Manufacturing 5.0: We’re at the beginning of a new industrial revolution
In the wee hours of Easter morning 2020 — as the pandemic raged and most people were sleeping — there was a quiet but important handoff happening in Ohio.
About 2 a.m. a group of about 20 companies turned over a 3D-printed mold to other manufacturers so they could begin making clear plastic face shields that would protect thousands of health care workers, state employees and other essential workers.
Until the pandemic, Ohio — the third-largest manufacturing state in the U.S., behind only California and Texas — didn’t produce personal protective equipment (PPE). But manufacturers, working with nonprofits and the state of Ohio, stepped up.
“They moved mountains,” said Ethan Karp, president and CEO of the Manufacturing Advocacy and Growth Network, or MAGNET, that serves Akron, Cleveland and all of Northeast Ohio.
Karp said the story of how more than 2,000 Ohio companies ramped up PPE production within weeks is a parable for “onshoring,” or the return of manufacturing and production to the U.S. from overseas.
Onshoring is a trend that began before the pandemic as companies compared costs and feared geopolitics, natural disasters and other crises could interrupt their business.
And Karp, Lt. Gov. Jon Husted and others working with Ohio manufacturers say the desire to onshore has only accelerated since the pandemic.
How much manufacturing might return to Ohio, or grow anew in the state, is not yet clear.
It will take enormous investments in technology, ongoing cooperation and networking among companies already here and a lot more skilled employees, some with certificates that take only a few weeks to earn, others with new specialized college degrees.
But getting onshoring right is important, particularly in Northeast Ohio, where Karp said that 50% of the economy still depends on manufacturing.
Ned Hill, an economist at The Ohio State University who studies American manufacturing, said this is one of the most interesting times for manufacturing he’s seen during 40 years, the beginning of the fifth industrial revolution.
“It’s a time of confusion, change, turmoil and opportunity,” he said
Dude, where’s my car?
Fords, iPads, furniture, ketchup packets.
There are shortages of many products Americans crave as they emerge from the pandemic.
Mahesh Srinivasan, who teaches at the University of Akron and directs the Institute of Global Business there, calls the shortages a “perfect storm of certain things coming together.”
Steel, he said, is a good example. When the pandemic hit, demand dropped, so manufacturers cut back on production to avoid a glut. But as the pandemic lifts and the economy heats up, steel makers need more time to come back online.
“No one expected the economy to rise so sharply,” he said, adding that it’s being bolstered both by pent-up demand and U.S. stimulus money to families.
“What do you have for a family of four? $5,600. That’s good money and if you have a wish list of things you want to do — home improvement, a new washer and dryer,” he said.
In addition to short supplies, he said there are transportation bottlenecks, both by land and by sea.
About 74% of U.S. shipping depends on trucking. There was a shortage of drivers before the pandemic and it only got worse during the pandemic, with about 25,000 drivers dropping from the workforce.
Meanwhile, there are not enough giant shipping containers to handle the demand of global trade. A 40-foot container traveling from Shanghai to Los Angeles cost about $1,800 pre-pandemic. About a month ago, he said that cost had risen $4,500 and in some cases, where supplies were critical, had reached into the five digits.
“It’s just economic theory 101,” he said. “Supply and demand. Prices are going to go up.”
Many people say supply chains are broken, Srinivasan said.
“But really, I think the supply chains and professionals are doing a wonderful job keeping up,” he said. “If you’re not used to going on a 10-mile run, it’s hard on a body just to catch up.”
Most shortages will be resolved within six months to a year, Srinivasan said. But not all. Microprocessor chips — almost exclusively made in Asia and used in everything from cars and trucks to toys and phones — may not be fully back in supply until 2023.
That could have devastating consequences, particularly for the auto industry. Some analysts say automakers could lose more than $60 billion this year as auto factories in Ohio and elsewhere slow or halt production because they don’t have the semiconductors they need.
President Joe Biden last month told corporate leaders that the U.S. should be the world’s leader in computer chips, and his $2 trillion infrastructure proposal would set aside $50 million for the semiconductor industry, mostly to expand manufacturing in the U.S.
“We need to build the infrastructure of today, not repair the one of yesterday,” Biden told computer and technology leaders. “China and the rest of the world is not waiting and there’s no reason why Americans should wait.”
Show us the money
Ohio manufacturing advocates are pushing for federal money to be spent here on other manufacturing in other sectors, too.
Ryan Augsburger, who was promoted to lead The Ohio Manufacturers’ Association in January, said Ohio is expected to get $22 billion in stimulus funds, divided about equally between the state and county and local governments.
It’s not yet clear how state officials plan to use that money, but Augsburger wants a portion of it to help Ohio manufacturing thrive.
“You could spread that out to different interests, but it’s not transformative,” Augsburger said. “But we have a one-time opportunity to position Ohio to have a competitive advantage.”
Right now, he said, there are so few qualified manufacturing employees that companies are curtailing production or refusing new orders.
“There are great career pathways for people coming out of school, jobs with potential,” he said. “Most factories are not the dark, dirty dangerous stereotype that really isn’t accurate.”
These manufacturing jobs, he said, pay enough to sustain a family. They have an annual average pay in Ohio of about $60,000. But that can range from about $85,000 a year at a chemical manufacturer to about $45,000 a year at a furniture maker or printer, he said.
Karp said people need to be trained for open jobs now — there are 8,000 to 10,000 open now. But they’re expecting the need to grow to more than 50,000 in coming years as baby boomers retire, even without onshoring.
He said the average age of workers in manufacturing is 10 years older than in other fields.
“I talk to people all the time who say they have a 76-year-old master machinist,” Karp said. When the machinist asks for a raise, he gets it because employers know how hard it will be to replace him.
Augsburger said his group is also talking to state and federal officials about using federal dollars to “capture onshored activity,” particularly targeting PPE, medical equipment, pharmaceuticals, defense, infrastructure and energy.
To compete internationally, Ohio will need to compete on price.
“Modern manufacturing with robotics and automation … that’s what we need policy to drive,” he said. “You need to constantly be reinvesting in equipment.”
Working to set up PPE manufacturing in Ohio last year taught many lessons, Karp said.
In the beginning, Karp said his MAGNET organization was working with dozens of companies hand-sewing masks. They could sew about 200,000 masks per week at a cost of about $3 each.
But that was neither enough masks to fulfill demand nor at a price that could ultimately compete with foreign competitors.
Karp, The Ohio Manufacturers’ Association and others knew that automation was the answer and found a German company that could supply machines in Ohio that could make 100,000 masks per day at a profit.
But there was still an obstacle: Would any manufacturer risk this much money — $100,000 to $200,000 per machine — on something they hadn’t made before the pandemic?
Ohio’s Development Services Agency helped with grants. And JobsOhio, the state’s private, nonprofit economic development organization, provided unusual financing: If the mask-making ventures succeeded, the companies would repay the loans. If they collapsed, they wouldn’t.
Karp said that Ohio manufacturers learned several things through launching PPE production:
• Manufacturers need clear demand before they will consider risking a major investment in automation. There was a clear demand for PPE during the pandemic.
• Ohio can make anything, but without automation, it cannot compete. The mask makers likely wouldn’t have purchased machines without government loans taking some risk out of the expenditure.
• There is power of collaboration: Manufacturers, nonprofits and government working together provide strength and flexibility. When thin plastic to make face shields was in short supply, for example, small Ohio manufacturers could have been locked out. But a call from Eaton Corp. — the Beachwood-based world power management powerhouse — and other large area corporations secured supplies for the smaller companies.
Training workers and jobs
Husted, Ohio’s lieutenant governor, grew up in Montpelier in the northwest corner of the state in the 1980s when about 400 of the 4,000 people who lived there — including his father, two uncles and an aunt — worked at Mohawk Tools.
When the plant closed, he said it was devastating. Not only were people out of work, but much of his family — who lived within 20 minutes of each other — had to move to find new jobs.
Husted, who has spent the past couple of weeks traveling the state talking to schools and students about in-demand jobs that include manufacturing, has said the experience shaped how he sees the world.
When his dad worked in manufacturing, Husted said, people often got jobs through people they knew.
“You couldn’t prove you were good at any of those things,” he said
Now, he said there are “stackable credentials,” education certificates that show someone is trained with specific skills like welding, robotics or the operation or repair of specific machines.
“They are the currency of the modern economy,” he said during an interview last week. Many credentials can be earned in high school, he said, and while someone is working a job they are qualified for, they can also be going to school to get more training and a higher-paying job.
Some students who gain a skill in high school start in manufacturing earning $50,000 a year with no student debt, he said
“And if an employer doesn’t treat you right … you can go somewhere else because these kinds of skills are transferable,” he said.
Ohio needs more of these workers now, with more onshoring underway.
Husted said the state is still considering how it will be spending the federal stimulus money. But Ohio is trying to attract more venture capital to help startups grow.
“When you see a great company, that company started somewhere with a couple of people, some venture capital and a great idea,” he said.
Ohio, through JobsOhio and some other state programs, is trying to make it easier for startups to grow and other companies to succeed.
“We want to take the friction out and show how easy it is to provide a workforce … how easy it is to market with similar suppliers,” he said. “If you want to manufacture something in Ohio, we can make the introductions.”
Husted said the state will have a “pretty big announcement” about reshoring to Ohio in a couple of weeks, but didn’t say what sector or company might be involved.
In Europe, they already have a name for this new manufacturing job: “Mechatronics.”
At Ohio State, though — where the school launched a new degree program at its satellite campuses in Lima, Mansfield and Marion in 2020 — there is no shorthand. These students will be graduates with a bachelor of science applied manufacturing technology.
Whatever you call them, though, they do the same thing: They’re business-oriented engineering leaders who will run the highly automated factories of tomorrow.
Ohio State’s Hill said the state needs these graduates because “manufacturing is at the core of Ohio’s economic present and future” and that manufacturing is starting its fifth major revolution — Manufacturing 5.0.
Machines will be digitally controlled. So will the supply chain.
Hill said this revolution offers a competitive reset for American manufacturing, but also challenges.
“The success of the sector is critical to the state’s economy and our graduates’ economic well-being,” he said.
Hill last week said the process would be slow, with a 10- to 20-year horizon, but it will change entire enterprises and the U.S. relationship with China, as some production moves back to the U.S.
But it’s not going to be easy for many small and midsize manufacturers to change. They have to figure out how to integrate technology with the equipment they have and come up with a strategic plan to make it work. Many, he said, don’t even have IT departments.
On top of that, there’s often substantial cost.
Don’t expect all factory workers to benefit from this gradual transition, that he said will likely happen piecemeal.
“Automation takes the semi-skilled labor out of it,” he said.
What happened to the 1,700 Amish women hand-sewing masks for PPE in Northeast Ohio last year during the pandemic is a good example. No matter how quickly they worked or how skillful they were, they couldn’t compete with the machine brought in from Germany.
And yet the Northeast Ohio company that employed the seamstresses couldn’t compete with Asian mask makers unless it used the machine.
Beacon Journal reporter Amanda Garrett can be reached at firstname.lastname@example.org. Follow her on Twitter @agarrettABJ.
Read the original story here: https://www.beaconjournal.com/story/news/2021/05/16/new-industrial-revolution-brings-change-turmoil-and-opportunity/5035698001/