business needs clarity, it needs certainty.” The forecast, which was conducted in December after the U.S. presidential election, is based on a survey of purchasing and supply executives in 18 industries. ISM forecast that manufacturing revenue will rise 6.9% in 2021, compared with a 1.3% last year. The institute said 15 of 18 industries expect revenue to increase. Those sectors include transportation equipment, non-metallic mineral products, machinery, primary metals, and fabricated metal products. Respondents also reported that they were operating at 85.7% of capacity at the end of 2020. That is up from 75.9% in May when manufacturing had been hammered by COVID-19. Factories in various industries closed plants starting in March 2020 to slow the spread of the virus. Those plants later reopened with new safety procedures. The survey also forecast that capital expenditures in manufacturing will rise 2.4% in 2021, compared with a 2.4% decline last year. In addition, respondents expect that employment levels will increase by 2.5%, from 2020 levels.

The strength of industrial machinery sales in the secondary market varies by sector as evidenced by the results of recent auctions that have taken place. Specific observations are as follows:

• Sales of machine tools, as well as metalworking and fabricating equipment are doing exceptionally well. The pricing has been very strong for high-capacity machines up to ten years old, and reasonably good for those in the ten-to-fifteen-year age bracket. In addition, the number of monitored auctions for these machines is way up from those that took place at this time in both 2020 and 2019.

• There haven’t been a significant number of plastics equipment auctions recently, but prices have been holding steady for later-model and high-capacity machines.

• Sales of equipment in the textiles, woodworking, and printing sectors have been limited, as has been the case for the past five plus years. However, the current market for high volume printing presses should become more apparent after the auction sales of three major U.S. newspaper operations take place in April.