As the economy continues to rebound from the COVID-19 pandemic, manufacturers in Michigan and around the nation are booking new orders yet are struggling to fulfill them, due to a lack of workers and a supply chain that has several broken links.
“All segments of the manufacturing economy are impacted by record-long raw materials lead times, continued shortages of critical materials, rising commodities prices, and difficulties in transporting products,” says Timothy R. Fiore, chair of the manufacturing survey committee at the Institute for Supply Management, the oldest and largest such organization in the world.
“Global pandemic-related issues such as worker absenteeism, short-term shutdowns due to parts shortages, difficulties in filling open positions, and overseas supply chain problems, continue to limit manufacturing growth potential,” Fiore says.
The workforce problem is far from a Michigan-only concern. As of June 2021, there were 700,000 unfilled jobs in manufacturing in the U.S., up from 500,000 before the pandemic, according to the National Association of Manufacturers.
What’s more, as many as 2.1 million manufacturing jobs will be unfilled through 2030, according to a 2021 study by Deloitte and The Manufacturing Institute. The report warns the worker shortage will hurt revenue and production, and could cost the U.S. economy $1 trillion by 2030.
To improve on market conditions and expand production, manufacturers in the Great Lakes State need to recruit more workers and straighten out the kinks in the supply chain, even as many of the logistics issues are out of a manufacturer’s control.
“It’s like a tale of two cities,” says John Walsh, president and CEO of the Michigan Manufacturers Association in Lansing. “On the one hand, orders are up, the economy is still healthy, (and) manufacturing in all industries feels good. The opposite of that is the impact of the workforce. Many of our members and the industry at large are struggling to get folks to come in and work. And if they can get them in to work, there’s a shortage of truck drivers and longshoremen.”
Walsh says he’s confident the workforce issue will improve. “We hope and expect to see more (job) applications start to come in now that the extended and enhanced unemployment benefits have come to an end,” he says.
In early September, when extended and enhanced unemployment benefits enacted in response to the COVID-19 ended, the Michigan Department of Technology, Management, and Budget reported statewide employment for the entire month advanced by 16,000 workers, while the number of unemployed people dropped by 4,000. Manufacturing jobs edged up slightly for the second consecutive month during September.
“Workforce was a weakness for Michigan even before COVID-19,” Walsh says. “I think the governor and the legislature have responded aggressively, with $230 million more in the budget for training programs, so that will be helpful. That’s not immediate relief, but more of a long-term acceptance that we need to invest in skilled trades. And manufacturers have consistently been raising their salaries, which seems to be impacting folks and their interest in the industry.”
Although immediate relief is needed, many of the efforts to boost the manufacturing sector are focused on long-term remedies. SME, for example, recommends a concerted effort to boost vocational training as well as four-year college as an option for high school graduates.
Diversity also is critical, according to Joe Steele, senior director of communications and legislative affairs at LIFT in Detroit (American Lightweight Materials Manufacturing Innovation Institute). The public-private partnership between the U.S. Department of Defense, industry, and academia is reaching out to more women and minorities. One example is LIFT’s initiative with the Girl Scouts of Southeastern Michigan, which awards a manufacturing patch to encourage girls to explore the field of advanced manufacturing.
LIFT also brings students from Detroit high schools to its learning lab to participate in a curriculum called IGNITE: Mastering Manufacturing. “The program gives students the opportunity to meet LIFT engineers and see our ecosystem at work on new manufacturing innovations and processes,” Steele says. “By immersing (students) in that environment, not only are they being introduced to materials science and advanced manufacturing, they’re also able to see the future for themselves.”
Then there’s the supply chain, which includes the transportation of raw materials and components as well as the delivery of finished products. “Supply chain is still a weakness for all of Michigan’s industries,” Walsh says.
Overall, the computer chip shortage plaguing the auto and electronics industries since spring 2020 is the logistics issue most detrimental to Michigan’s manufacturing production growth. Walsh says he expects that bottleneck to be opened up in the first half of 2022.
While manufacturers can’t do much about the shortage of truckers on the road and longshoremen on the docks of U.S. ports, which is slowing the delivery of raw materials and finished products, Walsh says industry trade associations are working to resolve the issues.
He says he believes the upside to manufacturing in Michigan is its continuing diversification.
“We make something for virtually everything on the planet,” Walsh says. “There’s someone making a piece for a fighter jet engine. There’s someone making a part that goes into a nuclear energy facility. We make clothing, cars, and equipment for health care and agriculture. We’re very diverse.”
Motor vehicles and auto parts still accounted for the bulk of the state’s manufacturing output in 2020, at $40.9 billion. General machinery added nearly $9 billion; fabricated metal products, $7.9 billion; chemical products, $7.7 billion; food, beverage, and tobacco products, $5.8 billion; plastics and rubber products, $4.1 billion; electrical equipment and appliances, $2.8 billion; and furniture and related products, $2.5 billion.
One bright spot in the state comes from companies that manufacture products for the defense, aerospace, and space industries. According to the Michigan Economic Development Corp. in Lansing, the state has the highest military vehicle production in the U.S., with 37 percent of total contracts in the country. It also added more than 1,000 jobs in relevant defense industries between 2015 and 2019. The 15-percent growth rate outpaced national trends over the same period.
“We’re very big in tool and die for both aerospace and space,” says Gavin Brown, executive director of the Michigan Aerospace Manufacturers Association (MAMA) in Sterling Heights. “We make a lot of the platforms for tool and die use in aerospace. We also do limited production of titanium parts for both mainframe and engine components.”
To drive additional business, MAMA has been at the forefront of establishing facilities for both horizontal (from airplanes) and vertical (from a launch pad) low Earth orbit rocket launch facilities in Michigan. The horizontal launch site in Oscoda is expected to be operational, along with a command center in Chippewa County in the Upper Peninsula, in 2023. The vertical launch site in Marquette, also in the U.P., will be developed in future years.
“We’re looking at building an ecosystem, or a value chain where the capabilities interact to eliminate bottlenecks,” Brown says. “When you’re working with space and aerospace, you’re providing both with the material knowledge that’s needed for high-grade alloys that are used in both.
“It allows you to do a more regional approach that includes engineering and design, manufacturing, and special processes. It becomes cost-prohibitive when you have to go across the country to get a part. Michigan is well-positioned with all of its capability throughout the entire manufacturing process chain.”
Brown foresees a time when satellites designed, produced, and launched in Michigan will help the auto industry reach its autonomous vehicle goals. The vision is outlined in a MAMA white paper titled “Space Enabled Connectivity for Advanced Mobility” (SECAM).
The plan calls for coordinating the research and development of the engineering design guidelines and standards for a common automotive industry platform of advanced connectivity for mobility (ACAM) data links, and developing a pathway toward implementation of ACAM-enabling technologies. This approach positions Michigan as the center of these efforts, while creating jobs and advancing the nation’s technological competitiveness.
“To get to the point of EVs and autonomous technology operating outside of urban areas, there has to be constant connectivity — and that will be provided by a satellite program,” Brown says. “We see our growth as essential to helping the auto industry get to its next benchmark. This will also help the overall community stay connected with 5G.”
While the move to EVs and autonomous vehicles will be a boon to high-tech manufacturing, it’s going to cause problems for the companies that have been supplying parts for internal combustion engines for more than 100 years.
A recent report by Bloomberg News describes how legacy auto companies are leery about a future of electric vehicles that contain a fraction of the parts of their gasoline predecessors. Where a conventional car’s engine and transmission have hundreds of parts, some EV powertrains have as few as 17, according to the Congressional Research Service. That doesn’t include radiators, fuel tanks, or exhaust systems that EVs don’t need.
But the eventual widespread switch to EVs, which is a few years away, may help overcome worker shortages, as far fewer parts are needed.
At the same time, the number of advanced manufacturing systems is on the rise. The trend will help companies continue to churn out highly specialized parts. To speed the adoption of greater production efficiencies, Automation Alley in Troy and a recently announced partnership between SME in Southfield and CESMII, The Smart Manufacturing Institute based in Los Angeles, are working to accelerate the adoption of advanced manufacturing to assist companies large and small.
Due to these efforts, Michigan is a national leader for employment in industries related to Industry 4.0 (the adoption of machine sensors) and automation. Michigan is home to the nation’s first Industry 4.0 Accelerator program, launched by Automation Alley, Lean Rocket Lab in Jackson, and Lawrence Technological University’s Centrepolis Accelerator in Southfield.
Still, more work needs to be done. Tom Kelly, executive director and CEO of Automation Alley, says the supply chain issues may force companies to reshore some of their parts, bringing more manufacturing back to the U.S.
He adds that many local small and mid-size manufacturers aren’t taking advantage of the advanced technology resources in their backyards.
“Things are going great, but (the manufacturers) don’t see the sands shifting beneath their feet,” Kelly says. “There’s lots of change that’s happening in manufacturing. A lot of it is being observed by the larger players and even, to some degree, the Tier 1s. Tiers 2, 3, and 4, they’re just not paying attention as well as they should be.”
Because manufacturing is a “physical thing,” smaller players “have a difficult time wrapping their minds around how software can help them,” he says. “What I’m seeing out there is a complacency in understanding that efficiency alone isn’t going to matter.”
He says Industry 4.0 is about mass customization rather than mass production. It includes the ability to produce products where they’re sold and the ability to share data up and down the production stream — from the intake of raw materials to selling the finished goods.
Kelly says he believes one answer to many manufacturing ills, including workforce shortages and supply chain problems, is 3-D printing, otherwise known as additive manufacturing.
High costs and low build speeds have been hurdles to adopting 3-D printing in the past, but the technology is changing the landscape. According to Kelly, a 3-D printer that cost $14,000 a year ago costs $8,000 now and is many times faster.
He points to the example of Relativity Space in Long Beach, Calif., which is 3-D printing entire Terran 1 and Terran 2 rockets from raw material in 60 days, compared to 12-18 months with traditional methods. The company claims its additive manufacturing platform has cut production costs from $120 million to $12 million, and reduced the number of components from 30,000 to 300.
This method, according to Relativity Space, reduces touchpoints and lead times, simplifies the supply chain, and increases overall system reliability.
“If they’re successful, they’ll destroy the aerospace industry and remake it in a new way,” Kelly says.
Until 3-D printing comes into more widespread use, proponents of Industry 4.0 are encouraging manufacturers to use artificial intelligence, sensors, the industrial internet of things, collaborative robotics, big data, modeling and simulation, and virtual and augmented reality to make their operations more efficient.
With fewer workers to keep their eyes on manufacturing processes, sensors — which now are wireless and are becoming less expensive every day — become a manufacturer’s eyes. Paired with AI and other advanced technology, a plant foreman using a smartphone or a tablet can make decisions to stop, start, and adjust operations in seconds, further improving efficiency.
“5G (the fifth generation of cellular networks) is going to be profoundly impactful for manufacturing,” Kelly adds. “One of the things that keeps manufacturers from digitizing is the cost, but with 5G, because the latency is so low and the throughput is so high, you can put in wireless sensors that will last for years in machines. That’s a game-changer. Sensors are the five senses of your AI.”
SME, as evidenced by its recent partnership with CESMII, also is a strong proponent of advanced manufacturing.
“Too often, small and medium manufacturer owners and workers may perceive these issues as too big, too complex, or too costly for them to address,” says Robert Willig, executive director and CEO of SME. “But as the majority of manufacturers in the United States are classified as small businesses, the industry’s success relies on making low-cost, high-efficiency solutions for manufacturing’s transformation (that are) available across the board, not just to its biggest players.”
Ultimately, Kelly predicts, “3-D printing will become the de facto manufacturing method for almost all products at some point — maybe in 20 years, 10 years, or five years. It will be the most disruptive force for manufacturing, ever, including every other industrial revolution, because the change is so profound. Manufacturing is going to be a software business that happens to make stuff. Right now, we’re a maker business that happens to use software. Labor’s not going to matter in a 3-D printing world.”
Kelly talks about a graph where one line charts the increasing fixed costs of the machines manufacturers currently are using, while another line traces the decreasing cost of 3-D printers.
“Eventually those lines are going to cross and all hell is going to break loose,” Kelly says. “Once those lines cross, I must go additive or I’m out of business. That’s the catastrophic cliff that we don’t want to see happen in Michigan.”
It’s a cliff that may someday be faced by Michigan’s more than 11,000 manufacturing firms, which employ more than 600,000 people.
Regardless of the current challenges facing Michigan’s manufacturers, represented by more than 11,000 producers that employ 600,000-plus people, trade association leaders are bullish.
“Our manufacturers are incredibly resilient,” Walsh says. “They’re problem-solvers. They’ve survived other impacts before. They know how to adapt. We have to acknowledge we’re in a worldwide economy and that’s good for everyone, but we do need to identify things that need to be manufactured here — certain components for medicine, for instance. Defense items, and things like chips.”
Automation Alley’s Kelly says in order to make the changes necessary to carry production into the future, Michigan’s companies need to return to what made Detroit the manufacturing capital of the world 100 years ago and the Arsenal of Democracy in World War II. “We need to get back to the age of innovation and creativity,” he says.