Last week’s International Manufacturing Technology Show (IMTS) in Chicago was fantastic. I’m always cautious about praising the economy, particularly the manufacturing economy, but I’ve got nothing but good things to say about the level of business activity. Don’t get me wrong, business is still hard. At the Horst Engineering Family of Companies and across our industry, costs are high and we have challenges of all types, but at least we have sales to support our effort to overcome these issues and make a profit.
After years of recession and a tepid recovery, manufacturing is making a comeback. I’m proud to lead a 68 year-old family firm that makes stuff. Our core aerospace and defense business is driving our growth as a wave of new aircraft programs bolsters the industry. The resurgence in manufacturing, particularly USA manufacturing, is vital to the overall economy.
The costs and challenges in the three states in which we operate (Connecticut, Massachusetts, and Sonora), and elsewhere include high taxes, high labor costs, high health insurance costs, high energy costs, stiff pricing competition, regulations, inflation, and a lack of skilled labor. These are not small issues to deal with, but its much easier to take on these headwinds when you have the benefit of business volume.
I’ve been repeatedly asked, “How’s business?” I heard the question many times last week at IMTS. My standard answer has been to say that we have good business volume, but that we still face significant challenges and need to drive our own business performance if we are going to capitalize on the opportunities now and ahead. I just can’t be bullish anymore. I’ve seen what bad times look like and we are in a better situation today, but I won’t get too excited because work is work.
The entire USA economy is growing slowly, but folks are looking for more improvement in the employment rate, but more importantly with wage rates. The subject of wage growth is a difficult one to debate. Real wages may not have grown much in recent years, but the cost to employ people is higher than ever. Health care costs, unemployment insurance costs, payroll taxes, and other benefits, suck up a large and growing portion of overall wage costs. Much of the compensation for today’s employees is indirect and does not go to the employee in the form of pay. For wage driven disposable income to meaningfully grow for middle class manufacturing workers, then our industry has to rein in costs, increase productivity, and strengthen our pricing like never before.
At Horst Engineering, Thread Rolling Inc., and Sterling Machine, we say that we have a two-pronged approach to stay competitive:
2) Continuous Improvement
A lot of that technology was on display last week in Chicago at McCormick Place. The stats on this year’s show are impressive. There were 114.147 attendees and nearly 2,000 exhibitors from all over the world. The show is massive. The largest booths cost the exhibitors more than $10,000,000. The show is a huge investment for the machine tool, tooling, gaging, supply, software, service, and other vendors, but clearly, they get a return on investment.
Like any marketplace, IMTS is fertile ground for deal-making, and that was evident. Optimism was the word of the day as vendors cited a “perfect storm” of activity. In addition to the aerospace market, other markets requiring advanced manufactured/high precision products are strong as well. Those include automotive, power generation, oil & gas, and medical. The resurgence of North American manufacturing and reshoring has benefited domestic companies.
USA, Canadian, and Mexican businesses are some of the most productive in the world. That productivity is a direct result of the technology and continuous improvement (lean enterprise). In New England, we have some of the highest costs in the world, but we also have some of the highest skills in the world. Right now, having skills is an advantage. We need a next generation of skilled workers interested in manufacturing to emerge. That is critical.
At least the buzz at IMTS helped renew the cry for skills. I saw a lot of youth in attendance, and if more youth could be exposed to IMTS type technology, then they too would be excited about careers in manufacturing. I was stoked to see the automation advancements and 3D printing along with the traditional processes that I know well. We depend on our people. They are our most important asset. We train and we will be training more, especially as we introduce new technology. We are constantly working to be more efficient. We intend to keep the momentum rolling, and with Manufacturing Day on 3 October, we have the opportunity to keep the promotion rolling.
We are in investment mode at our businesses. Our customers are driving us to build new capabilities and increase capacity. Customers are the key ingredient, but success will only come if we can compete with the world. Business requires risk taking and no one will guarantee that business volume will continue to increase, but after 68 years, we have a track record of investments to lean on. Not all of our moves have paid off, but enough have for us to survive. After a trip to “the show” last week, I’m keen to make a few more moves and see how the game plays out.