From emissions standards to additive manufacturing and reshoring, the face of manufacturing changed rapidly in 2015.
With higher customer expectations, buyers and suppliers of manufactured parts were expected to be more efficient and more importantly, on the cutting edge of technology.
And as cited by the December 2015 Semiannual Economic Forecast by the Institute for Supply Management, low oil prices and a strong U.S. dollar helped manufacturers do just that.
Both of those things [low oil prices and a strong U.S. dollar] have lined up to create deflation in raw materials, and it costs less to run a factory when oil prices are down, said Brad Holcomb, chair of the ISM Manufacturing Survey Business Committee.
A consequence is that more companies were able to expand in 2015. As companies poured more money into research and development, technology, and people, there was a direct correlation to increased innovation and customer satisfaction.
But oil prices weren't low all year, and neither was the dollar always strong. So, let’s take a look at 4 key factors that helped reshape manufacturing in 2015.
Additive Manufacturing is Growing ... FAST
Advances in 3D printing hardware and materials over the past decade have now made this once emerging technology a process that is rapidly redefining manufacturing. In 2015 alone, there were more than $3M worth of business opportunities for manufacturers capable of 3-D printing in the MFG.com marketplace.
More and more, buyers -- and suppliers -- are realizing the paradigm shifting potential of this nascent industry.
- In April, the FAA approved the first 3-D printed engine part for commercial aviation. The part, to be used inside GE commercial jet engines, is one of many other 3-D printed parts currently at various stages of development and quality assurance.
- In August, the FDA approved the first 3-D printed drug product, Spritam, for consumer use, a watershed moment for the medical industry.
- In December, a prototype for the first truly 3-D printed car was been unveiled by Local Motors. It's only hurdle: upscaling production.
- And also in December, 3D Systems, a leader in the 3D digital design space, has announced its move away from consumer goods. In the future, the company plans to refocus efforts on more traditional manufacturing applications and industrial settings, hoping to help 3D printing gain a greater foothold in the manufacturing sector as a whole.
Growing at a compound annual growth rate (CAGR) of 25%, 3D printing is expected to be worth more than $17 billion by the year 2020. The chart below shows the expected growth rate for 3D printing in various sectors over the next 5 years.
New Shores on the Horizon? Reshoring Seems to be Ramping Up ...
Reshoring is big news. With sharp downturns in China and Europe, manufacturers are reevaluating their production strategies, focused on economic competitiveness, decreased risk, and improved production quality.
In a recent study by the Boston Consulting Group, 17% of manufacturing executives said they are actively pursuing reshoring efforts today, with 31% planning to bring their manufacturing efforts back to U.S. shores within the next 5 years.
20% of the report's respondents said they planned to maintain their focus on China in the near-term. However, that number is down 10% from 2012, when 30% of respondents said China was their focus.
These findings underscore how significantly U.S. attitudes toward manufacturing in America seem to have swung in just a few years, said Harold L. Sirkin, a BCG senior partner and a coauthor of the research. The results offer the latest evidence that a revival of American manufacturing is underway.
Does that mean manufacturers are abandoning overseas production? Not necessarily. As we know, offshoring can and does have its benefits in certain situations. But it does mean that the shift toward domestic manufacturing is in full swing.
For instance, the BCG report shows that manufacturers want to make products closer to their customers, and that the U.S. has surpassed China and is outpacing Mexico as the most likely destination for new manufacturing capacity heading into 2016. And at MFG.com, our data backs that up, with domestic suppliers in 2015 getting:
- 57% of Machining RFQs
- 68% of Molding RFQs
- And 97% of Additive Manufacturing RFQs
The Technology Gap is Shrinking -- and Manufacturing is Catching Up
Digitization and automation are changing the way manufacturers interact with the world. As advanced manufacturing technologies such as robotics become more commonplace, capital expenditures are rapidly shrinking for companies on the cutting edge. And as the U.S. leads the world in technology implementation in both quality and process, more and more manufacturers are being lured home, with many finding sound, secure investments in the domestic market.
According to the BCG study, 56% of respondents said that lower automation costs have improved the competitiveness of U.S.-made products compared with similar goods sourced from low-cost countries. Moreover, 71% said advanced manufacturing technologies will improve the economics of local production, and 75% said they will invest in additional automation or advanced manufacturing technologies in the next five years.
What's making it all possible? The Internet of Things.
From operational and logistical efficiency to proactive maintenance, the Internet of Things affords manufacturers the confidence to accurately strategize and implement solutions that directly affect their bottom line. It also frees up employees to think and create, increasing R&D efficiency. This type of business behavior is set to redefine manufacturing in the coming years.
For example, companies such as General Electric are already pushing the envelope with groundbreaking management software. With its predictive-maintenance tool, SmartSignal, GE has grown revenue by 20% annually over the past four years. And GE passes those savings on to their customers, helping them achieve, on average, return on investment in as little as 6 months following adoption of Smart Signal.
But GE isn't the only company leveraging the Internet of Things and seeing big returns. UPS has shown that IOT is reshaping logistics, too. With ORION, UPS' proprietary delivery route enhancement software, the logistics company predicts they'll save upwards of 10% on their operating margin, increasing profits while decreasing overall operating expenses -- saving the company an estimated $300 to $400 million per year.
Emissions Standards & Sustainable Manufacturing Will Be Top-of-Mind
Volkswagen's Emissions Fraud
A "systemic" worldwide issue, a bevy of carmakers joined Volkswagen in October as ones who knowingly skirted emissions standards for their diesel-fueled vehicles in some form or fashion.
The VW issue in the US was purely the trigger which threw light on a slightly different problem in the EU - widespread legal over-emissions,” said Nick Molden, whose company Emissions Analytics tested the cars in question. “For NOx, [diesel] cars are on average four times over the legal limit, because of the lenient nature of the test cycle.
In an attempt to save money in the near-term, Volkswagen faces a potential long-term loss of $50 billion -- when, in fact, they should instead be saving money with the tools at their disposal.
Today, most Class-8 trucks get about 6 mpg, contributing to more than one-fifth of greenhouse gas emissions and oil usage in the United States alone. If that mile-per-gallon number were raised to 10 mpg or more, "the cost savings per [120,000 miles driven by a Class-8 truck] could be $25,000 or more," according to a recent Wal-Mart logistics study.
That cost savings directly influences ROI, trickling throughout a company's supply chain, from the shop floor to the customers' door.
The COP21 Accord
While the final verdict won't be passed down for years to come, the COP21 accord appears on the outside to benefit manufacturing as a whole. As we've seen recently, domestic sourcing appears to be on the rise, with demand for quality and increased eco-consciousness leading the charge at home.
As perception amongst buyers of manufactured parts alters, there has been a paradigm shift in the manufacturing ecosystem: No longer is business conducted purely in the confines of B2B or B2C.
Now, manufacturers are expected to consider the end user more than ever. In our new B2B2C world, issues such as global warming and greenhouse gas emissions are paramount in both public perception and manufacturing execution. Manufacturers cannot afford to ignore such issues moving forward.
Looking Ahead: How These Will Reshape Manufacturing
As technology becomes more and more entrenched into our everyday lives, manufacturers will undoubtedly keep pace to satisfy the demands of their customers. The Internet of Things demands that ERPs and e-commerce services further integrate with traditional management systems as time moves forward. And manufacturers will -- as they have already begun to do -- realize and leverage the power of search engines and social media as powerful ways to discover and nurture business.
In 2016, Lean is set to take on new meaning with the growth of the Green Manufacturing movement. Innovative manufacturing processes such as 3-D printing will only gain stronger footholds throughout the industry, while robotics, recyclable thermoset plastics, and 4-D printing will reshape how manufactur and deliver parts and products.Efficiency will be the name of the game, and sustainability will be its goal.
Looking back, 2015 laid the foundation for manufacturing change. Looking ahead, 2016 will be the year that change gains greater momentum.