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U.S. Manufacturing Outlook Update

November 17, 2016

The long term outlook for U.S. manufacturing looks positive, but the skilled labor shortage is a lingering issue—how are manufacturers coping?

U.S. manufacturing is in a bit of a slump as of late, but luckily that is expected to change relatively soon. With the prevalence of reshoring and the resurgence of American-Made products, it seems that the long term outlook for U.S. manufacturing is more positive than industry professionals might have thought before.

Fast Facts

Here’s an update on the industry:

  1. There is a growing demand for ‘Made in America’ products and reshoring- This has been a growing trend for some time now, but it seems that the “Made-In-The-U.S.A.” tags on products are driving sales more than other factors. Branching off this Made in America trend, the resurgence of U.S. production from China (reshoring) is a huge trend as well, as China and other countries overseas no longer offer the lower labor costs and taxes they once did.
  2. There is a steady growth in U.S. production capacity- Production capacity in America is expected to grow over the next five years more than other nations. A recovery in the U.S. has added 800,000 manufacturing jobs and a 62% jump in foreign direct investment.
  3. There are, at this time, 12.3 million manufacturing workers in the U.S.—making up roughly 9% of the workforce.
  4. It looks like higher costs in China and other countries are making the U.S. more attractive. - According to recent research, wages, power rates and political uncertainty have gone up in China. Credited to the recent boom in natural gas production, electricity prices in the U.S. are a little more than 30% lower than in China, and about 50% lower than in Europe.
  5. From the outside looking in, the U.S. political climate is more stable than others. Despite the perception that the 2016 presidential candidates offer more controversy than stability, the global view is that America’s political system is more dependable than some other countries’ systems, which is, without a doubt, a benefit for U.S. manufacturing.
  6. For now, it appears that Intellectual Property protections are greater in the U.S.

What are remaining difficulties?

Skilled labor shortage- In recent decades, technology, globalization and recession erased some lower level positions, meaning those in the manufacturing industry do not have the skills for today’s jobs (which require knowledge on operating sophisticated machinery).

Aging workforce- Branching off the skilled labor shortage, an aging workforce has made the manufacturing industry struggle as well. Experts say it takes months or even years to train a machinist or other skilled laborer, but DECADES to train a new CEO.

Improving Operations

Manufacturers are attempting to curb difficulties by:

  • Applying new technologies- Many manufacturers have been exploring the benefits of the Internet of Things (IoT). In the manufacturing industry, the IoT will allow workers to link machines, computers, sensors etc. for improved information monitoring, collection and processing (Check out our blog on the topic). As technology expands and improves, so too does the industry, especially in the midst of the skilled labor shortage.
  • Embracing “lean” operations- The idea of lean manufacturing has been around for a few years, but it seems that lately more companies are exploring the benefits of this initiative. Reducing wasteful inventory allows companies to free up space and manpower. In turn, companies can achieve better flexibility and efficiency in their operations.

Questions? Our team can help. Also, don’t forget to check out KLR’s 2017 Manufacturing Industry Survey for valuable insight into the strengths and pain points of the industry.

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