Growing market signals a strong 2017
Analysts, economists and the actual numbers have been pointing to this conclusion since May 2016. The latest U.S. Manufacturing Technology Orders report shows that both March and April grew compared to those same months in 2016. I am fairly certain that in July, the USMTO report for May will do the same and yield an official statistical end to the long downturn in orders. The USMTO data supports what I have heard from members over the past month: The ratio of quotations to orders has continued to improve since February, and inventories have declined significantly over the past three months, with prices firming up in many product areas.
Another qualitative indicator is the type of ad hoc research requests that AMT’s Strategic Analytics department receives. In the past month, we have received an unusual number of requests related to distribution channels. We have fielded requests for developing distribution systems and identifying distributors with technology gaps in their offerings. We have also helped to develop methods to find representatives and agents. The spike in these types of requests suggest that members are looking to add capacity to their current sales channels.
The market has been busy! I was at EASTEC in Springfield, Mass., earlier this year where foot traffic seemed to be much better than it was in 2015. AMT members shared that leads were significantly better and that business was good on the show floor. The strongest presence among customer industries were job shops, aerospace engine producers and their first-tier suppliers, and mold & die producers. Phone interviews with members conducted in the latter half of May were upbeat about opportunities in the Midwest for aerospace and appliances; in the Southeast for auto parts, HVAC and contract machining; and in the West for almost every customer segment.
The market is rapidly changing
With recovery often comes growing pains, and this iteration is no exception. Our members’ top challenge is finding skilled, motivated workers to employ as the markets expand. They often find themselves competing with customers for talent, making the situation even more challenging.
There are efforts toward improving worker skills. I recently caught up on the changes that have taken place at Detroit’s Focus Hope, a community dedicated to improving the health and well-being of its residents through education and opportunities. The program has been a leader in developing manufacturing and information technology skills in young people and supplying local businesses with excellent employees for 36 years.
In the past month, while visiting members, I have seen some extraordinarily talented and motivated young people working in members’ shops, attending open houses and participating in student summits at EASTEC and HOUSTEC. One group I met were students from Westfield Technical Academy in Westfield, Mass. Meeting these students was refreshing, as they talked about manufacturing of the future where hands move farther from the materials and deeper into the machines and controls. They talked about their studies in advanced technologies, artificial intelligence, and machine learning. While the engagement was encouraging, the volume of students at these events and schools needs to move from thousands to tens of thousands as a majority of our industry’s workforce nears retirement.
It is also exciting to see the speed of innovation increasing in our industry and among our customers. Several of the recent additions to AMT’s membership are startups with some unique solutions to manufacturing challenges. Likewise, while conducting survey interviews with manufacturing technology users, I heard about some great technology and innovative initiatives. One intriguing story was of two college friends who were awarded a $2,000 grant from their school to turn their class project into a business. Now, a couple of years removed from that start, their company is exporting products around the globe, with countries such as India accounting for double-digit growth in their business.
The manufacturing processes are advancing, as well as the manufacturing models. AMT has members offering manufacturing as a service, and others who are moving lower volume advanced manufacturing technologies like additive manufacturing into mass production.
Data supports observations
As mentioned each of the past two months’ USMTO orders outpaced the same months, from 2016. The Cutting Tool Market Report was up 3.5 percent for the first four months of 2017 vs. 2016. The Conference Board reported that their CEO business confidence index reached its highest level since 2004 - higher than 2012 or 2007 levels! Profitability, a key indicator in projecting capital spending, for the top five publicly traded medical device firms grew by 41 percent 2016 over 2015. While the quantitative data has pointed to a late spring turnaround for a while, and now the qualitative information is supporting those numbers.