AMT President Douglas K. Woods Talks With CEO Briefing About Manufacturing Trends

March U.S. manufacturing technology orders totaled $492.78 million according to The Association For Manufacturing Technology. This is a healthy 38.5% increase from February and a 2.9% increase over the same month last year. CEO Briefing sat with AMT President Douglas K. Woods to uncover the trends behind the growth, and what we can anticipate in the months ahead.

May 30 2014 by Lynn Russo Whylly

CEOB: Where is manufacturing coming back the strongest?

DKW: Automotive continues to rebound the strongest. They were pushing 10 million vehicles during the recession, down from 16 million, and now they’re up to 16 million again. That’s helped by the fact that we’ve got a fairly aged vehicle market out there—vehicles are averaging 11 years old right now. So demand is strong from people wanting cars.

Aerospace is the other one. It’s not so much defense as it is commercial. There’s an enormous backlog of both Aerbus and Boeing. There are not enough spindles to manufacture the backlog they need,and that’s creating good opportunities. They’re testing new ways to generate fuel efficiencies and looking at how to add automation into some of these processes that have been more craftsman-based.

CEOB: What is driving new manufacturing jobs?

DKW: There’s a large amount of foreign direct investment/reshoring going on that we didn’t have before, including automotive companies like Toyota and Hyundai. Business leaders want to be close to the consumption market. It’s more compelling to do that if you have other variables in your favor. For example, if energy is readily abundant and priced competitively and your consuming market is nearby, saving costs and time to market. Even nearshoring such as in Mexico. If parts don’t have to go over the ocean for 15 days, that’s significant, and it affects the transportation chain, so there are more trucks and trains going back and forth, and more use of area ports.

CEOB: How do you see this changing five years from now?

DKW: What you’re seeing is an interesting fusion between the software / data-centric and hardware / manufacturing world. Open source has eliminated the need for proprietary software, making connectability of devices and turning data into analytics easier and less expensive than ever before. And machines are becoming smart enough to make their own decisions without the operator.

CEOB: What new technologies are helping manufacturers improve operational costs?

DKW: Collaborative robots are coming that will work side by side with people instead of off in a corner. They’re more intuitive and adaptive. They will figure out themselves how to do things better and better for the same reasons stated above. The whole automation piece supporting the manufacturing system will continue to drive price points down and efficiency up and allow people who otherwise would be doing those things now to be doing analytics, tooling development and product generation, and that’s a much better place to apply the human touch than on the line.

CEOB: Are there any new developments on the horizon in energy that will help improve manufacturers’ operating costs?

DKW: The thing that will have the biggest impact over the next 5-10 years is in batteries. Right now an electric car battery gets you about 300-400 miles and takes about three hours to charge. When the life of that battery doubles and you can get 500 miles out of one charge and that charge now takes an hour, that will be an enormous boon and more people are going to buy electric cars. Now think about the impact that will have on the market and what goes into building battery factories, charging stations. In about 5-7 years, I think we will see a crossover happening, where automotive batteries will start to become more of a mainstream product and we’ll see a shift jin batteries from combustion to electric technology.

CEOB: How are your members finding the skilled workers they need?

DKW: A lot of people are taking the responsibility upon themselves. For instance, major corporations like Siemens are running their own apprenticeship programs. Small to medium-sized companies are looking for people with good aptitude or good emotional intelligence. They’re also choosing former military personnel because of their strong discipline. There are a lot of community colleges and high schools working with companies to train students. That’s happening in almost every state. And some community colleges are leveraging industry standards. But the problem is, once there is a lull in hiring, oftentimes the classes stop. And not enough kids are going into the program because they don’t think they’re going to get hired. They need to look at the need as long-term rather than short-term. The manufacturing base is there so they need to keep those programs in place.

CEOB: Where are you geographically seeing opportunities for expansion?

DKW: Right now, the flow is primarily in the southwest and southeast. Texas and Florida are good for manufacturing because of the low taxes. If a state has good tech universities, a good supply of labor and is a right-to-work state, those states are likely doing well. But states like Michigan that have lost companies are now realizing they have to offer incentives and are starting to win business back. Minnesota has a lot of high tech. Indiana has a lot of medical. Even California has a lot of interesting things happening despite the high taxes. Over time, as the less popular states work to bring manufacturing back with tax abatements, free land and facility usage, we’re going to see the flow move back up and eventually the opportunities will flow in both directions.

CEOB: When a manufacturing CEO looks 10 years into the future, what should he or she be planning for?

DKW: First, near-term, they should be thinking about how I can find the kind of people who are going to drive innovation. Second, long-term, they should be thinking about what technology is going to wipe them out. If you make blocks or heads, in 15 years, electric batteries could take over 30% percent of the combustion engine marketplace. When that happens, you just lost 30% of your market. That’s a big deal. And third, is there an international player I don’t know anything about today who’s going to come and set up shop here and take some of my market share away.

Find more information on March manufacturing technology orders here.