This document focuses on a number of topics that relate to or affect the machine tool/manufacturing industry as a whole, including the 2018 increase in manufacturing jobs, the benefits of data collection, signs of strain emerging in the automotive industry, and the recent performance and outlook for manufacturing orders. It also includes a brief commentary on the outlook for the manufacturing industry.
Manufacturing Industry Posts Largest Annual Increase in Jobs in 20 Years: During 2018, the manufacturing industry added 284,000 jobs, capping the industry’s best year since 1997, and up from the 207,000 jobs added in 2017. Manufacturing growth, which is one of President Trump’s priorities, was up significantly in December with 32,000 jobs added within the industry. According to a recent release by the Labor Department, most of the December increase occurred in the blue-collar durable goods sector, reflecting growth in fabricated metals, and computer and electronic products. Durable goods consist of items with a life expectancy of three or more years, such as automobiles, furniture and machinery. The growth in manufacturing contributed to the 312,000 jobs added by the U.S. economy as a whole, far exceeding the December growth estimated by economists. The job growth that occurred in 2018 was also accompanied by a 3.2% rise in wages, marking the largest annual jump since 2008.
“Manufacturers are bringing people back into the workforce, and we need this trend to continue,” said Dr. Chad Moutray, chief economist at the National Association of Manufacturers. “Our industry currently faces a workforce crisis with more than half a million open jobs today, and 2.4 million jobs expected to go unfilled over the next decade. Closing the skills gap continues to be the top challenge facing manufacturers in the U.S. and is absolutely essential to ensuring that the sector continues to grow.”
How Manufacturing Companies Can Benefit from Data Collection: Manufacturing companies are realizing the importance of data collection and analytics to remaining competitive in the industry. Improving business processes, finding operational efficiencies, and transforming business models all rely on data collection. As a result, manufacturing companies are increasing their investments in this area and shifting their focus to solution providers that offer local solutions to enterprise-level problems. There are several areas in which the benefits are most transparent.
Over the years, manufacturing companies have reduced costs by implementing lean and Six Sigma programs. Those programs, have enabled manufacturers to improve on yield and quality, while reducing variability and waste in production processes. However, despite lean programs, some industries, including the mining, chemical, and pharmaceutical industries, still experience significant variability. Because of the number of processes involved in production and their complexity, diagnosing and correcting process flaws requires a more granular approach. An ideal approach involves the use advanced analytics, the application of mathematical and statistical tools to business data in order to assess and improve practices. Managers in the manufacturing industry can use advanced analytics to assess historical process data and identify relationships and patterns among discrete inputs and processes. This data can then be used to optimize the factors that have been shown to significantly impact yield. A manufacturing company can use real-time, shop floor data as well as sophisticated statistical assessments. Manufacturers can take what were once isolated data sets, aggregate the data, and then analyze it to reveal critical insights.
Offer Insight to the Manufacturing Process
Advanced analytics can help a manufacturing company identify opportunities to increase production yields. For example, one data analysis showed that a mining company’s best performance occurred on days when oxygen levels at the mine were at their peak. As a result, the mining company altered its process of leach recovery, increasing its average yield by 3.7% over a period of three months. This increase resulted in a $10 million to $20 million yearly profit with no additional capital investments.
Improved Customer Satisfaction
For a manufacturing company to meet the needs of its customers, it must first determine what its customers are looking for. The only way to do this is obtain data on customer preferences. To streamline this information collection process, manufacturing companies can use online forms and turn the collected responses into editable PDF documents, which can easily be shared with management. The information can then be analyzed to identify commonalities and differences between customers. The company may not be able to meet all requirements immediately, but they can still do their best to ensure that customers’ needs are satisfied and that they maintain brand loyalty. With more manufacturing companies competing to gain market control, acquiring market insights is critical. All manufacturers are looking to get the right product to the market at the right price and at the right time. Data collection and analysis offer insights that can significantly help management in making the right strategic decisions to achieve tangible results.
Automobile Sales Strong, but Showing Signs of Strain: In January, automakers expressed little cause for concern in the months ahead after recording another year of strong U.S. sales. However, a closer look shows signs of strain emerging on several fronts. Last year, 17.3 million new cars and light trucks were sold, representing a 0.6% increase from 2017. It was the fourth year in a row that those sales exceeded 17 million. But last year’s increase was driven by higher sales to rental, government and corporate fleets, while sales to individual consumers, considered to be a more accurate measure of demand, were flat. At the same time, the attractive loan deals that many car buyers rely on have started to disappear. For example, interest-free loans accounted for just 5.5% of all finance plans offered by dealers in December, the lowest level since 2005. In addition, 2018 sales got a one-time boost from the recent tax overhaul, which gave some consumers extra income to spend on new vehicles.
“This year is going to be tougher than last year,” said Mark Wakefield, a managing director at Alix Partners, a consulting firm, “and the next year will even tougher than 2019.” While sales of small sport utility vehicles rose strongly last year, sales of most other types of vehicles were either down or up only slightly. In addition, Tesla’s sales more than tripled in 2018, and without that increase, the industry would have reported a decline in sales. G.M., Ford and Toyota reported lower sales for a third year in a row. G.M.’s domestic market share fell to 17%, its lowest level since the company’s early stages a century ago. Beyond the domestic market, automakers face other potential challenges. The potential repercussions of an economic slowdown in China became more real in January as Apple slashed its financial forecast, citing disappointing iPhone sales there. Lower consumer spending in China could hurt G.M., Ford, Toyota and other automakers because they now depend on that country to drive global growth, and some reap considerable profits there. One thing that the economic outlook may not change is the continued American preference for larger vehicles. Slumping oil prices have offered little motivation for buyers to make fuel economy a priority. Unless supplies are constrained, an economic slowdown should keep prices low.
Manufacturing Orders Up Significantly from Prior Year; Outlook Remains Positive: Manufacturing technology orders totaled $458 million in November 2018, down 2% from October, but up 7% from November 2017. While the level of orders for the fourth quarter are running significantly higher than the fourth quarter of 2017, they are not at the furious pace set during the third-quarter. Through November 2018, the $5 billion year-to-date level is up an impressive 22% from the same period last year.
“Orders in the third quarter were amazing, and no one expected that pace to continue into the last three months of 2018,” said Association for Manufacturing Technology President Doug Woods. “The single-digit October and November year-over-year growth rates are a harbinger of what we’ll see in early 2019, but our members are confident growth will continue as the aerospace industry ramps up to reduce order backlogs; medical equipment demand grows with the graying of North America; and the auto sector drives capex investment deeper into the supply chain.”
The strength in November orders was the product of two sectors – contract machining and industrial machinery. October and November levels in the aerospace and automotive industries provided a strong base for order levels in both months but jumps in demand for manufacturing technology in the contract machining and industrial machinery industries accounted for a significant portion of the year-over-year growth in total orders. November industrial machinery orders were a third larger than October. Forging and stamping also had a good November; up 25% in November following a 75% increase from September to October.
Most of the key indicators are very strong. Consumer confidence moved upwards to 98.3 in December from 97.5 in November, and the sales indices available were stable, including light vehicle sales which posted sales at a 17.4 million units-per-year pace for November. The Institute for Supply Management’s Purchasing Managers’ Index slipped five points from November to December but is still in the expansion range for manufacturing. Several other leading indicators used to gauge the health and directions of the manufacturing technology market are unavailable due to the U.S. government shut down.
Manufacturing Industry Outlook
The growing demand for superior-quality products has propelled companies to undertake automation in manufacturing. Investment in global process automation is continuing to grow at 6% and the global machine tool market is projected to reach $120 billion by 2020. This growth is focused on areas such as technology, hardware, software, services, and the communication protocol used for automation. Irontrax has observed that industrial sectors where automation is employed on a wide scale such as automotive, aerospace & defense, electrical & electronics, medical devices, industrial machinery, and renewable energy are showing signs of strong secondary markets for used equipment.
Irontrax has also observed upward movement in the market for machinery with the latest software implementation. The machine tools industry has evolved with the development of both hardware technology & software applications, resulting in machines becoming faster, intelligent, and more versatile. Machines have now become multifunctional and are capable of performing a broad range of tasks inside a single set up.
The future will be multiple software products that can be standardized on one platform. Advanced CAM technology is being used for multi-axis, multi-spindle, and multi-turret machines. Software is increasingly being used in automation of manufacturing and engineering processes. Software applications provide an integrated view of operation through direct integration with product lifecycle management, manufacturing execution services, process planning, and enterprise resource planning systems.
Irontrax recognizes that increased productivity as a result of process automation will be a major factor going forward. Companies implementing process automation will not only enhance their profit margins, but will also see positive impact on resource regulation and loss control.