This document focuses on a number of topics that relate to or affect the machine tool/manufacturing industry as a whole, including machine tool demand, the benefits of replacing metal with plastic, ways to effectively reduce manufacturing waste, the move toward digital manufacturing, and job growth. It also includes a brief commentary on the outlook for the manufacturing industry.
Machine Tool Demand Remains Weak and Uncertain: During October, orders placed by U.S. machine shops and other manufacturers for new machine tools totaled $376.1 million, indicating flat manufacturing demand, at best, as we approach the end of 2019. In fact, the October data supplied by the Association for Manufacturing Technology (AMT) in its monthly U.S. Manufacturing Technology Orders (USMTO) report showed just a slight 2.1% increase from September in the demand for capital-equipment, but a 20.6% decrease from October 2018. Year-to-date through October, USMTO totaled $3.74 billion, representing an 18.4% decline from the same period last year. The report issued by AMT is considered to be a leading indicator of industrial manufacturing demand.
“Since March, job shops have accounted for an unusually large share of orders, reflecting the fact that large players deflected capital-spending decisions to their sub-tier supply chain,” commented AMT president Douglas K. Woods. “That trend began a reversal in October, however, as companies of all sizes placed orders.” According to AMT’s regional data summary, all October order increases were in the North Central-East and North Central-West regions, though both regions trailed activity for the first 10 months of 2018. AMT also noted robust growth in the industrial machinery manufacturing sector. Machine tool orders in the automotive sector grew by 40% in October, while demand in the aerospace-sector fell by just over 10%. “Our research and the data point to a shifting of capital-investment activity from small companies downstream to Tier 2 and 1 suppliers,” Woods continued. “Based on quotations activity, orders in November and December are likely to be from larger companies expiring their capital spending budgets rather than small manufacturers continuing to invest at their second and third quarter rates.” Mr. Woods also reaffirmed that U.S. manufacturing uncertainty is based on “trade issues dampening U.S. manufacturers’ enthusiasm for investing in new capital equipment.” However, he countered that idea with the insight that Federal Tax Reform continues to encourage manufacturers to invest in additional capacity, and that those incentives would have more positive effects in late 2020 and into 2021.
Manufacturers Reap the Benefits of Replacing Metal with Plastic: In today’s fast-paced world there is an immense pressure on manufacturers to create a better, faster, stronger, cheaper product, and only those who are willing to adapt and innovate will survive. Manufacturers who’ve been dragging their heels are now getting on-board with replacing metal parts with plastic ones. The industries most impacted by the switch include: Automotive/Transportation, Aerospace/Aviation, Military/Defense and Consumer Appliances/Goods. For many decades these industry manufacturers have relied on metal, not because it’s necessarily better, but because it’s just the way it’s always been. However, with modern advances in engineered resins and plastic molding capabilities, manufacturers are no longer constrained by the heavy, expensive and restrictive metal parts of yesterday. The forward-thinking manufacturers who have switched, or are in the process of switching, from metal parts to plastic ones are doing so for many reasons:
- Plastic weighs and costs significantly less than metal. In fact, it can be 6 times lighter than steel and half the weight of aluminum, and can cost 35% to 50% less.
- Plastic molding is less time consuming than metal fabrication because it requires fewer secondary operations.
- Plastic doesn’t corrode and thereby eliminates the cost and downtime required to repair or replace corroded metal parts.
- With plastic, complex geometries, surface texture and branding/labeling can all be directly incorporated into the part’s tooling, which means plastic parts can be produced faster and at a lessor cost.
- Plastic parts can go to market faster than metal ones because of design flexibility, reduced secondary operations required, quicker molding cycles, and faster production times.
While not all metal parts can be replaced with plastic ones, there is substantial opportunity for many manufacturers to take advantage of making the switch when and where it makes sense. This is more factual now than ever before with advances in engineered resins that make it possible for plastic to perform as well as, or better than, metal in aspects like strength-to-weight and strength-to-stiffness ratios. There is a strong future ahead for plastics and manufacturers who seize these opportunities as they become available will inevitably beat their competitors.
How to Handle Manufacturing Waste: Industrial waste is one of the most significant forms of matter dirtying our world. As such, manufacturers are in a unique position to make a real impact on the total waste produced in today’s market. Some estimates put industrial waste as high as 7.6 billion tons per year. That statistic shows that waste is of great concern when it comes to the potential adverse impact on our environment. The question is how to reduce waste using modern techniques and solutions (i.e., what can manufacturers do to limit waste production).
Ultimately, there is no way to eliminate waste production, as there is always going to be some byproduct of development and industrial processes. That’s true whether one is talking about chemicals, solid goods or another product. However, with the right protocols and techniques in place, there are a number of ways manufacturers can effectively reduce waste:
- Generate an accurate profile of waste generation across an operation by identifying areas or departments that produce the most waste, as well as the type and amount of waste being produced.
- Prioritize the cleanup process by focusing on the biggest waste producers.
- Create a committee, department or team that exclusively deals with waste reduction.
- Find an environmentally compliant disposal partner.
- Move to a closed-loop manufacturing process. Closed-loop systems, which automatically regulate a process variable to a desired state or set point without human interaction, help reduce costs, improve the quality of products and goods, and allow for the internal use of recycled materials.
- Learn to recycle, or recover and reuse. In many cases, waste produced may serve another purpose.
- Either curtail or tighten-up the use of hazardous materials.
In today’s market, waste reduction is imperative. While the concept of waste reduction can seem overwhelming, there are many benefits that can be realized from its implementation. For starters, less waste means a minimal impact on the environment and surrounding communities. It can also mean higher profits, better quality goods and services, and a more positive reputation for the organization. Waste reduction is, and will continue to be, imperative to adequately sustain operations.
Manufacturing Industry Gets Ready for Digital Manufacturing: Manufacturing organizations are continuously looking for ways to increase productivity and operational efficiency. As such, Artificial Intelligence (AI), Industrial Internet of Things (IIOT) and Automation are changing the face of manufacturing as we know it, placing digitization at the top of every priority list. AI provides factories with the ability to automate tedious mechanical tasks, as well as the means to enable machines to “learn” and autonomously alert, improve, advise, and sometimes make decisions regarding their own operation. To appreciate the maximum benefits of AI and IIOT, organizations need to understand the major benefits and effects that AI can bring to an organization’s IIOT deployment strategy. In the current economic climate, adopting new radical approaches to digital transformation in manufacturing is critical in order to stay competitive. Studies show that the adoption of new technologies such as AI, IIOT, automation, analytics and cloud has been slow in the manufacturing industry, where a mindset shift needs to happen in order to boost efficiency and product quality and reduce operational costs. This needs to be a coordinated, strategic effort to increase revenue and hold off the competition.
On November 27, IT News Africa hosted the Digital Manufacturing Africa summit at the Altron Conference Centre in Midrand. This event stressed the importance and benefits of implementing new technologies and methodologies in manufacturing. It examined how manufacturers can migrate from complex legacy systems and digitally transform their operations in order to improve efficiency and maximize profits. It also discussed how companies can help their employees and stakeholders embrace digitization in order to enhance productivity both on the factory floor and in the back office. Discussions looked into how automation if implemented intelligently can increase accuracy, product quality and reduce costs. The overreaching message was that organizations that want to remain competitive need to move rapidly to identify, consider, and evaluate AI and IIOT initiatives that can drive real value.
Manufacturing Job Growth Remains Stressed Despite Positions Added in November: According to a recent government jobs report, the U.S. unemployment rate dropped to 3.5% in November as employers generated 266,000 new positions, bringing the unemployment rate to a 50-year low. At the same time, wage growth accelerated slightly to 3.1%, and the number of unemployed Americans fell by 44,000. Health care and social assistance professions led all major industries in job creation, accounting for more than 60,000 new jobs. Manufacturing also had a solid month, though the government jobs report attributes much of the sector’s 54,000 new positions to a correction from a General Motors strike in October. Striking workers were left out of the October jobs report, and analysts expected that returning workers would add between 45,000 and 50,000 positions to the November numbers.
In a recent research report, Mark Hamrick, Washington bureau chief and senior economic analyst at Bankrate.com, stated, “Other data indicates that manufacturing remains stressed because of trade tensions and tariffs, as well as the struggling global economy. Even with the positive November jobs report, it remains the case that hiring so far in 2019 is running 19% below the pace this same time last year.”
Manufacturing Industry Outlook
According to its semi-annual December forecast, the Institute for Supply Management (ISM) believes that manufacturing will expand in the first half of 2020, including increased revenue for companies. “We think 2020 half one going into half two will be a better economic situation” than the second half of 2019, Timothy R. Fiore, chair of ISM’s Manufacturing Business Survey Committee, said on a December 9 conference call. The forecast is based on a survey of purchasing and supply executives across 18 manufacturing industries. It’s the same group that ISM surveys when compiling its monthly manufacturing index. Based on that index, the manufacturing economy contracted for four straight months through November. However, the forecast for 2020 is more upbeat. The executives surveyed expect 2020 revenues to rise an average of 4.8%, with increases spread across all 18 industries. Respondents also expect that growth will continue in the second half of 2020. “We think we’re going to have a fairly stable year at fairly moderate growth compared to the last three years,” Fiore said.
However, part of the forecast reflected some softening in the manufacturing economy. Those surveyed said their companies are operating at 83.7% of normal capacity. That’s down from 84.2% in May and 85.2% in December 2018. The purchasing and supply managers also expect capital expenditures to fall by 2.1% in 2020, following a 6.4% increase for 2019. The forecast indicates that employment will rise slightly, increasing 0.1% on average for 2020 compared with 2019. The surveyed executives also expressed concern about ongoing trade tensions, which include an unresolved trade war between the U.S. and China.
Consistent with the above forecast, Irontrax believes that manufacturers remain cautiously optimistic that the economy will continue to be stable. Appraisals conducted over the past six months have been primarily to support or establish financial positions that allow for the expansion of current operations. Manufacturers are adding equipment to increase capacity and to take advantage of newer technology. Some manufacturers are also pursuing additional space.