Accelerating economic growth bodes well for the electronics industry, but buyers remain plagued by long lead times and hiring concerns
The accelerating global economic growth that began in late 2016 looks increasingly sustainable, painting a positive picture for the U.S. manufacturing sector in 2018, according to the latest outlook from the Manufacturers Alliance for Productivity and Innovation, a Virginia-based industry research and education firm. A rise in business spending, along with economic growth in Europe, East Asia, and Canada, add up to positive signs for U.S. industry, MAPI research shows.
Other economic indicators released late in 2017 bolster that view. The Institute for Supply Management’s Purchasing Managers Index (PMI) registered 58.2 in November, indicating 15 straight months of growth in the U.S. manufacturing sector. A separate survey of procurement leaders conducted by the industrial buying group Prime Advantage was equally positive, revealing growing optimism among mid-level manufacturing firms heading into the New Year. Nearly 90% of the 100 purchasing and supply chain executives surveyed for the group’s 16th Annual Purchasing and Manufacturing Survey said they expect their company’s revenues to increase or remain steady over the next year.
All of this doesn’t mean business will be going gangbusters in 2018– just that the sluggish times may be well behind us. Although economic uncertainties remain, the widely accepted outlook is for moderate growth as far as the eye can see. MAPI anticipates average U.S. economic growth of around 2% between 2017 and 2021, with U.S. manufacturing growth of between 1.2% and 1.8%.
“In spite of a range of political and geopolitical risks, the moderate but durable and widening world economic recovery is propelling a modest rebound in U.S. manufacturing growth after years of virtual stagnation,” Cliff Waldman, MAPI Foundation chief economist, wrote in the group’s fourth-quarter outlook, released in late November.
As conditions improve, other issues are rising to the surface and remain on buyers’ watch lists for the coming year. Increasing lead times for some electronic components and the fight to find qualified workers for manufacturing jobs rank high.
Lead times, hiring
Longer lead times and rising prices for some components and materials is the top procurement concern heading into 2018 for Tim Crammer, vice president of supply chain for Ohio-based Henny Penny, maker of commercial food service equipment. Procurement managers at Henny Penny are responsible for buying everything from raw materials such as stainless steel to industrial products and a wide range of electronic components. Crammer says lead times on some of those components are approaching 30 weeks or more – opening the door to planning and production challenges as well as cost concerns.
“That’s what ‘keeps me up at night,’” Crammer says.
Indeed, 61% of respondents to the Prime Advantage survey cited component parts as one of the top cost pressures they face heading into 2018 – a close second to logistics and transportation costs (62%) and distant third to raw materials costs (94%).
Also at the top of Crammer’s list: hiring trouble on the factory floor. Although Crammer admits that Henny Penny’s rural location is a large part of the problem – the company is located 35 miles west of Dayton, Ohio – he says finding workers to fill vital blue-collar jobs has become even more challenging in recent years. Henny Penny is addressing the issue through a combination of efforts – including internships, partnerships with local schools and colleges, and tapping into employees’ network of friends and family – but challenges remain.
“We’ve not found that silver bullet yet,” Crammer says, adding that employee retention strategies go hand-in-hand with recruiting efforts as companies seek to keep their production lines running smoothly.
This rings true across the manufacturing spectrum, and especially with mid-sized firms. Forty percent of respondents to the Prime Advantage survey cited a lack of qualified workers – for blue- as well as whitecollar jobs – as the greatest potential barrier to business growth in the year ahead. Still, most say they need to add employees in 2018 to keep up with projections, making the hunt for the right workers an even more important task.
The issue promises to remain on the front burner. Manufacturing employment grew for the 14th consecutive month in November, according to ISM’s December 1 PMI report, “in spite of signs of labor market tightening,” the group said.