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Posted March 6, 2019

What's in store for manufacturing?

by John Wiborg, president and founder, Stellar Industrial Supply


John WiborgIn 2019 we expect a continued strong and robust manufacturing sector. Even if there is some slow down, the challenge for many companies this year remains, “How do we generate more with less?” as they face labor and talent shortages, and increasing prices for labor, energy and cost of materials.

1) Tightening of the Labor Market Continues
There will not be a decline in shortage of available workers who will continue to expect higher compensation. These two elements combined will negatively impact output and profitability. A tight labor market coupled with higher-priced labor overall will keep companies scrambling to fill key positions. In order to best compete, companies will need to develop improved processes around screening and selecting new employees, attracting top talent with not only competitive compensation packages but a better working environment as well.

2) Change Management = Doing More with Less
Even while the economy remains robust at present, manufacturers will still grapple with how to increase output without increasing price, and must create new processes that generate more output for every $1 spent. Companies will need to excel at Change Management as a core competency, and bring increased and focused investment into testing and evaluating new ideas that can produce the desired change and results. Paradoxically, change will meet resistance from overstretched workers. Change Management as a company-wide initiative can help shepherd a company into a more collaborative, development-focused culture, creating processes that ensure transparency and buy-in.

3) Economic Risk Remains Low but Volatile
Credit risk is low right now and companies are flush with cash, so the impact of a rise in interest rates should be mitigated. However, companies should prepare for volatility. Geopolitical risks such as terrorism, trade wars and tariffs cause a myriad of potential unintended consequences. For example, one such consequence for companies who have China-based manufacturing is skyrocketing price increases in raw materials. On the brighter side, companies can reevaluate the notion of re-shoring facilities back to the U.S. This longer haul regionalization, such as where companies produce in North America to sell to North American customers, can alleviate potential currency and other supply chain risks.

4) Risk is Prevalent and Multi-faceted
Uncertainty continues regarding regulatory and interest rate risks which will create a delay or reduction in new procurement and initiative-based investments. Smart companies will start planning now for a potential downturn, or as stated previously, figure out how to create more productivity with less resources.

5) Artificial Intelligence Continues to be a Driving Force
AI will increasingly impact the supply chain, enabling companies to problem-solve, experiment and redefine production assumptions; predict and eliminate gaps/or inefficiencies; and automate key processes. Combined, this dramatically improves operational productivity and safety.

We will also see increasing use of digital twins to enable companies to apply deeper forensics into how they predict machine and critical asset failure. This trend will allow for the application of preventative maintenance to reduce unplanned failures. Data insights will be progressively applied to better factory scheduling and forecasting of machine downtime over time. Blockchain is a hot buzz word but the industry still needs to discover and determine how to harness it for beneficial outcomes.

John Wiborg is founder and president of Tacoma, Washington-based Stellar Industrial Supply. He is also a past president of the Industrial Supply Association and is a member of the board of directors of AD, the member-owned buying and marketing group.

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