The Purchasing Managers Index (PMI) – a widely recognized leading economic indicator – registered at 47.2% in December, below the 50% that indicates the manufacturing sector is expanding.
It was the lowest reading since June 2009.
This number highlights the uncertainty that manufacturers say they’re facing as 2020 begins. It’s all pointing to a manufacturing outlook for 2020 that’s flat to slightly up at best – uncertain at worst.
Deloitte’s outlook for manufacturing, based on the Oxford Economic Model, is that growth will taper off, with projections of a 1.3% increase for manufacturing GDP in 2020.
But even as manufacturing companies face a potentially lukewarm year (after several years of above-average growth), they will continue to invest in industry-changing strategies and technologies amid unprecedented disruption.
Challenges for Manufacturers in 2020
The greatest sources of disruption for manufacturing in 2020 will be global trade wars and finding skilled workers, according to the Association of Equipment Manufacturers, a trade association for manufacturers of construction and agricultural equipment. Their director of market intelligence Benjamin Duyck says that while general economic indicators are strong, businesses are afraid that “consumer confidence might deteriorate,” in part due to American tariffs levered on foreign goods.
On the labor front, baby boomers are retiring, and attracting younger workers is growing more difficult. Manufacturers will spend more than $25 billion on internal and external training for new and existing employees in 2020 to combat this shortage, according to the Manufacturing Institute. The Manufacturing Institute found in a 2018 study that a lack of qualified talent could cause the U.S. to lose $48 billion in manufacturing GDP a year, and this could grow to $454 billion by 2028.
Deloitte in its 2020 forecast for manufacturing also pointed to volatile costs and sometimes unpredictable policy decisions as challenges.
All of this means manufacturers must get serious about driving efficiencies and productivity within their organizations, “increasing resilience in their operations” (as Deloitte recommended) and investing in the right technology that can support both.
Rise of Digital in Manufacturing in 2020
Analysts worry that the challenges facing manufacturers will stall digital progress, but, according to the Deloitte report, companies have shifted spend to invest strategically in technology that will help them navigate uncertainty and manage risk. Expect more of this in 2020.
This “digital muscle building,” according to Deloitte, includes applying Artificial Intelligence (AI), cloud computing, advanced analytics, robotics and additive manufacturing to the value chain for improved visibility and transparency so manufacturers can move more quickly when faced with threats or opportunities.
Here are some examples of ways manufacturers are expected to apply tools like the Internet of Things, AI and the cloud in 2020:
Industrial wearables are designed to collect data, track activities and provide customized experiences depending on the users’ needs, according to a report from ResearchandMarket.com. The devices, designed to upgrade productivity, safety and efficiency for manufacturers, include such leading-edge technology as tool-handling exoskeletons, powered gloves and body-powered suits that reduce fatigue over extended periods. Other examples include Google Glass telling you which surfaces are too hot to touch or whether hazards are present.
Getting employees up to speed takes time. With wearable Augmented Reality tools, manufacturers are helping employees be productive sooner. Google Glass is helping General Motors train factory workers in real time, including difficult applications like installing strip molding. Google Glass shows them the correct technique in the glass as they do the work.
From simple applications on smartphones to more sophisticated technology like the Microsoft HoloLens 2, manufacturers are integrating Augmented Reality not only to help with training, but to assist in repairs, with applications like the Dynamics 365 Remote Assist that allows someone offsite to see what the worker is seeing so that production lines can get back up and running more quickly.
Productivity and Efficiency
The need for real-time data in the production process will become even more critical in 2020. One area is in preventive maintenance. With IoT sensors and Advanced Analytics with AI, manufacturers can reduce production failures, stay on top of equipment maintenance and refine the production process, no matter the product, resulting in less downtime and more dollars to the bottom line.