Manufacturing Boom
A manufacturing boom is on its way. Although it might not appear so according to clients’ SIOP (Sales Inventory Operations Planning) models with weaker clients’ backlogs and hesitant customers, we have no doubt it is imminent. Since January, there have been more than $10 trillion dollars of investments announced into manufacturing, data centers (with the power of artificial intelligence), shipbuilding etc. As the National Association of Manufacturers (NAM) says, for every $1 invested in manufacturing, $2.67 will be added to the economy as it drives additional manufacturing, logistics, services etc. Get ready for a boom!
In addition, we think two of the three critical conditions are in great shape to stimulate manufacturing, and the third is in decent shape to create a boom in the by early next year. First, the favorable corporate tax rate has been extended as part of the OBBB Act. This is essential to providing stability for investors and executives as if it wasn’t extended, the U.S. would go back to the bottom of the pack (in terms of countries). The OBBB also provided many incentives for manufacturers. Read our review for more details. Secondly, the tariffs have leveled out. Deal frameworks have been negotiated with key countries such as Europe, U.K., Japan, and South Korea while China is progressing and most of Mexico and Canada’s trade is covered with the USMCA. The third item is access to capital and the cost of capital. Interest rates have remained high; however, it looks promising that interest rates will start coming down in the fall. Thus, the trifecta will be in place to support a manufacturing boom.
Manufacturing Investments
Investments into the U.S. manufacturing are abundant especially in critical industries. For example, recent investments to expand capacity include the following:
- AbbVie: expanding U.S. based drug production capacity with $195M.
- Apple: Apple announced another $100B in investments in addition to the $500B to bring additional components of its supply chain and advanced manufacturing to the U.S.
- Century Aluminum: A $50M investment was announced to revive its South Carolina plant to peak production levels after a decade.
- Ford: Ford already has the largest manufacturing footprint in the U.S., and they continue to invest in expanding capacity. They are investing $5B to invest in midsize truck and advanced batteries.
- G.E. Appliances: G.E. is expanding capacity across five states with a $3B investment.
- Emirates Global Aluminum (EGA): They are investing $4B in the first new U.S. smelter in around 45 years. This will be a significant expansion in capacity of around 600,000 tons/year.
Get Ready for the Manufacturing Boom
Manufacturers must prepare and be ready to scale up rapidly. Hire and invest in top talent ahead of time, invest in artificial intelligence, robotics, automation, and ERP upgrades to improve your ability to scale up rapidly, and roll out process upgrades such as SIOP and advanced planning processes to respond in real-time to changing conditions and to take advantage of opportunities. Companies looking forward and willing to take reasonable steps forward while everyone else is waiting for absolute clarity (which is unlikely to come in the new global era) will have more business and growth opportunities than ever before in history. Will you be ready to take advantage of the opportunity?
If you are interested in reading more on this topic:
Advanced Planning Strategies to Optimize Manufacturing Success