Many of today’s manufacturing trends are in line with the industry’s goals to improve processes, create more efficiency, and meet consumer demand.

The manufacturing industry has seen challenges, from changes in the way people work to the rapid growth in demand, with many of these challenges accelerated by the recent covid-19 pandemic.

So, what evolutions and challenges are the manufacturing industry currently facing? Let’s dive into the latest manufacturing trends.

WHAT ARE THE LATEST TRENDS IN MANUFACTURING?

• DIFFICULTY FINDING LABOR
• DIVERSIFYING WORKFORCE
• TECHNOLOGY IS TAKING OVER
• INCREASING CYBERSECURITY
• CARBON NEUTRALITY
• BUILDING RESILIENT SUPPLY CHAINS

DIFFICULTY FINDING LABOR

Manufacturers are still struggling to find labor, with a recent Deloitte survey estimating that the manufacturing sector will be short 2.1 million skilled workers by 2030. It’s difficult for manufacturers to fill open positions, with respondents claiming it is 36 percent more difficult to recruit than in 2018.

To combat the shortage, manufacturers are looking for ways to recruit and retain skilled talent, by raising wages and reskilling current talent to meet company needs. According to the Manufacturing Institute, young employees are attracted to companies that look to train and invest in them. 70 percent of manufacturing workers under 25 said they will stick with an employer because of these opportunities to grow.

Additionally, technology is advancing and should help manufacturers combat their labor challenges. With tools like artificial intelligence (AI) and the Internet of Things (IoT) becoming more accessible, companies should be able to become more efficient and able to produce more with fewer people.

DIVERSIFYING WORKFORCE

Diversifying the workforce is one of the growing manufacturing trends because the industry has held a reputation for being a male-dominated industry. According to a study by the Manufacturing Institute, less than 30 percent of manufacturing workers are women. So, in 2021, the Building Economic Strength Through Manufacturing Act was passed. This bill seeks to double the number of women-owned and minority-owned manufacturers.

According to Glassdoor, when applying for jobs, 76 percent of applicants look for company diversity. Diversifying the workforce is a trend that goes in hand with employee recruiting. It creates opportunities for new talent and can help make operations more resilient.

TECHNOLOGY IS CHANGING THE INDUSTRY

Technology changing the industry has been and will be a manufacturing trend for some time. Technology is improving, becoming more accessible, and showing its benefits, so many manufacturers are investing in it more. Manufacturers need technology to keep up with the challenges of increased demand while facing a labor shortage.

Some technology tools companies are using include AI, automation, sensors, IoT, robotics, predictive maintenance, and remote monitoring. These tools help manufacturers with the manual and repetitive tasks that they struggle to find the labor for. In addition, companies are evaluating their operations to make the best use of technology and people.

Frontline workers will likely expand their roles to take on new responsibilities. As technology automates processes, workers will need to use more communication, collaboration, and analytical skills. Technology will also offer more flexibility and safety for frontline workers, further helping with employee recruiting and retention.

Some manufacturers are even pushing the limit and testing our “dark factories”. These are fully automated factories without any human workers on site.

Industry 4.0 is what many refer to as this trend of technology. It’s a shortened term for what is being called the fourth industrial revolution. Industry 4.0 technologies, such as the above examples, can raise productivity by 40 percent.

INCREASING CYBERSECURITY

As technology use increases and manufacturing processes get more connected and complex, a growing challenge is cybersecurity. In 2021, manufacturing was the industry that suffered the most cyberattacks, according to IBM’s X-Force Threat Intelligence Index. In fact, according to a survey by Omdia, the increasing risk of cyber attacks are one of the main challenges slowing down the implementation of more analytics, automation, and AI in manufacturing.

Because of its increased risk for cyber attacks compared to any other industry, manufacturing companies are investing more in the cybersecurity strategies and monitoring, implementing the use of multi-factor authentication, issuing employee training on cybersecurity, and building recovery plans to be prepared should any attacks take place.

CARBON NEUTRALITY

Combatting climate change is a priority on everyone’s mind and the manufacturing industry is no exception. The manufacturing industry produces almost a quarter of global greenhouse emissions. However, with the government pushing industries towards sustainability, manufacturing companies are rethinking their operations.

One manufacturing trend is carbon neutrality. Carbon neutral is when a company removes the same amount of carbon dioxide it emits into the atmosphere.

Manufacturing companies can become carbon neutral by purchasing carbon offsets. An example of this would be a company sponsoring a solar energy farm or a project for reforestation.

BUILDING SUPPLY CHAIN RESILIENCE

Since the start of the covid-19 pandemic and the supply chain bottlenecks we continue to face, supply chain resilience remains a top manufacturing trend.

Supply chain bottlenecks like the covid-19 pandemic, high container costs and delays, severe weather, protests, and new regulations are a few of the disruptions that have shed light on manufacturers’ fragile supply chains.

Manufacturers continue to look for more resilience to keep up with consumer demand despite these challenges.

Improving communications with supply chain partners, onshoring or reshoring, and investing in supply chain technology are some of the ways manufacturers are making their supply chains more stable.

STAY AHEAD OF MANUFACTURING TRENDS

Whether you know the latest manufacturing trends are or not, having an expert on your side is one easy way to stay ahead. And that’s just what Trinity Logistics aims to be.

Yes, our primary focus is as your logistics partner, but our People-Centric culture means we’re more than that. As a business relationship, we’re invested in your company’s success. We stay knowledgeable on what’s going on in your industry to help keep you updated. And we stand at the ready to offer your business any logistics support and expertise that you need.

Don’t miss your opportunity to gain a business relationship that stays on top of your industry’s trends and is people focused. Let’s get connected.

HVAC contractors and plumbers continue to face supply chain woes like material shortages and rising costs. 

Battling these issues is making it tougher for HVAC contractors and plumbers to meet their customer’s demands in the short term and perhaps even longer. Here’s what HVAC contractors and plumbers can do to rise above. 

WORK WITH MANY SUPPLIERS 

If current suppliers can’t meet your needs, then it’s a good time to explore other ones. Many suppliers are ready to strike up new relationships and may be willing to be more flexible with contracts. Shopping with multiple suppliers will not only gain you access to more resources but can offer you more varied pricing options to consider. 

CONSIDER ALTERNATIVE MATERIALS 

It might be worth checking into other materials as they may be easier to get your hands on. Considering other brands of materials or equipment can keep your projects from staying stagnant. 

COMMUNICATION IS KING 

In difficult times like these, communication can be something that gives your company a competitive edge. Not only is it a vital aspect of a successful business, but it helps build trust and long-lasting relationships. While no one likes delivering bad news about backorders or delays, keeping your customers informed will go far, as they’ll appreciate your honesty and transparency. 

IMPROVING CUSTOMER SERVICE 

While material shortages and delays are out of your hands, great customer service will keep your current customers and help you gain new ones. In addition, extra attention to customer service can help address any frustrations among your customers. While these challenges may not last forever, your reputation will, so make sure yours remains good, if not great. 

PRE-ORDER MATERIALS AND EQUIPMENT 

Many HVAC contractors and plumbers often only order the materials and equipment as needed. Instead, plan and stock up on the materials you most often use for your projects. This way, you’ll have what you need ready instead of waiting for materials to deliver. 

CONSIDER MODE DIVERSIFICATION 

Trying different modes of transportation could help you offset your increased costs. Keep an eye on transportation costs across the different modes available. Being more flexible with your freight shipping can give you some financial benefits. 

INVEST IN TECHNOLOGY 

Logistics technology, like a transportation management system (TMS), has tools available to help you stay on top of your supply chain and plan efficiently. One example is helping you with your routing decisions by matching your freight with the best carriers, lanes, rates, and transit service. It will also enable you to better track and manage any service disruptions or shipment delays in real-time, thus increasing your service levels and improving your customer relationships. 

THINK ABOUT ONSHORING 

Onshoring is a strategy that HVAC contractors and plumbers can use to mitigate supply chain woes and improve competitiveness. Onshoring strategy can ensure resilience in your supply chain and give your company a competitive edge. 

Onshoring refers to the overall practice of moving manufacturing operations from foreign soil back to the United States or outsourcing to domestic contract manufacturers rather than overseas. An example of onshoring would be having operations moved to Mexico versus China.

Onshoring allows your supply chain shorter travel times since materials and products are much closer than if they were overseas. This not only keeps your projects moving that much quicker but reduces your transportation costs. Additionally, you’ll also have the benefit of being greener due to less fuel being used. 

CONSIDER OUTSOURCING YOUR LOGISTICS 

According to the 2020 Annual Third-Party Logistics Study, 67 percent of shippers stating using a 3PL contributed to reducing their logistics cost, while 83 percent said it improved their service. By outsourcing to a 3PL, like Trinity Logistics, you won’t have to spend hours worrying about your logistics and get the help you may need to be more flexible with your shipping options. 

“In this market where it’s difficult to meet demand and project deadlines due to material and product shortages, it may not be the best option to send it via LTL as you may save a few dollars on the front end but pay for it with extended estimated transit times, and the possibility of the parts being damaged as they go from terminal to terminal throughout transit. Working with a 3PL, like Trinity Logistics, can bring you other possibilities on how to move your freight efficiently, such as dedicated full truck options, expedited (straight trucks/sprinter vans), partial, and hot shot options to keep your freight moving to arrive on time so you can achieve your project deadlines.”

– Michael Whitaker, Business Development Representative at Trinity Logistics 

If you’re looking for a reliable 3PL provider to help with your HVAC supply chain, consider Trinity Logistics. With Trinity, you gain a Team of experts to help optimize your supply chain, help arrange shipping using other modes, and end-to-end visibility through our available technology.

Stay up to date on the latest information on conditions impacting the freight market, curated by Trinity Logistics through our Freightwaves Sonar subscription.

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2023 Crystal Ball

It’s usually this time of year when predictions for the upcoming year start to make headlines. It’s safe to say that most folks could make some predictions based on what has transpired recently, so I wanted to highlight a few of those as we kick off the new year.

The gap between spot and contract rates will stabilize.  

Now, this does not mean that they will be equal – that rarely happens. Just about a month ago, the spread was quickly approaching $1.00 per mile between contract and spot rates (with contract being higher). That gap is slowly starting to shrink (Figure 1.1). Some of that is due to spot rates seeing a holiday bump, and part of that is related to new contract rates taking hold. With many carriers taking an extended break from the road since mid-December, less capacity has pushed spot rates higher. This upward trend will be short-lived and expect rates below $2.00 per mile to become the norm as we chug through winter and into early spring. Contract rates will also trend downward, finding a floor most likely in the middle part of the year.

Few sectors will see bright spots in 2023.  

I don’t think anyone thought the economy could continue to chug along at its rapid pace seen in the latter half of 2020 and through most of 2021.  Even though 2022’s growth was not as robust as the prior year, the U.S. Gross Domestic Product (GDP) should seek out a modest two percent growth rate. However, where that growth occurred sets the stage for this year.  

2022 saw a return of spending on services versus goods. So, while things like healthcare are important to the overall economy, from a freight standpoint, service spending has much less impact on transportation. Expect auto sales, both new and used, to continue their strong run. As parts and inventory issues continue to be resolved, vehicles with temporary tags will be more commonplace as Americans continue to purchase cars and trucks.  

On the opposite end, most notably, the housing market will have a rough 2023. With Americans seeing inflation compete for more of their take-home dollars, and the cost of borrowing increasing, many will choose to remain in their current situation. And it’s not just the building materials that will see less of a demand. With fewer new homes comes less demand for things that go in those homes – like appliances, carpets, and furniture.

Following the building industry, manufacturing will be the next downstream effect, and banking will also see less demand for consumer and business loans. Overall, expect 2023 to see, at best, no year-over-year (YoY) growth in GDP, with 2024 being a rebound year (Figure 2.1)

Import activity will continue to slow. 

As we saw in last month’s update, Figure 3.1 shows the impact of the ship backlog being resolved and container movement starting to slow. That will be a common theme this year. While 2022 saw year-over-year import activity down almost 20 percent, that downward YoY story will continue in 2023. This will have an immediate impact on intermodal activity, but also over-the-road and less-than-truckload volumes will feel the impact.

One thing to keep in mind as we see recent actual and forecasted numbers showing negative, that is against a backdrop of a very successful 2021 and modest growth year in 2022. So while 2023 will not continue that positive trend, by comparison to a recent down year like 2019, 2023 will be up from an overall volume standpoint versus just a few years ago.

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Stay up to date on the latest information on conditions impacting the freight market, curated by Trinity Logistics through our Freightwaves Sonar subscription.

As we near the end of 2022 and the start of 2023, let’s look at three things in relation to the freight market: freight volumes, the rates, and what’s happening in the maritime segment. 

SLOWING FREIGHT VOLUMES

In Figure 1.1, you can see the contracted outbound tender volume index over the past four years. The yellow line on the top represents 2021, the blue line represents 2022. 

Since about the end of the first quarter of this year, we started seeing those volumes pacing around the same way as last year, but then all of the sudden they started to take a nosedive. Contract volumes are down around 15 percent below 2021 levels. What that means is we’re seeing less volume trickling to the spot market and this trend will certainly continue as we go into 2023.

FALLING RATES

Speaking of rates, in figure 2.1, you’ll see the top green line represents the average van rate for contracted freight. The blue line is vans for the spot market. 

As you can see, just like with freight volumes, they were running neck and neck until about March, and then there was a discrepancy. We’re seeing this on the rates side as well. Typically, the difference between contracted and spot rates is maybe 10 or 15 cents per mile. The fact that right now it’s about 70 to 80 cents a mile, we’ve never seen it at that high of a discrepancy.  We do feel that as we get into the bidding season, new contracted rates will start to kick in, so we do anticipate that the green line will trend down.  I’m not sure how much the blue line, the spot line, can continue to go, as it’s currently sitting at just below $2.00/mile. We may soon reach a point where carriers are not profitable on spot rates. 

FINDING MARITIME BALANCE

On the maritime side of things, in figure 3.1, the green line shows the number of actual containers that are clearing customs. They are coming off the ships, being unloaded, and clearing customs to be distributed via warehouses, intermodal, truckload, and what have you. The blue line shows the number of actual import bookings that have happened. 

You may say to yourself, that doesn’t make sense. If somebody is booking freight and that number is going down, how come we are still clearing these containers? Remember, throughout much of 2021 and even 2020, there was a backlog of ships, particularly on the West Coast, waiting to get unloaded. So, while the flow of ships is not coming into the ports as greatly as it was, it just kind of shows you how big of a backlog there was, that it’s taken six months and we’re still not through this backlog of ships, both on the West and East Coast.

Overall import volume is down 20 percent year over year. Yet, East Coast and Gulf ports are up as shippers moved their freight to the East Coast when the West Coast was originally facing backlog delays. 

KEY TAKEAWAYS

Low, single-digit rejection rates on contracted freight mean less is hitting the spot market, by some accounts 30 percent less than last year. 

Carriers need, and we need carriers, to remain solvent. Be diligent in negotiations with carriers but understand that we are very close to the floor for when a carrier becomes unprofitable.

Less freight is coming through the ports. Short-term will trigger an over-supply situation, particularly on ports with declining YoY volumes like Los Angeles and Long Beach. Other ports like Savannah, Houston, New York, and New Jersey will see more capacity balance.

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Onshoring, nearshoring, reshoring – these are terms that we keep hearing in growing popularity lately. Even before Covid-19, many companies have considered onshoring their operations due to concerns about quality and supply chain disruptions. Political tensions and rising tariffs also triggered the growing considerations. 

When Covid-19 hit, it led to sky-high air and ocean freight rates. Any companies with operations in China saw their productions come to a halt. Offshoring your operations has never been riskier. You never know what could happen in another region and how that could affect your operations if offshored. So, the question is, should you be onshoring your operations?

A BRIEF LOOK BACK

Before the 1980’s manufacturing had a large presence in the United States. Technology improved communication and global transportation, so companies saw the opportunity to save on costs by offshoring their operations outside the United States. Offshoring grew and became the norm, until recently. Onshoring has become popular again due to politics, rising labor costs, and increased demand for higher quality products.

WHAT DOES IT ALL MEAN?

Onshoring, nearshoring, or reshoring; it all refers to the overall practice of moving manufacturing operations from foreign soil back to the United States. It may also refer to the practice of outsourcing to domestic contract manufacturers rather than overseas. Nearshoring can also refer to the moving manufacturing to outside the United States, but not across ocean waters. An example of nearshoring would be having operations moved to Mexico.

Offshoring involves outsourcing manufacturing assets far outside of the primary country of operations. American companies have traditionally offshored manufacturing to Asian or Southeast Asian regions. Offshoring has been used in situations where production, materials, and labor costs outweigh travel complexities and shipping costs. 

ONSHORING VS OFFSHORING WHEN IT COMES TO..

..YOUR CUSTOMERS

Poor customer service can have a huge impact to your company’s success. More than 50% of consumers said they would never do business with a company after just one negative experience. When choosing to onshore your processes, it gives you the benefit of serving and supporting your customers from “home”, which reduces your risk of your customers receiving poor service elsewhere. 

Customers nowadays like to support products made in their own country. They feel that it further benefits the local economy and they feel more confident in a products quality when its been made in the same country. Depending on your customer base, this could give you a huge advantage over your competitors. 

Due to the recent Amazon Effect, customers now expect their products delivered to them in days. Shorter travel times can make that expectation easier to meet. If suppliers are farther away, delivery times can sometimes be uncertain and take longer. Customers also want full transparency on their freight’s travel, and onshoring can make that more successful on your end. 

..YOUR SUPPLY CHAIN

Onshoring can offer you better supply chain management. It allows shorter lead times because companies can operate all within the same time zone (or at least closer to each other than if offshoring). Not to mention other processes that can take time, such as design and approval. All parties in the supply chain can have closer relationships because they won’t have to deal with the challenges of long distances and varying time zones. Nor do you have to worry about the risk of facing language or cultural barriers among locations. Onshoring is becoming very popular for those organizations that need a lot of communication to be successful.

..YOUR COSTS

With rising labor and shipping costs, many find savings are no longer there when it comes to offshoring. Time is money and offshoring can add weeks to delivery times. Shorter distances with onshoring mean reduced (and less complicated) transportation costs. This also means less fuel used, giving you the benefit of being greener (and customers like that). 

As time goes on, overseas economies are further developing, taxing is changing, labor, wages, and shipping costs are all on the rise; all making it less profitable to handle business offshore. Tariffs have risen in recent years, with some commodities up to a 25 percent charge. By choosing to even nearshore your operations rather than offshore, you can avoid those increased costs. 

There’s also the possibility of defected goods arriving to consider when offshoring. Recalled products have been a rising concern. The defect rates of shipments from other countries can be so high at times that entire batches must be inspected upon arrival. The time and expense to do this and rework or scrap products, can wipe out the savings offshoring promised and even exceed your original budget.

THINGS TO ASK WHEN CONSIDERING ONSHORING

Tariffs, customs, duties

• How many fees will you incur in transporting your finished goods to distributors? Could these fees be avoided if goods are produced elsewhere?

Transportation costs

• Transportation can sometimes be your largest expense. You can reduce costs by shortening travel distances or choosing to work with a logistics company, like Trinity Logistics.

Lead times

• How long will it take to get the finished product in hand? Lead times vary depending on how far away production takes place. Make sure to consider design and approval time. This is one part of the process where differences can slow down your production.

Political environments

• What is the political climate like in the region where your goods are produced? No country is immune to civil unrest. What is the political climate like between your primary company’s country and where the products are made? Consider any chance of future supply chain disruption, and those tariffs. 

BEFORE YOU DECIDE..

Before you make your decision on whether to onshore or offshore, make sure to consider all factors. Onshoring may seem like the answer right now, but will it still in the future? If transportation costs and delivery disruptions are your main concern in business, consider looking into outsourcing your logistics with third party-logistics (3PL), like Trinity. Choosing to work with a 3PL can offer you some of the same benefits as onshoring, but with less work on your part.