What is in this article?:
- Six Key Predictions for Manufacturing in 2015
- 4. Increased investments in predictive maintenance technologies
The lower costs associated with reshoring are driving more local manufacturing activity; technological developments are drastically changing the way plants operate; and capital investments are on the rise. The result will be a landmark year in 2015 for U.S. manufacturing.
The landscape of manufacturing in America has undergone more significant changes than many of us in the industry care to remember. The recent past has been particularly painful, with economic downturns driving manufacturing overseas to take advantage of lower labor costs, and a generally depressed level of manufacturing activity becoming the norm.
However, there’s good news to share. The lower costs associated with reshoring are driving more local manufacturing activity; technological developments are drastically changing the way plants operate; and capital investments are on the rise.
As the director of the Georgia Center of Innovation for Manufacturing, I consult with manufacturing companies of all shapes and sizes on a wide range of projects. Over the past year, I’ve been privy to a convergence of activities that suggest to me that 2015 will be a landmark year for American manufacturing. Among my predictions:
1. Reshoring will continue, but at a slower pace
Manufacturers typically evaluate seven critical areas when it comes to operational decision making: transportation and energy costs; market demand for their products; rising labor costs in China and other developing nations; access to talent, tax, and regulatory policies; availability of capital; and currency trends.
In 2015 we will see jobs continuing to come back to America as trends around these divergent areas continue to work favorably for bottom lines. But this reshoring will happen in a more targeted way, with natural gas use serving as a driving factor in some cases.
The growing abundance of natural gas in the U.S. provides more affordable energy for factories, as well as new opportunities for products and services. PricewaterhouseCoopers estimates that high shale gas recovery and low prices could add 1 million U.S. manufacturing jobs and reduce natural gas costs by up to $11.6 billion annually through 2025. In fact, one particular U.S. steel manufacturer has already invested more than $100 million in a Midwest plant to help meet demand for tubes and pipes used in shale gas extraction activities.
The U.S. shale gas boom has prompted some chemical producers – such as Dow Chemical (IW 500/21), which began construction on a Freeport, Texas plant in 2014 – to construct ethylene production plants in the southeast to take advantage of more affordable feedstock.
Then there are the manufactured goods themselves. Heavier goods equal higher shipping costs, a value-to-weight ratio that expands in concert with the distance between where they’re made and their market destinations. Higher transportation costs, combined with increasingly expensive labor rates in distant regions such as China, are leading manufacturers of heavy equipment and steel products to move production from overseas back to the U.S., where these products are also sold. Shortening the supply chain has become a significant value proposition.
2. A manufacturing boom will hit the United States
Manufacturing growth over the past several years has been minimal. 2015 will launch a new wave of domestic manufacturing, as the industry sees broader growth. One reliably strong trend has been the national Purchasing Managers Index, which stood at 58.7 in November 2014. Rooted in a solid expansion of manufacturing activity, this index allows us to look forward and reasonably expect between 4% and 5% growth in domestic manufacturing.
However, manufacturing employment won’t grow at that same rate because facilities and operations have become far more productive and efficient.
3. Big data will drive big efficiency
According to the CSC Global CIO Survey: 2014-2015, 81% of manufacturers feel big data has a positive effect on production and efficiency, and 65% believe big data will be a strategic business driver moving forward.
That trend will continue, but the lynchpin in 2015 will be the widespread introduction of the Internet of Things (IoT). The Advanced Technology Development Center at Georgia Tech, one of the world’s top technology incubators, hosts a wide range of IoT companies, and a recent Verizon Enterprise Solutions report stated, “The IoT market reared its head last year, and we have seen an increase in interest from companies worldwide over 2014.” In addition, a November 2014 Forbes.com article entitled "Two High-Tech Stories To Watch In 2015: Digital and Industrial Internet of Things," stated that, “IIoT will no longer be an intriguing, over-the-horizon concept.”
Sensor technologies will drive the concept of connected factories, and will fuel the introduction of mobility-based manufacturing. Web browsers will be used as dashboards to control equipment, identify snags, and make quick decisions that would have previously taken entire teams of people to handle.
As connected factories go online, myriad amounts of data will be collected. But 2015 will see that data put to use in a smarter way that makes things operate more efficiently.