While many are looking forward to a “New Year, New You” mentality, the same cannot be said in manufacturing. Before making any celebratory toasts for success for the new year, there are several lingering and frustrating factors that continue into 2023.
Many U.S.-based manufacturers need to start having the reshoring dialogue as several factors will negatively affect their businesses. The main concerns are:
A shortsighted federal government: It doesn’t much matter which side of the political fence you are on, we can all agree that a government that passes a one-week spending bill to give legislators time to pass a bigger bill in a few days is not thinking long term. Manufacturing needs greater predictability and stability from the government. With the House of Representatives passing to the Republicans, we are guaranteed two years of divided government. This is aggravated by the narrowness of the Republicans’ majority in the House and by the divisions within the Republican caucus. So, while we need greater stability, we are likely to get just the opposite. I hope I am wrong.
Ongoing issues in China: The long pandemic seems to be a persistent and pervasive problem in China as it affects the labor market. Many workers are either unable or unwilling to travel back to their manufacturing jobs after a COVID infection or lockdown. The Chinese government’s COVID policy exacerbates the problem. Until recently, the Zero COVID policy meant the closing of entire cities, which is bad for the global economy. Recently, Beijing relaxed these regulations but in doing so, the government has not been transparent in what the new arrangements are.
Supply issues are still there. The bottlenecks that almost strangled world trade have lessened, and when the world economy re-opened, some issues remain. Prices for just about everything are higher and are likely to remain higher than they were for some time to come. However, that is not the end of the concern.
We are still being affected by transportation issues like “blank sailing.” This happens when ships skip a particular port, region, or possibly an entire leg on the scheduled route. This unpredictability can be a direct blow for any U.S. manufacturers who are depending on materials to arrive on time to meet consumer demands. Recent shortages in domestic and foreign supply of a wide range of products from baby formula to construction materials and the increased consumer demand have forced some companies to bring back allocations and restrictions of selling.
In addition, congressional action recently averted a rail strike that would have crippled the production and distribution of all sorts of goods. Longer term, we have the trucking industry moving toward electric vehicles. Charging stations, battery life and running costs will affect the smoothness (or not) of the transition. Our current infrastructure cannot handle these types of change without major capital investments.
Taken as a whole, supply chain issues are still affecting our economy and the way we plan, purchase, and receive offshore goods and materials. It’s time for U.S. businesses to start some serious planning to re-invest in domestic capabilities and opportunities. Buying onshore means equal or better quality, faster deliveries, and cheaper transportation costs.
Geopolitical storms brewing. Risk is a constant in world trade, but in 2023, we will still be dealing with COVID, an ongoing war in Ukraine with Russia manipulating fuel supply in Europe, and soaring energy costs. That list is hardly complete; these are just a few storms coming in at one time. Even a decision by OPEC (Organization of the Petroleum Exporting Countries) is something we need to consider, as it will potentially end the days of cheap oil. Manufacturers in the U.S. need to brace for potential energy changes as a result.
We have jobs, can we fill them? Manufacturing positions flourish with often high pay and job stability, but will the new generation of young workers want to take them? There is an ongoing challenge to get younger workers to seek opportunities in manufacturing and other industries outside of technology. Often, it is a case of younger workers not having manufacturing on their career radar. We need to do a better job of selling the opportunities of working in the manufacturing sector, starting with academic educators and career counsellors.
The Green Life will take time, and by time, we mean generational time … and money: While there is a strong push for green energy and the continued push for recyclable materials, the truth is at this moment, we do not have enough cost-conscious alternatives right now. We won’t be able to completely get rid of plastics within a five-to-10-year frame; we are talking about perhaps many decades down the line. The bottom line is clear. Many would love to be green, but would they be willing to pay extra for that green? And how much?
Given the current economic volatility, the best advice is to:
- Communicate with your employees, customers and suppliers. Alleviating worker concerns and forecasting your needs will let everyone know you are interested in them and mindful of their needs
- Plan for contingencies with your suppliers
- Optimize your organization. Reduce waste and look for ways to better serve your customers
In conclusion, the one word to describe 2023 is uncertainty. Are you ready?
Paul Harencak is vice president at Moonachie-based LPS Industries, an ISO-certified, woman-owned flexible packaging materials converter serving the medical, food, military, cosmetic and industrial markets.