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2017

Manufacturing is enjoying a resurgence in the U.S. of sorts as companies from around the world invest in U.S. manufacturing. It appears, however, that shift may be due to technological innovations, rather than policies or an availability of labor. Nonetheless, speakers at a recent conference believe the U.S. is well-positioned to be a leader in advanced manufacturing for years to come.

 

“The reason, candidly, is less about manufacturing people and more about the technology,” Mike Marusic, COO of Sharp Electronics, said at an event hosted by Bloomberg, a U.S. News & World Report article reports. Marusic explained that Sharp is one of several companies which have chosen to increase investment in the U.S. in recent years, rather than seeking out “traditional manufacturing places” like China and Thailand.

 

Other companies include medical device manufacturer Insulet, which broke ground last month on a new central Massachusetts facility. That facility is expected to create hundreds of local jobs, and will provide additional manufacturing capabilities closer to Insulet’s large and growing U.S. customer base. The new U.S. manufacturing operation is also expected to drive operating efficiencies and increase productivity, according to the company.

 

Then there’s Taiwanese electronics manufacturing giant Foxconn. Despite its proximity to what have historically been considered countries with cheap labor, the company has plans to build a $10 billion factory in Wisconsin and develop a base of operations in the U.S. The Milwaukee Journal Sentinel now reports major issues between Foxconn and the state of Wisconsin have already been settled.

 

At the heart of this manufacturing resurgence, Marusic said, is the wave of technological advancements and the rise of the Internet of Things within the U.S., driving development of products including household items such as coffeemakers or refrigerators carrying Internet connectivity and data-tracking capabilities. Furthermore, as 5G mobile and wireless networks become the norm domestically and local researchers make more progress toward developing artificial intelligence capabilities which could revolutionize both industrial processes and consumer interactions, America’s “vibrant tech and startup scene puts it in a great position to attract manufacturing companies of the future,” Marsuic said.

 

“That will change, kind of, how information is moved around,” Marsuic said at the conference, the U.S. News & World Report article reports. “We’re seeing it more come this way into the U.S. than to traditional manufacturing places.”

 

The flip side of the coin is that manufacturing reshoring, and even international companies expanding operations into the U.S., hasn’t necessarily equated to the return of manufacturing jobs—and it isn’t expected to create nearly the same number of jobs that would have been created in the past. That’s because newer “smarter” factories and more advanced industrial processes require fewer workers than would have been needed in the past, which has the potential to reshape entire industries along with the expected capabilities of manufacturing operations.

 

“I think that will certainly be a trend that opens up a new series of questions which companies must deal with,” Shelly Swanback, group operating officer at Accenture Digital, said at the conference, U.S. News & World Report notes. “It totally changes the game in terms of where you want to [manufacture] and the workforce you need to have.”

 

What are your thoughts on reshoring and near-shoring? Secondly, do you too see a declining number of jobs due to increased automation and advanced manufacturing?

Medical device and drug manufacturing are significant industries in Puerto Rico. The U.S. Food and Drug Administration is monitoring companies’ facilities’ recovery after destruction resulting from Hurricanes Irma and Maria, and has found manufacturing there remains fragile with potential for shortages, explains FDA Commissioner Dr. Scott Gottlieb.

 

The medical device manufacturing sector in particular is struggling, Dr. Gottleib said last week in prepared remarks. There are currently more than 50 medical device manufacturing plants in Puerto Rico. Collectively, they manufacture more than 1,000 different kinds of medical devices, ranging from simple yet essential products such as surgical instruments, to highly complex devices such as cardiac pacemakers and insulin pumps.

 

“To date, we’re monitoring about 50 types of medical devices manufactured in Puerto Rico that are critically important to patient care—because they may be life-sustaining or life-supporting and/or because there may be a single manufacturer of that device type,” said Gottleib. “The FDA is working closely with about 10 manufacturers … to prevent medical device product shortages across the U.S. We are particularly focused on blood-related medical devices.”

 

Puerto Rico’s medical device industry faces the same significant challenges as most manufacturing sectors in Puerto Rico: a lack of power, connectivity, transportation, and clean water, said Gottleib. Most, if not all, of these medical device manufacturers continue to rely on generator power, and as a result, have been unable to return to pre-hurricane production levels. Similar to agency efforts with drug manufacturers, the FDA, along with manufacturers and government partners, is working to help device facilities secure fuel and the logistical support to move critical products onto and off the island, he said.

 

“We know it will likely be months before power is fully restored and medical product manufacturing returns to pre-hurricane levels,” Gottleib continued. “As we continue to monitor at-risk products, the FDA is taking other steps to mitigate the potential for shortages. This includes considering, when necessary, importing a device from outside of the U.S., or allowing manufacturers to shift production to alternative sites.”

 

A recent New York Times article offers an example which not only shows the inherent risk when many companies and facilities are clustered in a geographic area, but also the far-reaching impact of a supply chain disruption. In this case, the product is a Mini-Bag—a small, fluid-filled bag used to dilute drugs, like antibiotics, so they can be dripped into patients’ veins. The bag’s ease of use has made it popular in small facilities as well as at nationally known hospitals. Now, however, hospital pharmacists across the country are racing to find alternatives—which are becoming scarce themselves—after Hurricane Maria halted production at the factory in Puerto Rico where Baxter International makes the product.

 

Pharmacists at half a dozen hospitals, from Utah to North Carolina, said in interviews with NYT that the fluid bag shortage has had a domino effect, leading to scarcities of a range of products as administrators race to stock up on the supplies they need to keep their hospitals running smoothly. Even products like empty bags and plastic tubing, which are also made by Baxter in Puerto Rico, have been hard to come by, some said.

 

“With drug shortages, it’s often a race to see who can find a supply of the drug on shortage and also any alternatives,” Philip Trapskin, program manager of medication use strategy and innovation at UW Health, the University of Wisconsin-Madison’s health system, says in the NYT article. “We’ve been able to get what we need to avoid disruptions in patient care, but the mix of products isn’t ideal and there are no guarantees we will continue to get the supplies we need.”

 

In the meantime, Baxter recently announced that the FDA now allows it to import fluid bags from the company’s factories in Ireland and Australia, and that production in Puerto Rico was slowly resuming. While Baxter didn’t provide a timeline for when the bags would be back in stock, the reality is that it could be weeks—or even months.

 

What are your thoughts on the supply chain disruptions of pharmaceuticals and medical devices produced in Puerto Rico? Will the FDA indeed be able to help companies bring facilities back on-line quickly?

Millennials working in supply chain management jobs are focused, engaged, enthused and committed to working in supply chain management, according to a new report from APICS, the professional association for supply chain management. Millennials in supply chain jobs were surveyed earlier this year by Peerless Research Group in conjunction with Supply Chain Management Review (SCMR) and the American Productivity & Quality Center (APQC), and the resulting APICS report, “Millennials in Supply Chain,” shows that among Millennial respondents, the supply chain represents a sought-after, dynamic and rewarding long-term career choice for professionals in their 20s and 30s.

 

“The results of the report are eye-opening, especially when compared to [comments from] more senior supply chain professionals in leadership positions, who were part of a previous study from APICS and SCMR in 2016,” says APICS CEO, Abe Eshkenazi, CSCP, CAE, CPA. “We see that more Millennials started their career in supply chain, are moving around less, are highly satisfied with their jobs and see more opportunities for advancement in the field.”

 

While planning, procurement and inventory management are the top three supply chain roles for Millennials, supply chain management is increasingly a cross-functional position. Millennials say they are involved in a wide variety of supply chain functions, led by inventory management (64 percent), transportation and logistics (56 percent), demand planning, forecasting and S&OP (54 percent), supply chain design and planning (52 percent), and purchasing (51 percent).

 

Looking to the future, respondents want to be involved in supply chain design and planning (49 percent), business intelligence and analytics (45 percent), lean management (44 percent), and robotics and robotics process automation (41 percent). Interestingly, they consider inventory management, manufacturing, warehouse and DC management and transportation and logistics as less desirable career paths, with less than 30 percent of the respondents hoping for future involvement in those areas.

 

Nonetheless, there are challenges for the industry to address. For instance, just as research of senior managers in 2016 showed a pay gap between males and females, there is a gender wage gap among Millennials. Men and women start at roughly the same salary, but the disparity grows larger as they move up the career ladder, the report notes. This disparity is chief among complaints from Millennials surveyed.

 

That said, the primary frustration, cited by 36 percent of respondents, is an unclear career path for upward mobility in supply chain positions. Relationships with management—or, really, the lack of positive relationships—is also a significant frustration for Millennials. Twenty-three percent say they are frustrated by the attitude toward Millennials by older generations in their organizations, and a similar number said they feel disconnected from the big picture or experience a lack of purpose in the workplace. In other findings, a lack of mentoring and strong hands-on guidance is a concern for 22 percent of respondents, 21 percent said they believe they don’t get enough recognition for the work they perform, and 20 percent said they are put off by micromanagement from leadership.

 

“Despite some noted frustrations, Millennials are continuous learners and fast movers who are eager to advance,” Eshkenazi says. “Millennials are growing and learning on the job in an era of lean, optimized, end-to-end supply chains, and are critical to the ongoing transformation of the industry. To address the ongoing skills gap, industry expectations, priorities and communication styles must adapt to, and embrace, the different needs of this younger generation.”

 

If you are a Millennial, do you agree with the findings in the report? If you aren’t a Millennial, do the report’s findings mirror what you hear from Millennial colleagues?

Some estimates predict that, over the next decade, as many as 3.5 million manufacturing jobs will need to be filled, which emphasizes the importance of training the next generation of advanced manufacturing technicians. With that in mind, I was interested to recently read about Workshops for Warriors, a state-licensed, non-profit created to provide quality, accredited STEM programs and advanced educational opportunities for veterans, transitioning service members and wounded veterans, or Wounded Warriors. The educational programs are provided at no cost to the veterans, thanks to donations from, and partnerships with, companies that include Johnston Companies, JP Morgan Chase & Co. and SolidProfessor.

 

“In our region alone, more than 40,000 veterans transition out of military service each year,” says former U.S. Navy Officer Hernàn Luis y Prado, founder of Workshops for Warriors. “Unfortunately, many [veterans] face significant challenges—including access to living-wage jobs. Our mission is to make significant, lasting improvements in the lives of veterans and their families, and job re-training is a key to this transformation.”

 

The accredited school, which works to train, certify and help graduates get into advanced manufacturing careers, accepts only a select 50 students each semester. Each graduate earns third-party, nationally-recognized credentials accredited by the National Institute for Metalworking Skills (NIMS), Immerse2Learn, the National Coalition of Certification Centers (NC3) and the American Welding Society (AWS).

 

To date, 421 students have graduated from Workshops for Warriors, earning a combined 2,350 nationally recognized credentials. Machining students earn training in Computer-Aided Design (SolidWorks), Computer-Aided Manufacturing (Mastercam), CNC milling and turning (on Haas Mills and Lathes), 3D printing (MarkForged) CNC laser (Amada), CNC waterjet (Flow), and Precision Measuring Tools (Starret). Welding students earn nationally recognized credentials from AWS in shielded metal arc welding, gas metal arc welding and flux cored arc welding.

 

WFW recently announced it’s teaming with Stratasys, a supplier of applied additive technology solutions, to provide advanced manufacturing job re-training and certification initiatives for students through a new additive manufacturing STEM-accreditation and training. Key to this program is the Stratasys Fortus 450mc 3D printer. Driven by Stratasys FDM technology, the solution meets demands of high-requirement production, such as faster speed, agility and design freedom for accurate and repeatable 3D printed prototypes, manufacturing tools and production parts.

 

WFW also announced last month that it has received a $1 million donation from Ariel Corporation, a manufacturer of separable reciprocating gas compressors. For Ariel, this training pipeline is a great way to find qualified, skilled machinists while also supporting veterans in their transition to civilian life, says Karen Buchwald Wright, President & CEO of Ariel Corporation.

 

“We’re so pleased to be able to support Workshops for Warriors, and we encourage manufacturers across the nation to take a look at the great candidates this program graduates,” Buchwald Wright says. “They come with all the fantastic training and experience received in their military service, combined with skills we’re looking for in a modern manufacturing operation. We couldn’t ask for more.”

 

What are your thoughts about training military veterans for advanced manufacturing jobs? Does your company have a program for training or recruiting veterans?

Last weekend, Kobe Steel, Japan’s third-largest steel maker, admitted it may have falsified data to show that its aluminum and copper products had met customer specifications, and suggested the problems could be widespread. This week the company confirmed it had falsified data about the strength and durability of aluminum and copper products used in cars, aircraft, space rockets and defense equipment. The company further said it’s examining other possible data falsifications going back 10 years.

 

Kobe Steel said inspection data, such as on the strength of the products, were rewritten when customer specifications were not met. Kobe Steel Executive Vice President Naoto Umehara said workers were “feeling pressure” to meet the deadlines to deliver the products, but denied that data fabrication was ordered by senior management, a Japan Times article reports.

 

The company checked products shipped over the past year and found data fabrication in about 19,300 tons of aluminum products, 2,200 tons of copper products and 19,400 pieces of aluminum forging and casting products sold to more than 500 customers. While Kobe Steel didn’t disclose the names of the customers, aluminum products supplied with fabricated data were found to have been used in vehicles made by Toyota and Mitsubishi Regional Jet passenger planes, which are currently being developed by a subsidiary of Mitsubishi Heavy Industries Ltd., the Japan Times article reports.

 

An official of Mitsubishi Heavy said the aluminum products in question are unlikely to have safety problems and that the development of Mitsubishi Regional Jet will not be affected, Japan Times reports. The aircraft will be Japan’s first domestically developed jet airliner, although its delivery schedule has been repeatedly pushed back.

 

Toyota said it used the aluminum products in some car parts, such as hoods. The company is investigating which models were involved and the impact of using the products, Japan Times further reports.

 

The implications for Kobe Steel are just now coming to light. First, the company faces potential costs from any recalls, replacements and any legal action, including class-action suits in the U.S., Yuji Matsumoto, an analyst at Nomura Securities, said in a report, Reuters reports. What’s more, the revelations about data tampering in its aluminum unit could also hinder the company’s plans to expand the business as carmakers increasingly use the material, which is lighter than steel, to meet tighter environmental rules.

 

Of course, the incident may also trigger “déjà vu all over again” for investors, MarketWatch notes, since a Kobe affiliate, Shinko Wire Stainless Co, disclosed last year it faked data on tests for tensile strength of some stainless steel wire for springs for more than nine years.

 

The companies aren’t alone, however, in accusations of duping consumers and regulators about product and environmental quality and safety. For example, as the article points out, like Kobe Steel, India’s Tata Steel Ltd. has been accused of falsifying product quality certifications at its UK operations, and is under a Serious Fraud Office criminal investigation. Just last year, Japanese transport ministry officials raided the Tokyo headquarters of Mitsubishi and accused the company of cheating on fuel-efficiency tests for more than 25 years. And in other automotive emissions, two years ago, Volkswagen admitted it had rigged its diesel cars to cheat on emissions tests, and eventually implicated two more of Germany’s largest auto makers—Daimler and BMW. More recently, it seems the entire automotive industry is still reeling over the recalls of airbags from Japanese manufacturer Takata.

 

These types of incidents all cast a focus on supply chain visibility, but also on trust since it’s virtually impossible to tell what really happens in some suppliers’ plants. What are your thoughts on key suppliers falsifying information or certifications? Is your company prepared for potential disruption if a key supplier admits, or is accused, of falsifying information or product certifications?

Has your company experienced a “significant” supply chain risk event in the past 18 months, which negatively affected revenue, reputation and production time? If so, was it related to financial health of a supplier?

 

I ask because I’m intrigued by a new report from ProcureCon Indirect East and RapidRatings which discusses how procurement professionals can use key metrics to prevent supply chain disruptions. The report, “The State of Risk: Understanding Threats to Business Continuity, Supply Chain Challenges, and How Procurement can use Financial Health to Build Resilient Supply Chains,” is based on the responses of 88 procurement executives who were surveyed during the 2017 ProcureCon Indirect East conference.

 

Chief among the results of the survey are that more than a third of the respondents said their company has experienced a “significant” supply chain disruption in the past 18 months, which negatively affected revenue, reputation and production time. I was surprised by two other findings, the first being that the majority of survey respondents said their organization doesn’t actively track the financial health of suppliers after onboarding, even though financial issues are the most commonly cited cause of supplier disruptions. Secondly, only 14 percent of the respondents reported their company has a supply chain resilience strategy in place.

 

When survey respondents who did encounter supply chain disruptions over the last 24 months were asked to specify their causes, financial problems at a supplier were involved in 42 percent of the cases. Indeed, the most commonly reported cause of supply chain disruption was a financial issue on the part of a key supplier, resulting in losses of both production time and revenue, the report points out. “It’s easy to write that off as just another metric, but financial health is a factor that touches across many facets of an organization’s performance … [and it can] signal a host of other challenges in advance of their most disruptive consequences,” the authors continue.

 

“The survey picks up on the impact of supplier financial issues as the major category of disruption,” says Peter Murray, Managing Director, Supply Chain Risk and Resilience at RapidRatings. “Financial health is the root cause of so many supplier-caused disruptions, no matter what the immediate issue seems to be. In our research, we see supplier performance issues with quality and delivery being preceded by declines in financial health months and even years in advance.”

 

I was interested to read that adoption rates for elements of a risk management strategy, such as centers of excellence and supplier portals, remain at below 50 percent. That said, 41 percent of the executives reported their firm uses supplier portals. Procurement centers of excellence (CoE), which Spend Matters Chief Research Officer Pierre Mitchell describes as an “internal entity that performs knowledge-based services on a one-to-many basis to procurement (and to broader stakeholders) to drive scale, repeatability and best practice”—were listed secondly in survey responses, with a 38 percent adoption rate among the respondents’ firms.

 

As has been previously noted, key steps in working to assess and continuously monitor suppliers’ likelihood of financial failure obviously begins with identifying critical suppliers and their supply chains, and then conducting a review of financial indicators, including current and historical financial data. However, it’s critical from there to further consider qualitative factors, such as analyzing governance issues, leadership changes, litigations and investigations. Nonetheless, that’s really just a start.

 

What key steps do you think are necessary to further, and continuously, monitor suppliers’ financial health? Secondly, do you agree suppliers’ financial health is a growing cause of supply chain disruptions?

Federal officials and major drugmakers alike are working to prevent national shortages of critical drugs for treating cancer, diabetes and heart disease, as well as medical devices and supplies, which are manufactured at 80 plants in hurricane-damaged Puerto Rico.

 

Puerto Rico has become one of the world’s largest centers for pharmaceutical and medical device manufacturing and its factories produce 13 of the world’s top-selling brand-name drugs. Indeed, pharmaceuticals and medical devices are the island’s leading exports, accounting for approximately $15 billion worth of business annually, according to a report from the U.S. Bureau of Labor Statistics.

 

In the devastation caused by Hurricane Maria, the country has struggled without electricity. Many large pharmaceutical companies report their factories didn’t sustain much hurricane-related damage, however most estimates calculate power isn’t likely to be restored to the island for three to six months. Although factories run by global pharmaceutical companies generally have backup power generation, locating enough diesel fuel for generators to run their factories is difficult; and employees are busy cleaning destruction in their neighborhoods, and so are unavailable to help resume manufacturing.

 

All of these factors in turn lead to considerable concern about possible national shortages of drugs. Some of these products are critical to Americans, Dr. Scott Gottlieb, the commissioner of the Food and Drug Administration, told the House Energy and Commerce Committee’s subcommittee on Health. A loss of access could have significant public health consequences, he explained.

 

“We have a list of about 40 drugs that we’re very concerned about,” Dr. Gottlieb told the committee.

 

Thirteen of the drugs, Dr. Gottlieb said, are “sole-source,” meaning the product is made only by one company. Those include HIV medications, injectable drugs and sophisticated medical devices, although he didn’t name the products. The biggest problem, he said, wasn’t damage to the factories, but the instability of the electric supply. Manufacturers are worried that a long-term lack of connection to a major power grid could jeopardize their products, and are also wary of relying on the more limited electrical grids that the territory is likely to activate as a first step to restoring power.

 

Several notable pharmaceutical and medical device companies said that while their plants lost power and were forced to shut down, they are coming back on-line using generators, so the companies don’t anticipate supply shortfalls. On the other hand, some companies have said the situation is precarious, an article in the New York Times reports.

 

The industry’s outlook, one may suspect, is presumably offered—at least in part—to reassure nervous shareholders. Nonetheless, that perspective does stand in contrast with the concern expressed by Dr. Gottlieb.

 

“We know that the grid is going to be unstable for a long period of time,” Dr. Gottlieb said. “The generators were never meant to operate for months and months on end.”

 

Erin Fox, a drug shortage expert at the University of Utah, told NYT she and other hospital pharmacists are monitoring the situation in Puerto Rico, and are worried the storm’s impact could exacerbate the U.S.’ already critical shortage of some drugs. Compounding the situation is that companies generally don’t disclose where they manufacture their drugs because it’s considered a trade secret, Fox notes.

 

“Because we have no transparency around that,” Fox says, “it’s actually hard to know the true impact of this [situation on the pharmaceutical and medical device supply chain].”

 

What are your thoughts or concerns about the pharma and medical device supply chain in Puerto Rico? If it does take several months for power to be restored, what impact will there be on pharmaceutical companies, particularly those which rely on consistent refrigeration for their products?

 

Hundreds of manufacturers around the country will open their doors to the public tomorrow, October 6, for Manufacturing Day, which, organizers say, “is a celebration of modern manufacturing meant to inspire the next generation of manufacturers.” The annual event is an important means for the industry to show students, educators and the general public what modern manufacturing looks like. Organizers note that by working together during and after “MFG DAY”, manufacturers can address the skilled labor shortage, connect with future generations, improve the public’s perception of manufacturing and ensure the ongoing prosperity of the whole industry. It is, at the same time, an opportunity for students to see diverse career options which are innovative, impactful and durable, and gain an understanding of how they can apply their studies in math and science to better suit those careers.

 

“Manufacturing Day truly dispels old, negative myths about manufacturing and highlights the shift from a labor-intense environment to one of high-tech, robotics and computers,” Dr. Chris Kuehl, managing partner at Armada Corporate Intelligence, said at a panel discussion titled “How Manufacturing Drives the Economy,” held earlier this week to kick off Manufacturing Day. “It also provides opportunities to communicate how manufacturing is a big part of GDP and our economy.”

 

Last year’s event attracted nearly 600,000 people across the country, including more than 260,000 students. Deloitte conducted a follow up survey, developed in collaboration with The Manufacturing Institute, of students who participated, and found that Manufacturing Day is positively impacting attendees’ perception of the manufacturing industry and its career options. Among key results are that as a result of attending Manufacturing Day events, 81 percent of student respondents said they are more convinced manufacturing provides careers that are both interesting and rewarding; 71 percent of student respondents said they are more likely to tell friends, family, parents or colleagues about manufacturing; 93 percent of educators said they are more convinced manufacturing provides careers that are interesting and rewarding; and 90 percent of educators indicated they are more likely to encourage students to pursue a career in manufacturing.

 

Mary Barra, CEO of General Motors, told the Detroit Free Press that technology will create more changes in the auto industry in the next five years than it has in the past 50 years. Manufacturing Day, she explains, has become an important component of the company’s efforts to address its growing need for talent adept with technology.

 

“It’s my hope more students joint us in the technical fields required to lead the future of mobility,” Barra said.

 

Equally important, Andra Rush, chairman of the Rush Group of Companies told the Free Press that the events aim to educate not only students themselves, but also inform parents that manufacturing is not the “dirty, dangerous and dull work” it used to be. It gives companies a way to reach schoolchildren, but also their parents and educators through manufacturing experiences to shift perceptions, Rush says.

 

According to research last year by Deloitte and The Manufacturing Institute, 82 percent of executives responding to a skills gap survey said they believe the gap will impact their ability to meet customer demand. More than three-quarters (78 percent) of the executives further said they believe it will impact their company’s ability to implement new technologies and increase productivity. Finally, large numbers of the executives also said the lack of skilled workers hurts the ability to provide effective customer service (cited by 69 percent of the participants) and decreases the ability to innovate and develop new products (cited by 62 percent of the respondents).

 

As large numbers of Baby Boomers retire, it’s increasingly important to build new pipelines of talent. What are your thoughts on Manufacturing Day? Does your company have any events planned? Finally, do you think this type of event can help with industry perception problems, and correspondingly lead to an influx of future talent?