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U.S. Manufacturing is Building up a Head of Steam
Economic factors, advanced technologies, and stronger-than-ever demand for 'Made in America' are fueling the rise
In case you haven’t noticed, manufacturing is building up a head of steam in the United States. A number of factors, including lower energy prices and the strength of the U.S. dollar, are helping to put American manufacturers on more solid footing. And many domestic manufacturers are becoming more competitive with overseas suppliers through investments in advanced manufacturing technologies—such as robotics, automation, 3D printing, and software/IT, including data analytics—that improve their productivity, flexibility, and capacity, freeing them up to tackle engineering and other value-added work.
“There is kind of a renaissance of manufacturing in the U.S., and we are definitely seeing a lot more interest in manufacturing staying here or coming back,” said Jeff Owens, president of Advanced Technology Services, Inc. (ATS), a Peoria, Ill.-based company that provides services to help manufacturers increase their capacity, productivity, and efficiency. “I think there are a lot of reasons for that. The energy prices and the availability of energy is one thing. The changes that are going on in China, and maybe just the world at large, and security concerns, and just a wide variety of things are kind of driving people back to manufacturing in the U.S., and I think the strength of the dollar has a big impact on that also.”
Against this economic backdrop—and, to some extent, closely interwoven with it—is the realization by a growing number of manufacturers that in the United States, demand for ‘Made in America’ is stronger than ever. Although the demand has always been here to some extent, it’s been strengthening in recent years along with greater awareness of manufacturing’s role in the U.S. economy, particularly as a powerful creator of jobs, and its reputation for high quality parts and products.
“Made in America certainly means quality, reliability, it means jobs in North America,” said Stephen Vairo, president and CEO of Calumet Electronics, a maker of printed circuit boards in Calumet, Michigan, a town of about 3,000 people in Michigan’s Upper Peninsula. “It’s important. This country was founded on manufacturing, and I think it continues to be an important part of our economy, and I don’t think that being a service-driven industry or economy is good in the long run for our country.”
Claudia Bailey Honeycutt, marketing director for Spruce Pine, N.C.-based Buck Stove and its in-house powder coating and fabricating business, Tri-State Powder Coating & Fabrication, told D2P that she’s seeing more demand these days for American-made products, as well as parts, such as the fabricated parts made by Tri-State Powder Coating and Fabrication. She believes a lot of the demand has to do with the quality of American-made parts and products versus those made overseas.
“People are looking for quality, they’re looking for American-made, they’re looking for a company that they can walk in the door and see how it’s made. They’re looking for a company that they can call on the phone and talk to a human being, not an automated system that just goes to 14 different push buttons, but a real live person. We use technology every possible way that we can, but for us, our greatest resource is the human touch. So yes, people do look for American-made products, definitely. Am I going to go buy something that’s come over on a container from overseas, that there’s going to be no service, there’s going to be no guarantee on it, and it might be a little cheaper, maybe, but is it going to last? I’ll pay just a little more on the front end to have a quality product.”
Workers on a welding line at Buck Stove. The family owned and operated company has an in-house fabrication company, Tri-State Powder Coating & Fabrication, that’s “growing by leaps and bounds,” according to Buck Stove’s Claudia Honeycutt.
Photo courtesy of Buck Stove. For more on Buck Stove, see ‘Made in USA’ Stove Maker Growing with New Product Lines, Partnerships.
Buck Stove employs more than 140 people at its 300,000 square foot facility, where it makes its signature wood- and gas-fired stoves and is investing $1 million in improvements and upgrades. Its in-house division, Tri-State Powder Coating & Fabrication, has been “growing by leaps and bounds,” Honeycutt said, having recently added accounts like Panera Bread and Carriage House Door Company. Honeycutt said that it’s difficult to be a manufacturer in a small town in western North Carolina, but Buck Stove takes the responsibility to its employees seriously and is totally committed to staying. “That’s our home, she said. “We’re not going anywhere. There has to be a commitment on the part of the company to stay where you are, to stay competitive, and stay focused on the future.&rdquo
The Association for Manufacturing Technology (AMT) announced in December that year-to-date orders for U.S. manufacturing technology in 2014 totaled roughly $5.1 billion, up nearly 4 percent over 2013. In an AMT video explaining the results, Pat McGibbon, vice president, strategic analytics, said that the growth in orders made 2014 “one of the top three years in the last 20.” He said that growth has been particularly strong in the southeastern U.S., where orders for manufacturing technology grew by double digit figures—12 percent—over 2013.
“It may not be the largest sector or region in manufacturing technology orders, but it obviously is the fastest growing,” said McGibbon, who attributed much of the growth to billion-dollar investments by automotive and aerospace OEMs, such as BMW and Boeing, in their South Carolina facilities. But he also said that “tons of suppliers” to both of those organizations, as well as Mercedes, Hyundai, and a number of other manufacturers, are also contributing. “It’s one of the fastest growing areas for manufacturing in the United States, and fast coming up the ranks as being one of the largest places for orders as well.”
In a written statement, AMT President Douglas K. Woods said “The momentum we saw in manufacturing toward the end of 2014 is fueling optimism for 2015, with many major manufacturers saying they plan to hire more and invest more throughout the coming months.”
Due in large part to lower domestic energy prices and the steadily rising costs of doing business in China, the U.S. is once again becoming a preferred destination for high-value manufacturing. And as companies bring production and jobs back to the U.S., they’re injecting new life into what is already a stronger, growing American economy.
“I’ve been saying for some time that the U.S. economy is in a lot better shape than people think it is,” said Alex Carrick, chief economist for CMD Group, a Norcross, Ga.-based provider of construction data and business information for the North American construction industry, in a phone interview. If you look at total employment in the U.S., charted, it’s really a remarkably strong upward path. Employment last year increased by 2.5 million jobs, and historically, the annual figure is usually about 1.2 million to 1.5 million. So, that’s really strong growth in employment.”
Industrial Construction on the Upswing
As U.S. companies continue to reshore their operations, the demand for physical space for new manufacturing construction is intensifying. CMD Group reported in February that industrial construction starts are expected to grow 7.8 percent in 2015 on the strength of sustainable wage growth, increased business spending, and an expanding manufacturing market. Overall, when taking into account the residential, non-residential, and civil engineering sectors, the U.S. construction market is projected to expand by 10.5 percent in 2015.
A flourishing construction industry, Carrick noted, is a big source of demand for manufactured products. “Everybody gains when construction comes back because that’s helping building product manufacturers, and they’ve got very wide regional distribution,” he said. Building products, of course, span a wide array of parts, from small metal stampings for door hardware to castings for plumbing components and larger metal and plastic fabrications for structural uses.
“It’s a very exciting time in the building industry, especially after the downturn we experienced in the market just a few years ago,” said Bill Gray, president of building products manufacturer Uponor North America, in a release in February announcing that the company is investing $18 million to expand its manufacturing facility in Apple Valley, Minn., this year. “We’re seeing significant growth in commercial and residential construction, and this expansion will ensure we match forecasted growth and demand for our PEX systems.”
Uponor’s $18 million investment will be used to renovate an existing 34,000-square-foot structure and build a 54,000-square-foot addition to accommodate lean manufacturing and office space, as well as additional manufacturing equipment that is required. The building expansion is needed to meet forecasted growth for Uponor’s crosslinked polyethylene (PEX) tubing, which is used in plumbing, fire sprinkler, radiant heating and cooling, and hydronic piping systems for residential and commercial buildings. Company representatives say that Uponor has created more than 130 new jobs in the Twin Cities over the past three years and anticipates adding a significant number of jobs as a result of the manufacturing expansion.
Although CMD’s projected 7.8 percent growth in industrial construction starts this year is certainly substantial, it’s markedly lower than last year’s growth of 16.5 percent. Carrick offered two reasons why. “To a certain extent, that’s mathematics. When you’re coming off a low base, for example, if you start with the number four and you add two to it, you’ve got a 50 percent increase. Then when you’ve got six and you add two to it, you’ve got a 33 percent increase. So mathematics is a big part of that.” Another reason, he said, is that industrial construction includes a fair amount of investment in oil and gas projects. Some of these—notably, refining projects and other early-stage industrial work—are currently in jeopardy due to the drop in oil and gas prices, as company executives wait to see if they can expect the type of return on investment that would justify an expansion of production capacity.
Another key metric in the industrial sector is the extent to which manufacturers are utilizing the full capacity of their operations. Currently, the capacity utilization rate for manufacturing is about 79 percent, or “about as high as one could expect right now,” according to Carrick. “Historically, people used to always say it’s got to be around 85 percent before you get much investment for the manufacturing sector,” he said. “But the last time the figure was 85 percent was in the mid-1990s, and I’m not sure we’re ever going to get back there. It hasn’t been that high—in fact, it hasn’t been above 80 percent, hardly, ever since then—like, from 2000 to the present. It just hasn’t gone that high, so right now, it’s about as high as you can expect.” Carrick singled out the U.S. automotive industry as having both a high capacity utilization rate and very strong year-over-year growth in employment at 7.9 percent, almost four times as high as the national rate, he said.
Advanced Technology Services is trying to push the capacity utilization rate even higher. The company, operating with the tagline “we make factories run better,” provides production equipment maintenance, spare parts repair, and IT services for manufacturers in a number of heavy-duty industries, including heavy equipment, building products, engine manufacturing, automotive, and aerospace.
“I like to say that we help our clients find capacity,” said Owens. “It’s capacity that they may not even realize that they have. So if we can improve their output with no capital expense, which we do all the time, that’s a real win for them. You’re getting more out of the investments that you’ve already made, and we do that with virtually all of our clients.”
A printed circuit board manufactured by Calumet Electronics.
Photo courtesy of Calumet Electronics.
Energy Costs and Exchange Rates
The latest development that’s helping U.S. manufacturers become more competitive—one that’s having a dramatic effect—is the drop in oil and natural gas prices. Hydraulic fracturing technology, or “fracking,” has made it possible and commercially viable to extract shale gas and oil from otherwise hard-to-reach domestic reserves, increasing their availability sufficiently to cause significant drops in price. And lower energy costs are starting to give U.S. manufacturing an advantage.
Owens said that the lower oil and natural gas prices are of particular benefit to two categories of American manufacturing companies: those that use petrochemicals as a feedstock for their product (plastics) and those whose operations are energy-intensive (aluminum, steel, paper). “A lot of the process industries use a lot of power,” he said. “Having that energy available and at a lower cost is a real positive, and it’s a lower cost here than it is elsewhere in the world. That’s a good thing, I think, for manufacturing.”
Carrick noted that lower energy costs—particularly for oil and natural gas—are of tremendous benefit to manufacturers in three major areas—transportation costs, heating and cooling costs, and input (feedstock) costs for some industries, such as concrete cement and petrochemicals. But in addition to reducing transportation costs and heating and cooling costs, lower energy prices are “very similar to either a large tax cut or a big wage increase,” he said, resulting in more consumer spending and demand for products.
While declines in the price of oil and gas are well recognized, Carrick believes that exchange rate activity around the world is another important part of the story. Because of the strength of the U.S. economy, the U.S. dollar has appreciated versus almost every other currency, with dramatic effect. He rattled off the dollar’s appreciation versus numerous currencies—the Russian ruble (96.1 percent), Brazilian real (23.8 percent), Australian dollar (21.8 percent), euro (20.0 percent), Canadian dollar (17.5 percent), Japanese yen (15.8 percent), Mexican peso (14.2 percent), and British pound (13.2 percent).
“What that means is that it’s going to be harder for U.S. manufacturers to compete in foreign markets to the same extent, except—and there’s a big ‘except’ here—China has tied its currency to the U.S. dollar, as have a couple of other countries, like Saudi Arabia. The interesting thing there is that the U.S. dollar has appreciated 20 percent versus the euro, for example, and you would think that that would make U.S. goods less competitive—versus China—selling into Europe. But China has tied its currency to the U.S. dollar, so Chinese goods are, likewise, 20 percent more expensive selling into Europe.”
United States exports account for about 9 percent of total GDP, Carrick said. “The currency effect will damage some of that, but that’s not anywhere near as big a part of the economy as exports are for some other countries. And so that’s why most analysts think [lower oil and natural gas prices] are a huge win for the U.S. economy.”
Foreign Investment in U.S. Manufacturing
Chicago has long been one of the country’s and world’s biggest industrial centers, and has been a center for foreign investment in manufacturing for a hundred years or more. Daniel Goff, deputy director of the Office of Trade and Investment at the Illinois Department of Commerce and Economic Opportunity (DCEO), told D2P in a phone interview that although there’s nothing new about the trend of foreign companies investing in Illinois and the Chicago area, the Office of Trade and Investment has seen a resurgence of activity in this area in the last few years. Foreign investors are particularly interested in the Chicago area for a number of reasons, including its market size and strategic location at the center of the country, he said.
“Having a strategic location is really important, and O’Hare Airport is really important,” said Goff. “If you’re coming from overseas, there are few places as well connected as O’Hare. A lot of foreign companies want to be able to get to their plants quickly and with a minimum of connections and wasted time and difficulty, so it’s really important. Also, the Chicago area is the third largest urban area in the country, and it’s a big market for both consumer products companies, if they want to be close to their customers, and also for industrial companies that need to be close to their customers.”
A number of recent developments, however, have spurred increased interest on the part of foreign companies looking to expand their market presence in the United States. Perhaps the biggest driver, Goff said, is that the U.S. economy is growing faster than the economies of any of the developed nations.
“The economy made a lot of shifts and adjustments, and Europe and Japan would feel very lucky to have the kind of growth that we’re seeing these days,” he said. “So, there’s growth in the U.S. market, which means that there’s opportunity here, and then foreign companies want a piece of that, just like domestic companies.”
Goff said that Illinois tends to attract smaller foreign companies—business that have, say, 50 to 100 employees in Germany or Japan and are already exporting to the U.S., but want to establish a manufacturing capability in North America. These companies, unlike many of the large foreign automotive manufacturers that have come to the U.S. and built large supporting infrastructures along with their manufacturing plants, are typically looking to “slide into” an existing manufacturing infrastructure, he said.
“They don’t need to build a plant to build their own widgets because there already are 15 manufacturers within a half hour’s drive. That’s where the Chicago area really succeeds and has a real competitive edge over pretty much anywhere else—because of the diversity of the industrial companies and the ability for a company to come in and get moving on Day One.”
One of the larger firms is the railcar manufacturer Nippon Sharyo Manufacturing, a wholly-owned subsidiary of Nippon Sharyo U.S.A., Inc., which opened a new passenger railcar production facility in Rochelle, Illinois, in 2012. The company has since expanded it with the construction and opening in 2014 of a new building (Shop 3) for metal fabrication and machining that will enable it to meet Federal Railroad Administration (FRA) “Buy America” requirements. “It’s a very big project, a very big plant, and one of the biggest examples of Japanese foreign direct investment (FDI) over the last five years,” said Goff. “They’ve got a plant with about 500 people, and they’ve had a very good experience.”
Nippon Sharyo opened the U.S. facility to increase its competitiveness in the expanding passenger railcar market in the United States and to respond to increased demands for “Buy America” and “localization” of the passenger railcar industry, according to company representatives. The company was also looking to decrease total production costs by reducing transportation costs and by mitigating the risks of exchange rate fluctuations. Shortly after opening its first U.S. facility, Nippon Sharyo was awarded, in November 2012, the contract for Bi-Level Passenger Railcars by the California Department of Transportation (Caltrans) and Illinois Department of Transportation (IDOT), calling for 130 railcars with an option to purchase an additional 300. The contract is funded by the Federal Railroad Administration (FRA), which requires “100 percent Buy America.”
Since the completion of Nippon Sharyo’s Shop 3 in 2014, all components required for the project are now being produced in America, meeting the FRA requirement. The expansion has created an additional 90 manufacturing jobs (Nippon Sharyo had already employed 400 in its original facilities) and created numerous opportunities for U.S.-based vendors as a result of the increased need for U.S.-made materials, parts, and services.
Keith Neubauer, chief engineer at Brake Systems, Inc. (BSI), Portland, Oregon, said in a written response to a D2P survey that BSI has been enhancing its in-house manufacturing capability to meet rising consumer demand for American-made products. More than 90 percent of its products’ content is made in America, according to Neubauer. “BSI has always been primarily a Made in the USA business, and all of our growth is in the USA,” he said. The company recently decided to reshore some castings from China after weighing a number of factors, including the cost of transportation, shipping, and freight, and determining that it could achieve better control of the manufacturing process (and schedule), material content, and quality.
By having its parts manufactured domestically, BSI reaps the advantages of producing parts in a location that’s closer to where they’re designed and engineered. Other factors that tipped the balance in favor of reshoring were BSI’s ability to achieve faster time to market, improved customer service, and greater control over total cost of ownership (TCO), while keeping jobs in the United States, he said.
Robots a Key Contributor to U.S. Manufacturing Growth
One of the keys to making American manufacturing more competitive is robotics, which have been used in industry for decades, but are now being deployed to do more than increase speed and precision. In factories throughout America, robotics and automation are helping U.S. manufacturing companies not only reduce labor costs and quicken time to market, but become more flexible and adaptive while maintaining high quality. A prime example is Rethink Robotics’ Baxter, a mobile, 165-lb American-made robot that can be trained to perform new tasks—machine tending, part packaging, and kitting, for example—as they arise, freeing skilled personnel to perform higher-level responsibilities.
Rethink Robotics’ Baxter robot is deployed at GE’s new Advanced Technology Lab in Plainville, Connecticut.
Photo courtesy of GE.
Baxter’s Intera™ software platform, named to emphasize the interactive production capabilities of the robot, is the key to its flexibility. The software integrates smart software, multiple sensors, and embedded vision, and is upgraded periodically to enhance Baxter’s performance. In a recent upgrade, Rethink introduced its Robot Positioning System to help users more quickly and easily re-deploy the robot after common plant-floor variations—like the repositioning of tables and fixtures—occur. Previous upgrades have expanded Baxter’s skill set to enable the robot to tend machines, such as CNC lathes, ultrasonic welders, and press brakes; pack and unpack parts and components; load and unload lines; and perform kitting.
According to Rethink, the Robot Positioning System enables Baxter to adjust more readily to changing work environments by using environmental markers, called Landmarks™, in conjunction with its existing, embedded vision system. The robot recognizes the original locations of the markers, and, when those locations change slightly, can mark the new locations and adjust its movements accordingly. This ability to adapt to common variability on the plant floor allows manufacturers to deploy Baxter across multiple applications.
“Manufacturing robots have always been caged, not only to protect the workers around them from harm, but also to protect their precisely configured environments from being disrupted by those same workers,” said Scott Eckert, CEO at Rethink Robotics, in a release announcing the Robot Positioning System. “With Baxter, we brought the manufacturing robot out of its cage by making it safe enough to work next to people; and now, we’ve made it safe for the robot to work effectively in real-world conditions as well, by allowing it to adapt to everyday variations that people naturally produce.”
Praxis Packaging Solutions, a Grand Rapids, Michigan contract packaging company that specializes in secondary finished goods packaging for the pharmaceutical, food, and consumer industries, was among the first to deploy the new technology. The company, no stranger to rapid reconfiguration of its production lines, benefits from the flexible automated labor that Baxter provides to meet those demands.
“We need our people and our automation to effectively work in a semi-structured, and sometimes variable, manufacturing environment,” said Chris Hager, information technology manager at Praxis Packaging Solutions, in the release. “Rethink’s Baxter robot, particularly with the new Robot Positioning System, provides a solution that can finally adjust to the changing conditions of our work cells.”
Baxter’s capabilities will continue to expand—even as the physical robot remains unchanged—as the software is upgraded. Enhancements to the software have already enabled Baxter to work twice as fast as it had earlier, with twice the precision previously possible, according to Rethink Robotics.
“As a custom shop, every day presents a new challenge on the plant floor,” said Josh Rupp, process engineer at Du-Co Ceramics, in a release. “Most automation solutions don’t have the flexibility needed to respond quickly enough to these changes in demand—but Baxter does. Baxter picks up and moves parts four at a time, allowing us to respond in record time.”
Du-Co Ceramics, a ceramic parts manufacturer headquartered in Saxonburg, Pa., and a champion of the Made in America movement, was seeking flexible and affordable automation when it added Baxter to its ceramic parts production line. The robot, which sells for under $30,000, works safely alongside the Du-Co team to place ceramic parts into a saggar, readying the parts for firing in the kiln. By rapidly adapting to changes in process and parts, Baxter allows Du-Co to improve operational efficiency while maintaining precision and quality in its complex ceramics parts. After smoothly integrating Baxter into a pick-and-place task, Du-Co foresees Baxter performing machine tending and bulk handling tasks in the future.
“Du-Co Ceramics is an excellent example of a manufacturer looking to balance flexibility with efficiency, precision and cost,” said Jim Lawton, CMO of Rethink Robotics, in the release. “Like many of the manufacturers we work with, Du-Co is maintaining a competitive edge by building the factory of the future, leveraging smart, adaptive automation solutions that can quickly adjust to dynamic environments.”
Baxter is in use today at numerous companies across the United States and Canada, from GE’s Advanced Technology Lab in Plainville, Conn., to injection molder Koller-Craft Plastic Products in Fenton, Missouri, and aerospace hydroformer Cutting Dynamics, in Avon, Ohio. Other manufacturers deploying the robot include the injection molding firms The Rodon Group, of Hatfield, Pa., and Vanguard Plastics, in Southington, Conn., the stonecutting tools manufacturer Trow & Holden, of Barre, Vt., and the sheet metal manufacturer Tradesman Manufacturing, of Lethbridge, Alberta.
Many manufacturers were just beginning to become familiar with Baxter when Rethink Robotics added another smart, collaborative robot, Sawyer™, to its family of robots in March. Smaller and lighter than Baxter at 42 lbs, Sawyer is a single-arm, high-performance robot designed to work in tight spaces while performing precise tasks that have, historically, been difficult to automate with traditional industrial robots. These tasks include smaller-footprint machine tending, circuit board testing, and other jobs that require high precision and significant agility and flexibility.
Rethink Robotics’ SawyerSawyer™, a smart, collaborative robot scheduled for limited release this summer, is designed to execute precise tasks—such as machine tending and circuit board testing—that have, historically, been impractical to automate with traditional industrial robots.
According to Rethink, Sawyer offers a 4kg (8.8 lb) payload, with 7 degrees of freedom and a 1-meter reach that can maneuver into the tight spaces and varied alignments of work cells designed for humans. High-resolution force sensors are embedded at each joint, enabling compliant motion control that allows the robot to “feel” its way into fixtures or machines, even when parts or positions vary. This is said to enable an adaptive precision that is unique within the robotics industry, and allows Sawyer to work effectively in semi-structured environments.
“With Baxter, we introduced the concept of robots and people working together on the plant floor,” said Rethink Robotics President and CEO Scott Eckert in a March 19 release. “With Sawyer, we have taken that relationship to the next level, with a high performance robot that opens the door for many new applications that have never been good candidates for automation. As we continue to redefine this industry, we also continue to give manufacturers new ways of adding efficiency and flexibility into their operations.”
Sawyer, with a base price of $29,000, is currently being field tested by several large manufacturing companies and is scheduled for release, with limited availability, in the summer of 2015. One of the companies field testing it is Jabil Circuit, Inc., the global electronic product company headquartered in St. Petersburg, Florida.
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