Manufacturing 2020: Slowing Down or Ramping Up?

Looking back, 2019 was a pivotal year for manufacturing. More advanced technologies were introduced into manufacturing facilities than ever before, and the growing talent shortage required manufacturers to get creative to keep up with high demand. Toward the end of the year, a few additional trends and events emerged to ultimately define the current state of manufacturing:

• The United Automobile Workers (UAW) held the longest strike in recent decades against GM, totaling 40 days of work stoppage. Michigan manufacturers were the hardest hit by this, accounting for 40% of the UAW-GM workforce. GM lost approximately $450 million each week to the strike. Impacts of this strike will continue to be felt by GM suppliers in the foreseeable future.
• Ongoing tariff and trade disputes heavily impacted manufacturers of all sizes. During 2019, manufacturing activity dropped to levels not seen in 10 years, since the end of the Great Recession. This slump can largely be attributed to higher material prices and weaker global demand, as brought on by tariff changes. Additionally, global manufacturing shrank for six straight months, making for the longest continuous downturn since 2002.
• Manufacturing now makes up the smallest share of the U.S. economy since 1947. In the second quarter of 2019, manufacturing made up only 11% of gross domestic product, which could signal an approaching and larger economic slowdown.

As a whole, the manufacturing industry appears to be losing momentum as we enter 2020. Many factors paint a pessimistic portrait of the current state of manufacturing – but that does not mean there’s no hope for manufacturers to thrive in 2020. Knowing this, how can manufacturers move forward to ensure the future of manufacturing stays bright?

• Talent is key. Warnings of the massive skills gap have been circulating for years – and now, manufacturers are finally starting to feel the effects. Positions are left vacant and productivity plunges when there are no skilled workers to hire. There are also issues with low engagement and retention among current workers, which further diminishes efficiency and quality in production. To combat these problems, a change in company culture can help attract younger workers while engaging existing employees. Investing in workforce training also will make workers feel more valued and appreciated, while enhancing the skills they bring to the job.
• Technology can support improvement initiatives. From streamlining training to appealing to younger generations, technology implementations provide countless benefits to manufacturers. With more affordable, targeted innovation options on the market, even the smallest manufacturer can find relevant technological solutions to their biggest problems. For example, robots or cobots can free up workers to perform safer, value-added jobs, boosting productivity and engagement along the way. As a result of this opened capacity, manufacturers can pursue new business opportunities.
• With more open capacity, start to diversify. One of the safest strategies manufacturers can utilize during times of uncertainty is diversification. Whether it means supplying to new industries, making new products or growing into new geographic areas, diversification can provide stability during certain periods of instability. With a more diverse customer base, for example, workforce strikes in one industry won’t have as much of an impact if an organizations’ clients are distributed throughout different markets.

While much of the future of manufacturing remains uncertain, it’s critical that all manufacturers work toward becoming adaptable so their company can withstand whatever challenges the new year might bring, from talent gaps to tariffs to strikes. As hindsight is 20/20, manufacturers must learn from the past if they hope to move forward.

Since 1991, the Michigan Manufacturing Technology Center has assisted Michigan’s small and medium-sized businesses to successfully compete and grow. Through personalized services designed to meet the needs of clients, we develop more effective business leaders, drive product and process innovation, promote company-wide operational excellence and foster creative strategies for business growth and greater profitability. Find us at www.the-center.org.