Business growth: Crossroads IN manufacturing
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Indiana ranks first with the highest concentration of manufacturing employment in the country, according to the United States Bureau of Labor Statistics. As recently as this past October, the State had 2.04 times the national average. There were 2.73 million workers employed by Indiana manufacturers.
Within the manufacturing industry as a whole, Indiana has the following sub-groups: Transportation equipment was the largest manufacturing industry for the State reported by the Bureau in 2022. It accounted for 25.8% of manufacturing employment (541,112 people). Other manufacturing industry employment percentages reported in Indiana were; Fabricated metal products (10.4%), Food (8.1%), and Machinery (8.0%), followed by Primary Metal (7.6%), Plastics and Rubber (7.3%), Chemical (6.7%), Miscellaneous (5.4%), and Furniture (4.3%).
Historically, when supply chains were reliable, labor was cheap, and general stability existed on many political fronts; some manufacturers moved the production of their goods overseas. Then came the COVID-19 pandemic and the world changed, particularly for manufacturing. As supply chains tightened worldwide, many companies that outsourced their products, found themselves “reshoring” to the U.S. or Mexico, even though labor costs were usually higher.
Many items that were previously manufactured overseas have recently found their way back to the United States, as a result of improved automation on the factory floor, better skilled labor, and greater capital investment.
According to Patrick Van den Bossche, a partner in the consulting firm Kearney, consumers are beginning to “buy American.” He went on to say, in an article by Rick Barrett of the Milwaukee Journal Sentinel, “While it sounds like an election-year bumper sticker, the phrase ‘Made in America for America’ could describe the foreseeable future of manufacturing in the Western hemisphere.” All politics aside, in many respects, no truer words have been spoken. Fortunately, the United States seems to be trending in that direction.
While the renaissance in manufacturing is benefitting Indiana in many ways, there are several factors that must be maintained in order for the growth and expansion of manufacturing in Indiana to continue. Two significant factors that must be addressed are semi-conductors and labor.
First and foremost is our current reliance on semiconductors, which are primarily manufactured overseas. According to Jon Gabrielsen, a manufacturing consultant in Michigan, the U.S. is exposed if microchips are not readily available. If there is a shortage of them, “civilian manufacturing in the West ceases,” he said.
“We’re seeing more companies that want their products made in the United States again. The pendulum swung to Asia 20 years ago, and now it’s finally swinging back some,” said Megan Tzanoukakis, the president and CEO of Sussex IM, located in Sussex, Wisconsin.
Here is the bad news; the Observatory of Economic Complexity reported the United States imported $16.6B of semi-conductors in 2022. They were from Vietnam ($4.57B), Malaysia ($2.13B), Thailand ($1.66B), South Korea ($1.54B), and China ($962M).
Indiana is doing something about it.
But according to Purdue University and several regional news sources, the good news is SK Hynix will be building a semi-conductor plant in West Lafayette. The company said “the plant will produce high-bandwidth memory chips that will help meet U.S. demand for semiconductors, develop future generations of chips and house an advanced packagaing research and development line at the 430,000 square-foot plant.” In return, they will receive up to $450M in federal funding.
Conexus Indiana, a nonprofit initiative of the Central Indiana Corporate Partnership (CICP), has been “collaborating with industry, academic and public sector partners on a shared vision for an innovative, skilled workforce and stronger business climate.” Most recently, they published the results of their Industry 4.0 Technology Adoption Survey in collaboration with the Indiana University Kelley School of Business.
From a labor perspective, the survey indicated “most manufacturers reported that technology adoption is not eliminating positions, but rather, is reducing monotonous and repetitive tasks and upskilling the workforce.” Only 12% of the respondents to the survey indicated technology would eliminate or reduce the number of jobs.
Just last week, Alex Brown, managing editor of Inside INdiana Business, reported on the recent Workforce 2040: Pathways to Prosperity report released by the Sagamore Institute.
One of the key issues mentioned in that report is the expectation of minimal to no population growth as the State progresses toward 2040. Awareness of the problem can help drive a solution.
Regardless of how your company is positioned in the manufacturing sector, when it comes to the growth of your company, Conexus summarized things very well when they said, “More Indiana manufacturers should take time to develop a plan to catalyze momentum and meet their expectations of technology deployments in the next five years.” Planning the work and then working the plan is the key to success and growth for your manufacturing company.