A new research report has identified five challenges for factories heading out of this decade:
- Market volatility
- Material costs
- Price reduction pressures
- Labor costs
- Transportation/logistics costs
Examining the industry challenges
Market volatility is part of the post-election landscape, but industrial markets are affected by global factors, as well. Manufacturing has been volatile for a while now, but productivity is up and demand is up, so it’s a matter of holding on for the roller coaster ride.
Materials costs are rising as supplies diminish. Rubber is up by 400%, and average costs of raw materials have doubled in this century so far. As The United Nations Environmental Programme put it, “The current economic system, built on the idea of perpetual growth, sits uneasily within an ecological system that is bound by biophysical limits.” The challenge is to find or develop new alternative materials, and to push the envelope on recycling.
Price reduction pressures come from consumers who have gotten used to prices based on third world labor costs. As third world labor prices rise, it’s hard for manufacturers to produce the unrealistically cheap goods that we’ve gotten used to. There are other price pressures, too, from government regulations to retailers and insurance companies that put the squeeze on their suppliers — our customers.
Labor costs are rising in third world countries, but many manufacturers are responding with additional automation. A great motion control system and a smart robot can do their job for a fraction of a human worker. The human jobs that remain in manufacturing are higher skilled and higher paid, but there are far fewer of them than in the past.
Transportation and logistics costs have been one of the big drivers for reshoring, and automation is moving into this area as well. Fuel is a big issue here, though, and oil and gasoline costs are not predictable. They also can’t be balanced by automation. Rising energy costs affect raw materials costs as well. As production continues to increase, warehousing costs will have to rise.
Facing these challenges, manufacturers may want to keep their current machinery in service longer. We can help. As specialists in Rexroth electric motion control, we can keep your legacy units purring. Contact us now for solutions.