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Manufacturing Trends to Watch in 2014

Posted By Jeff Moad, December 31, 2013 at 1:44 PM, in Category: Transformative Technologies

As 2013 transitions into 2014, the Manufacturing Leadership Community’s editorial department offers 10 issues that should be top of mind for manufacturers in the new year.

1.     Manufacturing Growth Will Continue in U.S., Globally

Since 2010, U.S. manufacturers have added 665,000 jobs. That’s still far short of replacing the nearly 7 million manufacturing jobs lost over the past 30 years. But all indications are that the positive trend will continue, at least into 2015.

In November, for example, the Institute for Supply Management index rose to the highest level since April of 2011 as U.S. Manufacturers benefited from rising exports, a recovering housing market, and increased consumer spending on things such as cars and trucks. In November, in fact, U.S. car and light truck sales surged by 9%, reaching an annualized level not seen since February of 2007.

Manufacturing markets in the UK, other parts of Europe, and developing countries such as Mexico, are also on the upswing.

Although experts expect continued downward pressure on manufacturing employment, 2014 looks like a year of continuing expansion.

2.     Reshoring Will Gain Some Momentum, But the Global Production Trend Will Continue

Contributing to the modest increase in manufacturing jobs has been a reshoring trend that is expected to slowly build in the coming year. Driven by the desire to produce closer to where they innovate and sell, rising wage costs in China, rising transportation costs, and increasing concerns with quality and intellectual property protection, high-profile manufacturers such as GE, Whirlpool, Caterpillar, and Ford have reshored some production.

And, based on conversations among members of the Manufacturing Leadership Council, it appears that manufacturers are continuing to rethink offshoring decisions made over the past few years in the pursuit of low-cost labor.

Of course, reshoring/offshoring is a two-way street. Even as they consider reshoring some products, manufacturers such as Ford are making large investments to enable production in what they see as growing consumer markets in places such as China. This, too, will continue in 2014.

3.     The Skills Gap Challenge Will Grow

As the manufacturing economy grows, so do concerns about the availability of enough people with the skill sets needed to support that growth. In particular, manufacturing executives in 2014 will be increasingly challenged to attract talented young people to launch careers in manufacturing.

A recent Manufacturing Leadership Council survey, “The Manufacturing Workforce: A Deepening Crisis,” found that 27% of manufacturers already are experiencing a high degree of difficulty finding the production and operations workers they need in North America. Moreover, almost 36% said they expect to run into a high degree of difficulty finding such workers in North America over the next 5-10 years. Manufacturers in North America had the gravest concerns about workforce availability compared to counterparts in other parts of the world.

In 2014, a high-powered task force backed by major manufacturers such as Caterpillar and General Electric is due to issue a report on how government and industry should work together to narrow the skills gap.  In the meantime, however, manufacturers will need to work with local schools to improve curricula and generate interest in manufacturing careers.

4.     Manufacturing Advocacy Will Accelerate as Elections Near

In his 2013 State of the Union Address, President Obama raised support for manufacturing to a high-profile priority, promising a $1 billion investment in a series of manufacturing innovation institutes as well as business tax code reforms and stepped up enforcement of fair trade laws, all aimed at enabling the creation of more manufacturing jobs.

The elevation of manufacturing as a public policy issue will only intensify in 2014 in the U.S. and other parts of the world. In the U.S., with the arrival of the mid-term election season, politicians of all persuasions will strive to be perceived as enhancing job growth by supporting manufacturing. The challenge for manufacturers will be to see that promises translate into action.

5.     Additive Manufacturing Will Gain in Production.

Many mainstream manufacturers have been decidedly more ambivalent about the revolutionary potential 3D printing than advocates of the so-called maker movement. While the makers see 3D as a tool for transforming the production of physical goods in much the same way that the Internet transformed music, media, and other content-based businesses, many manufacturers have struggled to see 3D printing as anything other than a promising prototyping tool.

That will begin to change in 2014 as large manufacturers invest in and find new ways to apply the technology to their advantage. General Electric, for one, is making major investments to drive the evolution of 3D printing. And, recently, industrial giant and competitor Siemens said it is going likewise, with a goal of using 3D printers to produce spare parts for gas turbine engines.

The result of those investments will be a new generation of 3D printers capable of working with a wider range of materials and introducing a new model of distributed manufacturing.

6.     Drones and Smarter Robots Will Emerge

2013 was the year that Apple and Internet giants Google and Amazon got really interested in robots and even commercial drones. As a result, 2014 will be the year that manufacturers started thinking about such devices. The expectation is that investments by these behemoths could lead to a new generation of smart, learning-capable, location-aware machines capable of transforming distribution and plants.

Google is said to have acquired no fewer than eight robotics companies, and recently formed a robotics business unit. Amazon, meanwhile, has announced Amazon Prime a premium delivery service which, the company says, will be powered by drone technology. And Apple has acquired interests in a variety of robot makers, all with the expected intention of creating a new generation of robots with which it will build the next generation of iPhones, iPads, and iPods.

Apple, Google, and Amazon, of course, are being super secretive about the specific technologies they are developing and their potential. But, needless to say, this bears watching by the manufacturing world.

7.     The ‘Industrial Internet’ Will Flourish

If you think the data generated by today’s back office, MES, control, supply chain, and warehouse management systems is overwhelming, just wait. Increasingly, manufactured products from cars to airplane engines to medical devices are being outfitted with sensors and Internet connectivity that allow them to broadcast back to manufacturers information on things like how they’re being used and why they broke, and when they need to be serviced. In fact, it’s estimated that, by 2020, 40% of all data generated will come from such sensors. GE calls this trend the Industrial Internet and estimates that it will add between $10 trillion and $15 trillion to global GDP in coming years.

It will also introduce a need for manufacturers to manage and analyze more data faster than ever before contemplated. As a result, manufacturers may value data scientists as much as they do top notch engineers and supply chain executives today.

8.     Workplace Safety Will Become More of a Public Issue

On April 24 of this year, an eight-story plant in Savar, Bangladesh, that was known to be unstable, collapsed, killing 1,129. The collapse of the of the Rana Plaza building was one of a series of such disasters striking low-cost contract manufacturing plants in places such as Bangladesh and Pakistan. But, considered to be the largest garment manufacturing disaster in history, it attracted attention in publications and on social networks around the world.

Suddenly, manufacturers that contracted with the Rana Plaza plant and retailers that sold garments made there were under the kind of intense scrutiny that can bring permanent damage to brands. Some, such as PVH, responded after the fact by offering to pay for fire safety and structural improvements. Recently 4 others agreed to create a $40 million compensation fund for the victims.

As a result of the Rana Plaza disaster, manufacturers in 2014 and beyond have been put on notice that responsibility for insuring the safety of the workers who make its products cannot be outsourced. 

9. Cyber Vulnerability Will Increase

The current surge in connectivity in manufacturing - between people, machines, processes and global partners – is increasing every manufacturer’s vulnerability to cyber attack. The dangers of operational disruption, competitive espionage, or the theft of intellectual assets are rising daily. But while the latest connectivity technologies may be more security aware, legacy manufacturing control systems, such as SCADA or ICS, remain a potential Achilles heel for many companies.

As a recent blog on Security in Manufacturing by MIT’s Geospatial Data Center warned: “There are millions of legacy control systems open to attack from even the slightly experienced hacker.”

Continued examples of cyber security breaches will no doubt help to raise awareness among many manufacturing sectors in 2014. And no matter how many game-changing, advanced new technologies a company deploys in 2014, manufacturing leaders and their top IT executives will also need to focus significant effort on securing their existing legacy systems to ensure they are properly protected from rising cyber threats.

10. New Organizational Forms Will Be Tested

As mobile and social technologies continue to transform how manufacturers work and interact with employees, customers, and partners, manufacturing companies will continue to experiment with more collaborative organizational structures, seeking to strike what has already proven to be a difficult balance between efficient decision-making and inclusiveness. The Manufacturing Leadership Council’s September 2013 survey on Next-Generation Leadership showed, for example, that 56% of manufacturers said they expect to employ a collaborative organizational model in their companies within the next five years, but the finding was considerably below the prior year’s finding of 72% indicating the collaborative approach. The new year will test whether the collaborative movement has solid legs, whether manufacturers will revert to command-and-control structures as frustration with early experiences with collaboration continues, or whether they will attempt to devise some sort of organizational compromise to reap the benefits of both collaboration and fast but efficient decision-making.

Written by Jeff Moad

Jeff Moad is Research Director and Executive Editor with the Manufacturing Leadership Community. He also directs the Manufacturing Leadership Awards Program. Follow our LinkedIn Groups: Manufacturing Leadership Council and Manufacturing Leadership Summit

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Yes Jeff I agree that Reshoring will continue to gain momentum in 2014. The Reshoring Initiative (www.reshorenow.org) tracks all reported and some private cases of reshoring and concludes that about 80,000 manufacturing jobs have been reshored since Jan. 1, 2010. According to the Harry Moser, founder/president of the Reshoring Initiative, new offshoring is down by 70% to 80% and new reshoring is up by 1,500%. Reshoring has grown rapidly since 2010 and offshoring is slowing to the extent that the two processes are about in balance for the first time in decades! Repeated surveys by Boston Consulting Group, MIT Supply Chain Forum, MFG.com, Deloitte and others consistently show a sizable and growing percentage of companies deciding to reshore at least some of their production and sourcing. Current research shows many companies can reshore about 25% of what they have offshored and improve their profitability if they used TCO (total cost) instead of price to make their decision. The not-for-profit Reshoring Initiative offers a free Total Cost of Ownership software that helps corporations calculate the real P&L impact of reshoring or offshoring. In many cases companies will find that, although the production cost is lower offshore, the total cost is higher. - See more at: http://www.gilcommunity.com/blog/manufacturing-trends-watch-2014/#sthash.g8CiLSGi.dpuf
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