Potential Roadblocks Facing the Industrial Economy

Eroding Infrastructure, Expanding Global Markets and Evolving Job Descriptions Challenge Manufacturers in 2018

While the 2018 outlook for manufacturing in the U.S. appears promising, challenges remain. Among them are decaying infrastructure; a dearth of workers skilled in automation; and difficulty identifying new markets.

U.S. manufacturers depend on infrastructure in order to efficiently acquire materials and reliably transport their finished products, but the state of the nation’s roads, bridges and other public works continues to decline.

Amid the deterioration on the ground, the nation also faces challenges in the skies. The ASCE report gave aviation infrastructure, such as airports and air traffic control systems, a “D.”Meanwhile, the New York Times reported spending on government construction projects in 34 states, was lower last year than in 2007, adjusting for inflation. The trend has continued this year. The American Society of Civil Engineers (ASCE) graded America’s infrastructure a D+ in its 2017 evaluation. The report card cited a decline in parks, solid waste management and public transportation. It also noted there had been no improvement in four years in aviation, bridges, dams, drinking water, energy and roads.

“We have a very advanced airspace infrastructure for our military, but we don’t for civilian purposes,” said Deborah Wince-Smith, president and CEO of the Council on Competitiveness.

“We ought to be the first ones to do Uber in the sky — we invented the aerospace industry.”

The focus for decades has been on maintenance and repair, and it’s now time to make improvements, said Robyn Boerstling, vice president, for infrastructure, innovation and human resources policy for the NAM.

“I think what manufacturers are hungry for is a broad sweeping vision to modernize the infrastructure system — and a plan,” Boerstling said.

Still, another vulnerable area is cybersecurity infrastructure, Wince-Smith said. New systems of hardware are needed as the nation struggles to deal with penetration of security systems and identity theft.

“Cybersecurity has to be taken to a new level now,” Wince-Smith said. “I would put that really at the top of the list.”

For visible infrastructure, at least, help might be on the way from the federal level, as the Trump administration has promised an extensive plan for infrastructure improvement.

A problem that’s harder to define but no less important is what’s being called the “skills gap” — a shortage of workers who have the skills needed for technologically advanced manufacturing.

Where a worker might once have stood at an assembly line performing the same task all day, what’s now needed is critical thinking and “precision skills,” Wince-Smith said.

By 2025, the Council on Competitiveness reported, there could be two million U.S. manufacturing jobs unfilled due to lack of qualifications.

Automation is helping manufacturers address the skills gap, but an increase in automation means more trained workers are needed to manage the technology.

“As working side-by-side with machines becomes the norm, more jobs in the sector will require specialized digital and technical training,” the McKinsey Global Institute said in its Making It in America: Revitalizing U.S. Manufacturing report last year. “Technologies they will entail are still very new, and they never stop evolving.”

While schools can provide basic math and digital skills, they will be hard-pressed to keep up with the changes; apprenticeships might be a bigger part of the solution, the report stated.

“Instead of fretting about a skills gap, we should be focused on the real challenge of knitting together the supply and demand sides of the labor market,” said Andrew Weaver, assistant professor in the School of Labor and Employment Relations at the University of Illinois at Urbana-Champaign, in the MIT Technology Review.

“Thinking about the real financial and institutional mechanisms necessary to make, say, apprenticeships work is far more productive than perennially sounding alarms about under-skilled workers.”

Creative thinking is also needed if American manufacturers hope to find new customers in an increasingly fragmented global marketplace. More than 95 percent of the world’s consumers live outside the United States, according to the U.S. Chamber of Commerce.

And by 2025, consumption in emerging markets will hit $30 trillion, up from $12 trillion in 2010, McKinsey has projected.

Identifying and serving those potential customers pose a complex problem for manufacturers.

“Tapping into demand growth in emerging economies requires knowing exactly where and how to compete,” the report said. “Markets such as China, India, Brazil, and Africa represent an enormous opportunity, but they have significant regional, ethnic, linguistic, and income diversity.”

Information and the ability to leverage it is a key factor in being able to compete.

“Your clients are global citizens with full access to information and products from anywhere in world,” said Marina Schwartzman of Euromonitor, an independent provider of global market research. “They may demand something new one day that you won’t be ready to provide if you’re unable to anticipate global trends. You need to stay tuned with new products and services launched worldwide, new concepts of channels that are emerging abroad and new ways of interacting with your clients if you want to be competitive in a fast-moving market.”

Manufacturers who find ways to solve the puzzles presented by infrastructure, employees’ skills and global markets will have a distinct advantage in the year ahead.