As the year comes to a close, SPM is looking back at the state of manufacturing in 2019 and looking ahead at the trends that will shape our future in 2020. Here is what we’re paying attention to.
Manufacturing in 2019
- Overall, executive confidence in the future dropped in 2019 compared to 2018. However, a recent study of Minnesota manufacturing companies found that financial confidence remained at record high levels in that state, with 93% of respondents confident in the future of their company. We have observed similar attitudes throughout the midwest in 2019.
- There has been and continues to be a shortage of qualified workers. Attracting and retaining qualified workers is one of the biggest challenges to company growth. In order to get in front of potential employees, manufacturers are working to counter the stereotypes of factory work as dirty and unskilled and thus increase the pool of potential employees. In tandem with the labor shortage, the cost of benefits and wages rose, making it more expensive to hire interested, qualified employees.
- The existence of tariffs impacted operations. The uncertainty of tariffs makes long-term planning difficult. As manufacturers weighed their options in 2019, they “shifted both sourcing and production to different geographies, seeking tariff-friendly combinations.” For example, U.S. imports from China are down 13% while imports from Vietnam were up 37%.
- Manufacturers looked for ways to increase productivity through automation and process improvement. The upside of automation is better jobs. Automation is sometimes approached with suspicion, but when routine tasks are handled by software, robots, or ERP systems, the interesting work is left for humans to do. Realizing this, manufacturers have embraced automation and process improvement and have seen continuous improvement in productivity. We are expecting this trend to accelerate in 2020.
Manufacturing in 2020
- The manufacturing industry is expected to continue to grow. According to the most recent report from the Institute for Supply Management (ISM), in 2020 manufacturing revenue is expected to increase by 4.8%, capital expenditures will decrease by 2.1%, and production capacity will increase by 3.1%.
- Artificial intelligence (AI) will reshape value creation. “The advent of AI will lead to a significant reorganization of tasks in the manufacturing environment, displacing humans from repetitive and routine tasks, while creating new opportunities for them to focus on value-generating activities.” Manufacturers will be challenged to create a road map for AI adoption, develop a strategy for implementation, and find or train employees with the necessary skills to implement AI.
- Agility and speed to market will become top priorities. Opportunities will be plentiful in the coming year. Manufacturers who can respond quickly to changes in the marketplace and meet its demands will be more successful than those who can’t because they will be able to take advantage of more of these opportunities. Their success will also depend on how well they match up against their competitors in terms of cost, delivery, and reducing product development cycle times.
- Smart manufacturing will become the norm. Smart manufacturing isn’t new nor is it a new topic of speculation. But it has not been universally implemented in manufacturing before now because of the challenge of harnessing massive amounts of data. Furthermore, the Internet of Things (IoT) drives smart manufacturing and it has not yet reached its full potential. The vision for large scale improvement in manufacturing almost guarantees that smart manufacturing systems will be attainable by small to medium manufacturers in record time.
U.S. manufacturing has a bright future. At SPM, we are excited to be a part of the manufacturing renaissance of the 21st century. We’re energized by the challenges and opportunities that confront us. We’re optimistic about our future and the futures of our customers. As we look forward to 2020, we say bring it. We’re ready.