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Industryweek 35789 Chaos

Strategy? What Strategy!?

Aug. 23, 2019
Tariff and trade uncertainties are transforming manufacturers into full-time chaos-fighting enterprises. This was enough to win 2018, but future outcomes remain far from clear.

Throughout my career in this industry, I have held firm to one core belief: chaos is the enemy.

As I see it, nearly every problem, every error, every defect or flaw can be traced back to something or someone going out of process.

Even the "disruptive" in disruptive technology is really more of a marketing label than anything else. As our recent technology survey reveals, even the tech that could most radically reshape the whole world—looking at you here, AI—is adopted slowly, carefully and according to a strategy that eliminates every foreseeable disruption it promises.

And why do we do it like that? Because chaos is the enemy.

It's from this perspective that I have watched our trade war and tariff schemes develop over the past 18 months. At its heart, this all seems like a process specifically designed to disrupt processes—an ever-shifting, nothing-certain chaos that runs absolutely counter to the slow and careful strategies that are so vital to the manufacturing industry.

In my interview with him for the 2019 IndustryWeek U.S. 500 write-up, Chris Kuehl—economic analyst for the Fabricators & Manufacturers Association (FMA)—put it perfectly: "When you're trying to work out a business strategy according to the latest tweet, it becomes pretty challenging."

It is precisely this kind of challenge that led me—and a large population of far more legitimate trade experts—to predict that this whole thing would end in catastrophe. Raw material prices would skyrocket, consumer prices would skyrocket, demand would crash, production would be delayed, quality would suffer and so on. All the natural consequences of out-of-process volatility.


When we look at the actual results reflected in this year's U.S. 500 list, we don't see that at all. We see, in fact, exactly the opposite. Metals are up, fabricators are up, auto is up, machine makers are up. Everywhere: up, up, up.

How do we explain this?

Well, the short answer might be that the tariff strategy actually worked.

The longer answer, though, goes back into the process point.

What these last 18 months have taught us is that the international market and its supply chain dynamics can change on a dime (or in a tweet). They are being constantly disrupted by new conversations that could potentially radically reshape the whole world. Which should sound familiar.

It's essentially the same chaotic changes offered by every new piece of disruptive technology hitting the industrial market. So, in that context, instead of crying chaos and giving up, manufacturers began making processes.

Over the last year, we can see evidence of supply chains being remapped out of China to the U.S. or Vietnam or other less problematic sources. Capacity utilization of domestic mills were increased (without investing much on new lines). Price spikes were absorbed until they rationalized. Everything was held together until it made sense again.

In some respects, it can be argued that this has left us with a far more nimble and agile global supply chain that has been rebuilt to do one thing: absorb chaos (which is still the enemy). If the results through 2018 are any indication, this seems like a very good move, and one that could pay off big for the industry in the end.

It will require turning this newfound flexibility into a long-term strategy, though. And that might be the next big disruptive curveball in this process, as we have seen over the last few weeks of tariff chaos.

As Kuehl told me, "mostly what I get from people when I ask about their strategy is this perplexed look and a shrug of the shoulders. Like, 'strategy? What strategy!?'"

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