Manufacturing- Best Described as Flat

May 1, 2013

The April ISM Purchasing Managers Index  (PMI) was just released today. Best description is “flat.”

This Nikon optical flat  is pretty flat too...

This Nikon optical flat is pretty flat too…

 “The PMI™ registered 50.7 percent, a decrease of 0.6 percentage point from March’s reading of 51.3 percent, indicating expansion in manufacturing for the fifth consecutive month, but at the lowest rate of the year. The New Orders Index increased in April by 0.9 percentage point to 52.3 percent, and the Production Index increased by 1.3 percentage points to 53.5 percent. The Employment Index registered 50.2 percent, a decrease of 4 percentage points compared to March’s reading of 54.2 percent. The Prices Index registered 50 percent, decreasing 4.5 percentage points from March, indicating that overall raw materials prices remained unchanged from last month. Comments from the panel indicate a range of strong/steady growth, to flat/declining volumes, depending upon the particular industry.”

Flat at best.

Flat at best.

14  manufacturing industries  reported growth in April in the following order: Furniture & Related Products; Printing & Related Support Activities; Electrical Equipment, Appliances & Components; Apparel, Leather & Allied Products; Fabricated Metal Products; Paper Products; Machinery; Nonmetallic Mineral Products; Primary Metals; Miscellaneous Manufacturing; Petroleum & Coal Products; Plastics & Rubber Products; Transportation Equipment; and Computer & Electronic Products.

Precision Machining is a component of Fabricated Metals Industry which was in the middle of the  ISM list of growing industries for April.

Nikon Optical Flat

Graph courtesy Calculated Risk Blog

http://www.ism.ws/ismreport/mfgrob.cfm

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Labor Participation Rate- Even HUFFPOST Figures It Out!

April 5, 2013

The labor participation rate fell to 66.3 percent it’s lowest level in 34 years in March. What recovery?

Recovery? HA!

Recovery? HA!

Even the Huffington Post has figured out that we have a structural unemployment problem:

With more than 3 million open and available jobs on the career website CareerBliss.com alone, why do we keep seeing the labor participation rate dropping?

The answer is that employers can’t find the right workers. Too many unemployed American workers lack the relevant skills needed to fill the millions of jobs available.” -Heidi Golledge

That sure doesn’t sound like ‘cyclical unemployment’ to me.

Here’s more from HuffPost: “If you look at the current employment numbers there is a quality job out there for just about every graduate — if only they would have been guided toward courses of study that would give them the skills most in demand. We can start to bridge the skills gap now by guiding future workers toward growing and emerging industries.”

Sounds like the definition of structural unemployment to me: Structural unemployment is a form of unemployment which occurs when the number of vacancies is equal to, or greater than, the number of the unemployed. The unemployed workers may lack the skills needed for the jobs, or they may not live in the part of the country or world where the jobs are available.

We have been talking about this issue for some time- here, here, here, here are some of our most recent ones.

For a great (but ominous) discussion of just how bad this is, read The Market Ticker’s post: “The Chart That Will Crash The Market.

It is about this Labor Participation Rate chart posted above.

We need to give people skills so that they can be hired. Our industry is hiring. Info about skills  and careers can be found here. Need training? Check out PMPA’s Comprehensive Training Database.


February 2013 ISM PMI Increases to 54.2

March 1, 2013

In the words of PMPA’s economics advisor, Dr. Ken Mayland, “The factory sector wants to grow.  Orders were better (57.8, up 4.5 points), production was better (57.6, up 4.0 points), and the order backlog was better (55.5, up 7.5 points).  The U.S. economy may be the best performing of the major economies of the world.”

Graph via calculated risk blog

Graph via calculated risk blog

The Institute for Supply Management (ISM) reported that its summary Purchasing Managers’ Index (PMI) increased 1.1 points, for a February reading of 54.2.  According to the ISM, a reading above 50 would typically be associated with an expansion of the manufacturing sector. Furthermore, based on the ISM’s estimates, if the current reading of 54.2 were sustained, it would tend to be consistent with 3.7% real GDP growth (annualized).

Our inferences:

  • Manufacturing remains a growing sector of the U.S. and world economies
  • The ISM employment index was weakest of any of the ISM indicators tracked,  at 52.6%, down 1.4% from 54.0%.
  • With Affordable Health Care Act clearly on the minds of employers, adding employees has to be the least preferred outcome until we can see costs more clearly.
  • The Prices sub-index rose 5 points to 61.5. Can price increases and inflation be all that far away?

One respondent in the Miscellaneous Manufacturing sector is quoted by ISM, “Starting to pick up after a slower than normal year-end.”

That is certainly in agreement with PMPA’s Business Trends Report for January 2013 which showed a record rise of 41% over December 2012 sales levels, which were quite low.

ISM February 2013

Calculated Risk Blog


PMPA Business Trends 2012 Review and Summary

January 23, 2013

The PMPA Business Trends Report 2012 Year End Review and Summary is completed and posted on our website here

Despite a great start for sales in the industry at the beginning of the year, the special causes of the uncertainty leading up to the election and the ‘Fiscal Cliff’ took the wind out of our sails sales, resulting in 2012 sales index barely equalling that of 2011.

Bummer dude. Too bad about that election and fiscal cliff stuff...

Bummer dude. Too bad about that election and fiscal cliff stuff…

For a host of specifics, and our outlook for important precision machining markets in 2013, please see our report.


December ISM Manufacturing Report- Mixed Message

January 2, 2013

The December ISM Manufacturing Report is out, and the headline story is good news.

But the full report is a bit of a mixed bag for our industry.

Manufacturing is back in expansion mode as the Purchasing Manager’s Index, “‘The PMI™,’ registered 50.7 percent, an increase of 1.2 percentage points from November’s reading of 49.5 percent, indicating expansion in manufacturing for only the third time in the last seven months. This month’s PMI™ reading moved manufacturing off its low point for 2012 in November.” – ISM Report Dec 2012

ISMDec2012

A closer reading however notes that “The nine industries reporting contraction in December — listed in order — are: Nonmetallic Mineral Products; Chemical Products; Miscellaneous Manufacturing; Plastics & Rubber Products; Fabricated Metal Products; Transportation Equipment; Machinery; Electrical Equipment, Appliances & Components; and Apparel, Leather & Allied Products.”ISM Report Dec 2012

Precision machining is an industry of Fabricated Metal Products.  Four of our most important market segments were also in decline in December:  Transportation Equipment; Machinery; Electrical Equipment, Appliances & Components. The market we see is not as rosy as the headline.

In addition, the New Orders component of the survey, at 50.3, went unchanged.  This suggests that new orders, the source of our business’s future production, was virtually unchanged in December. The backlog of orders component,  at 48.5,indicates a small contraction of the orders book.

Graph courtesy of Calculated Risk Blog


The Future of Your Business in 8 Bullet Points

October 29, 2012

I know some folks who have an uncanny ability to predict the future. They are not psychic, indeed, they are the kind of people that discount that sort of thing out of hand.

The secret of these folks is that as critical thinkers, they are able to recognize the assumptions of the present state, AND MAKE INFERENCES from the data that they have.

They make these inferences by not being slavishly tied to the present assumptions.

12 page pdf about your impending future. Scarier than Stephen King.

The folks at the National Association of Manufacturers (PMPA is a member) have issued a new report fiscal shock: America’s Economic Crisis Executive Summary.

8 bullets that tell the future your business is facing:

  • Absent legislative action, large spending cuts and large tax increases will hit the economy at the same time, causing a total fiscal contraction of $500 billion, or about 3.2 percent of GDP.
  • Washington’s failure to address the pending fiscal cliff is already having an impact, cutting 0.6 percentage points from GDP growth for 2012.
  • The worst could be ahead. If the fiscal contraction happens, the economy will almost certainly experience a recession in 2013 and significantly slower growth through 2014.
  • From 2012 to 2015, the economy will lose 12.8 percent of the average annual real GDP it could have attained with moderate growth, sapping critical resources from all economic sectors.
  • Job losses will be dramatic. By 2014, the fiscal contraction will result in almost 6 million jobs lost, and the unemployment rate could reach more than 11 percent. (U-3 unemployment U-6? Too scary to contemplate!)
  • Households will take a big hit. Real personal disposable income will drop almost 10 percent by 2015.Reduced U.S. Standard of Living
  • Manufacturers of consumer goods and defense contractors likely will see large and durable contractions in their industries.
  • It will take most of the decade for economic activity and employment levels to recover from the fiscal shock. Another recession could deal a substantial blow to long-term economic potential, permanently reducing living standards in the United States.

These eight points document why manufacturers are worried about slowing economic growth.

You know what to do…

If you think that Hurricane Sandy is the perfect storm, wait until you see what happens when sequestration cuts, other federal spending cuts, and layoffs  hit at the same time that U.S. taxpayers- investors, businesses, employees get hit by a sudden increase in tax liability.

Get the report.

Seatbelt


Highest and Best Use, the Family Silver, Loblaw’s, Organizational Change

October 23, 2012

Deploying what we have- our people, our talents, our assets- to their highest and best use maximizes their return and maximizes everyone’s satisfaction. Change happens in our lives, in our families, in our organizations. 

When change happens, it provides us an opportunity to reassesss our assets and redeploy them to their new “Highest and Best Use.”

Wonderful memories of holidays, birthdays, and special occasions.

The Family Silver

My parents married in 1950. My mom was Canadian, and she shopped at our local Loblaw’s, which was a Canadian grocery chain that had stores in Ohio. A familiar taste of home in her new country.

Today we have frequent shopper cards, frequent flier miles, and  store perks. In the 1950’s, they had S&H Green Stamps and Loblaws also had “PC’s”- Premimum Coupons. You could purchase these premium coupons based on the dollars you spent on your groceries. You could redeem those coupons for ‘Premium Merchandise.’  My mom stretched her budget and maximized her buying power with Loblaw’s PC’s which she redeemed for this 8-place setting of Rogers Silver flatware in 1953- just in time for Christmas!

Before there were frequent shopper programs there were other ways to reward customer loyalty.

The silver  and the fancy plates came out for every holiday, birthday, and happy family gathering.

Until my folks retired. They retired to Florida, half a continent away from the Ohio branch of the family, and the silver never again saw the light of day – or of candles on the table. It too was retired.

A few years ago, I helped my dad move into assisted living back in Ohio. I helped him clear out his home. He asked me to take “Mom’s Silver” and put it to good use.

But my family was already dispersed- both daughters married and out of state; my son at college. When they returned home  for holidays, we were so happy to spend time with them, that what is now the  “Family Silver” was the farthest thing from our mind.

Highest and Best Use

What is the highest and best use of this asset we now call the Family Silver?  For us, the joy of still having it connects us to memories of happy days of a different era. But our entertaining is mostly behind us. The silver is a wonderful trophy, not to the victors, but to the survivors. It is just a trophy. What  higher and better use could it have?

My oldest daughter and her husband have a great start to their careers. They have many friends, and do a lot of entertaining. They have a life ahead of them of holidays, birthdays, and other happy occasions. What is the ‘Highest and Best Use’ for “Mom’s Silver?”

Her sister is deployed out of country, she does not need more ballast from home at this stage in her life.

I think that its highest and best use will be with my daughter as she builds new traditions, and memories with her husband and their friends in their home in Wisconsin.

Change happens.   It happens to families. It happens to companies too.

Loblaw’s no longer has stores in Ohio. When my brother moved to Canada he met Bob Loblaw, of the Loblaw family. Bob Loblaw was designing left handed surgical tools for left handed doctors. I’m not sure how that worked out, but it is a far cry from the retail grocery business.

Change happens to families. When it does, we need to ask, “What is the highest and best use of our assets? Are they adding value to our lives? Creating lasting memories and helping us achieve what we want to with the people we love?”

Organizational Effectiveness

What about our companies? Are we deploying our company’s assets, both technical and human, at their highest and best use?

Like the family silver, they may be assets on the books, but if they are not being utilized effectively, if they are not deployed at their highest and best use, what are they really to us?

As a guy with more years in manufacturing and quality than I would care to admit, I would say this: They are a loss. A loss to society, a sub-optimum arrangement that prevents your company  from achieving its highest and best.

This story about the ‘Family Silver’ isn’t just about the family silver. It is a lens to help us understand that the idea of ‘Highest and Best Use’ is the way to maximize our effectiveness.

What ‘Family Silver’ do you have that is effectively retired? Sitting out of sight and out of mind? Not just machine tools, processes, materials. What about your people? Are they each operating at their ‘Highest and Best Use?’

Jim Collins talks about having the right people on the bus. Then on the right seats on the bus. Assuring that your people are operating at their ‘Highest and Best Use’ is another way of getting at the truth behind Collins’ point.

I hope that you are operating at your highest and best use. And that the people and processes under your authority are too.

Highest and best use. It is the key to happiness, success, effectiveness and satisfaction.

Oh- if you read this post, please don’t tell my daughter… we’d like it to be a surprise when she visits next.