US Manufacturing is well positioned for continued growth through 2015, according to Manufacturing Trends to Watch, produced by Frost and Sullivan's Gil Manufacturing Leadership group. This is the first in a three-part series that examines developments in manufacturing that will play out in 2015.
Frost and Sullivan expects US manufacturing growth to continue strongly in the coming year. In 2014, industrial production in the US grew at a healthy 3.3%, due in part to a robust automotive sector. Auto sales have snapped back aggressively from the down years of 2009 and 2010. In 2015, look for a continuation of that growth trend, possibly at a rate even higher than 2014.
Lower energy costs, spurred by the drop in oil prices, will provide an additional advantage for some manufacturers, though not all. Clouds on the horizon include the continued economic weakness and uncertainty in Europe and the slowdown in China. Those clouds aren't particularly dark, though, since foreign trade -- apart from Canada -- is less than 10% of the total US economy.
One of the Industrial sectors on a tear is automotive. US automakers are revitalized and American car buyers need new vehicles. "The automotive sector is having a field day. Demand was 17 million in 2014. During the recession it was only 8 or 9 million, so the sector has had an enormous recovery," David Brousell, global vice president of Frost & Sullivan's Manufacturing Leadership Council, told Design News.
The average vehicle on the road is about 10 years old, so there is huge pent-up demand. The economy has improved, more people are working, and manufacturers have maintained their incentives. That translates into powerful incentives for continued high sales numbers. "Even GM sales are up," said Brousell.
Spending will rise on automation & equipment
Increased pocket money at plants may drive demand for upgrades. Lower oil will free up dollars, and analysts are beginning to believe reduced oil prices will continue. "If low energy costs are sustained over time, it will free up money in the industrial sector to invest in other things," said Brousell. "There is a lot of interest in investing in analytical tools and further automation. A lot of legacy equipment needs to be updated."
In the Frost & Sullivan Factories of the Future study, researchers asked what technologies plants expect to acquire in the next five to 10 years. Sixty-four percent of manufacturers intend to add intelligence. Simulation use is expected to grow from 34% of plants currently to 56% using it in next five to 10 years. Thirty percent of plants are now using robotics. That will grow to 45% in five to 10 years. "Manufacturers want to spend money on these technologies to improve productivity and automate processing," said Brousell. "They're looking for speed-to-market and efficiency of operations. They need the money to do it, and the lower energy prices may free up money."
Reshoring will hits ups & downs
According to Frost & Sullivan the pace of reshoring will fluctuate depending on how the potential economic crisis in the Euro-zone is resolved and what impact it will have on demand, risk, and costs in those geographies. The slowdown in China is also a factor. As a result, the "reshoring" terminology will begin to be replaced by "right-shoring," a shift that places the emphasis on where production belongs. The goal is to design global production and supply networks that can sense and respond quickly to rapidly shifting global economic trends and customer requirements.
Brousell believes reshoring was never much of a trend. "There is a bit of mythology about reshoring. There is some going on, but outsourcing is continuing without letup." Even though some production is shifting back to the US, there may be no net manufacturing gain. The production that is actually returning to US shores is not likely to improve manufacturing employment. "With outsourcing continuing, we're not going to get new employment in manufacturing, even as some production returns," said Brousell. "Add in increased automation, and you won't see employment increasing."
Design engineers and professionals, the West Coast's most important design, innovation, and manufacturing event, Pacific Design & Manufacturing, is taking place in Anaheim, Feb. 10-12, 2015. A Design News event, Pacific Design & Manufacturing is your chance to meet qualified suppliers, get hands-on access to the latest technologies, be informed from a world-class conference program, and expand your network. (You might even meet a Design News editor.) Learn more about Pacific Design & Manufacturing here.
Rob Spiegel has covered automation and control for 15 years, 12 of them for Design News. Other topics he has covered include supply chain technology, alternative energy, and cyber security. For 10 years he was owner and publisher of the food magazine, Chile Pepper.