Manufacturers heading into 2018 have made workplace culture a priority.
Despite positive growth projected for the upcoming year, talent issues continue to be a leading concern for manufacturers across West Michigan, according to executives. When possible, their companies are adopting strategies to improve employee culture, including offering better wages and benefits, and they’re adopting technology to automate the kinds of jobs that are mundane or put their people at risk.
Recently, MiBiz sat down with manufacturing executives from various industries to discuss their challenges, opportunities and uncertainties for the year ahead. Participating in the discussion were:
How is 2018 shaping up for the manufacturing industry?
Greene: From an overall standpoint, the automotive industry, at least for suppliers, has probably not been stronger in my memory. The automotive market is very strong right now. We have the benefit of strong employment, low interest rates, low gas prices, low oil prices for the foreseeable future with fracking and shale oil. All those add up to people wanting to buy cars. … We expect it to be flat next year, (and) we don’t expect a lot more, nor do we expect a sharp fall off.
Shaw: I’d have to definitely agree that it’s booming right now. We’re going to finish 2017 very strong. A lot of critics and people are saying next year is going to be soft or slow down, but they keep forgetting that we’ve been in a two-year stretch of 16-plus million vehicles. How big can the ceiling continue to go? I think the overall supply base in automotive could use a year, and you’re seeing that there’s not very many platform launches as you would typically see. Definitely for our organization, we’re not seeing too many platform or model-year changeovers in 2018.
Greene: There’s confidence. The consumer confidence has never been higher either. It does start with the consumer.
Shaw: The gas prices really launched a couple platforms we were on. Some of the truck lines for Chrysler, these things are going great guns. But you’re seeing the opposite for cars. In 2017, what we’ve projected for some of our car platforms, we’re below budget on those. We’ve offset that on the truck line, so it equals out toward the end of the year. But definitely, we’re seeing some periodic slowdowns in the midsize car line compared to the truck and SUV.
Greene: What’s interesting too is I think 2019 is supposed to be an all-time high for the number of launches, but … we’ve seen a lot of delays in launches in the automotive industry. … There’s so much strain in the supply chain right now that they’re not going to blow a launch by not being ready, so they delay it.
We’ve reported on the strength of the automation equipment business. What’s the outlook there for 2018?
Ermatinger: What we’re seeing right now is a lot of retooling where the investments are being spent to get more throughput, and in 2018, it’s pacing itself to go crazy. From our standpoint, we see a three-times higher rate than we did in 2017. … We’ve got some projects in Detroit where they’re taking every printer off that prints a label to stick on a car part and they’re going to laser-mark everything. They’re talking 108 lasers at $25,000 apiece, and that’s a huge investment. So it’s just mind blowing the amount of money that’s gearing up to for ‘lights-out’ automation.
Do you feel any threats when your competition automates something that you didn’t?
Davenport: It depends on the price. We’re dealing with tooling now — American versus Chinese toolings. … You are trying to go now to a low-cost country, which is China. I’m a capitalist, but if you think about that, some of that outsourcing hurt us here in West Michigan. And so it depends on what they do with the money. We think about our world in really three buckets. I’ve got three constituents that I’m trying to satisfy: my people, my customer and our company. … You’ve got to fight for our people, you got to fight for the customer, and you’ve got to fight for our company, and I’m expecting you to do all of those things very well and to balance it all perfectly.
Ermatinger: We were at a plastic injection mold company, and they’re looking to take self-driving robots to unload the boxes from the machines on their floor. … If they were to deploy that across their entire enterprise, the amount of efficiency that one company can get out compared to all the other injection molders could be substantial on a three-shift day. I was at another place the other day where they had a self-driving robot … and all of a sudden the sky’s the limit. And I asked the guy, ‘What’s the return on investment?’ He said, ‘It’s so stupid you don’t even want to know because it’s that fast and it’s going to change our industry.’
How have your companies dealt with the situation in which a customer might also be a competitor depending on the job and your place in the supply chain?
Davenport: At least for us, we’re friendlier and more open to talk to our competition because we’ve all existed and done well. … Customers (want) to streamline the number of suppliers that they have. They want fewer suppliers, which means then that you get suppliers that will ultimately do more. … You’re limited because I’ve got equipment and I’ve got automation, or is it all of a sudden, ‘do I start to create these partnerships with folks who otherwise wouldn’t be partners?’ I think there’s more of that stuff that’s going to come about because it has to. We’re all faced with these same headwinds, particularly around people. There’s a lot of dollars that are going to go toward that. If I don’t have dollars to go toward an acquisition, maybe now there’s a joint venture that rolls along (or a partnership).
Shaw: We see this a lot, especially in the stamping world … For our customer, we’re a supplier and we’re a competitor (to the company). Our value streams are all over depending on the job. … If they’re still our neighbors, it’s still our community, it’s still in the best interest of West Michigan. When they call because a press went down or equipment went down, or they’re struggling on a launch, if we’ve got the capacity, the space, resources, let’s work together.
Davenport: This is monumental in my estimation, as you start to think about it. … It’s like, ‘Hey we’re going to share sort of similar platforms. … I’ve got the customer I have to satisfy, and if that customer goes someplace else, we’re talking decades before I could possibly get them back.’
Shaw: I hope more companies start to look at that because a downturn is imminent. ’18 looks strong, but there’s been so much business so quick. (We tell customers,) ‘I can do that, let’s do that,’ but are we good at doing that? Is that one of our core things? Are we making money?
Outside of innovative kinds of collaboration, how are your companies positioned for any upcoming downturn?
Shaw: Diversification will always help you (during a) downturn, but it depends on where you’re at in that business (and) how far along you are. What type of overhead do you (need) to be doing all of these different avenues? … Say you need a press expert, and a welding guy. That cross-training is going to be important in the next year or two, so that way if something happens, when you have to inevitably shrink overhead, you can have the right people who can do everything.
Davenport: I think if you brought it up a level, what’s driving all of this … goes back to people. The fundamental sort of issue is that I’m challenged on the people side to get good-quality folks, and then it almost comes down to first-world problems. There’s things that we can do, and there’s things that we don’t do so well … which in the downturn where the economy’s going south, we don’t want to let any of that stuff go. In today’s world … I’m strapped with my good quality folks, I’m strapped with my good engineers, I’m strapped with tool and die, and so now I’m trying to not only get new business in … but I’m also trying to make sure that I’ve got a good environment for the folks that come in.
How are you selling your culture to prospective employees?
Shaw: Advertise. You’re selling yourself, but your people are selling it in all aspects. … One of the things that we’ve launched to push our culture and our vision is to the be the best structural component stamper. How do we get there? People.
Greene: Ours is a family atmosphere. I guess that sounds like West Michigan, and it does, but I think we give people the flexibility to have a life outside of the office, so they can have Friday as a family day. We allow them to have overtime. We don’t mandate it, and we don’t tell them it’s all cut to zero. We allow them to have that because we know that’s a part of their lifestyle.
Shaw: Our company wholeheartedly believes in culture and the people. … On the east side of the state, it’s hard to find employees to be a part of it. So a lot of companies are making decisions … that the automation has to happen on that side of the state.
Davenport: I’d even submit that there’s headwind on equipment. From a stamping perspective, we are an equipment-driven business. You can’t outsource this stuff. Even if we picked up and went to Mexico, there’s no saving because it’s not people-driven, it’s more equipment-driven. … So I think you have this piece now where we’re fighting for talent, and if you believe that people are lucky to have a job, then you’re dying, you’re going to be a dinosaur. We (want) good people working for us, and we have to make sure that they have a good place to eat, that their cafeteria is nice, they have a good environment to work.
Shaw: I definitely think you see that … on this side of the state. Definitely the value in getting the person and coaching them, (and them) wanting to learn the next level of technology. We’re all competing in it. … Companies have to sell themselves.
Greene: We say the same thing. If we can get these kids in the factory and give them a walk around, no, it doesn’t fit everybody, but for those that it does fit, they’re hooked.
How can manufacturers leverage the technology story with automation to attract more people?
Greene: We’ve got to create opportunities, and then we need to keep recreating ourselves and finding new ways to keep them motivated. I firmly believe that automation is one of those things that keeps them interested and motivated in what they’re doing because it’s ever-changing. … Robots are really in the place of where those hands used to be that would get cut or burned or whatever it may be. So it’s changing and it’s changing fast.
Davenport: At the end of the day, we’re not looking to automate to get rid of the jobs, we’re looking to automate to maintain and become more profitable, and to get rid of the more mundane things that people don’t want to do.
Shaw: We’re seeing and studying the jobs that have the turnover, and (trying to) understanding why. People always used to communicate turnover is turnover, and now we’re two or three years into a strong economy, and the companies that are going to advance aren’t going to keep blaming (their problems) on the worker pool. … If you look at where your turnover is happening, you can understand why it’s happening and then figure that out.
Ermatinger: It’s interesting how the conversation has shifted to people so fast, because when they see me walking into a plant, a lot of the people get scared I’m going to take their job, and the reality of it is that (manufacturers) are going to repurpose these people. Just the other day when I brought (robots into a plant), I had to come through the back door and couldn’t go on the floor — still to this day — because they didn’t want anybody to see it. I thought that’s really strange because there’s so many other positions they could be doing. But why would the worker want to be doing that? Maybe it says they don’t feel they can rise to the occasion to a higher position.
What are the expectations from your employees?
Greene: We have plants in Michigan and plants in North Carolina, and it’s actually a different culture dependent on where you are. … In Michigan, I find that people have a bit of an expectation that they like some level overtime, or at least the ability to have some overtime. In North Carolina, it’s not always that way. They have more of a value to quality of life, and they don’t necessarily always want as much overtime. Don’t work them seven days … or you are truly going to lose them.
Shaw: We encourage the cross-training big time, especially with the new people. It’s getting them intrigued. … We’ve got a lot of guys who come in as press operators, and it sounds good, but then they want to get into the die setting.
Davenport: The more folks that we can attract to the pool and to the community, the better off all of us are going to be. What should happen is if we’re good stewards of the resources that we’re given, I’ll bring folks in and then we’re going to help them grow and develop to the best of their ability. There comes a point where (people advance as far as they can in your company.) Am I going to be a hog and just try to keep them there? Or am I going to be the person that says, ‘Our community will be able to support you. I’m going to release you back out and so that you can go and become better somewhere else. There’s another opportunity.’ … We’ll have to get to this point where we’re thinking less about us and more about the community and the people that we serve. They’ve given us good time, and if your run with us is done, then I want you to go do the best that you can do, make the most that you can.
How is Michigan performing in preparing students for employment in manufacturing?
Shaw: I think it’s the high school counselors (who really need to engage with the students). Yeah, the community colleges like Grand Rapid Community College are doing a great job. Ferris State is doing it, and Western (Michigan University) has got a huge program in this, but it’s not getting to the high school level.
Davenport: I think it’s a values issue. … I think we’ve placed this value on sort of going to college and getting an education, which there’s absolutely nothing wrong with getting an education, but I think people are already equipped for different things. There are some people that are just geniuses with their hands … but we’ve discounted the value of that. We’ve said that the architect or the lawyer is better than the tool and die guy and the quality guy. … If you look at what you see on television, you don’t see anything about CNC or being a welder or being a tool and die guy.
Shaw: There’s bills being passed (in the state) that will allow that metal shop and the wood shop (class) … to count as a math credit. So it’s coming around. I think the industry and the state as a whole has seen (we need) this in order for us to be successful in manufacturing. They’re helping us push this.
Greene: I think our high schools do a disservice, they have the wrong indicator. Their key indicator is how many kids went to college. The key indicator ought to be how many kids graduated from college with a degree, and without student debt. Now that’d be the right indicator, because we end up judging this whole college system around (going) to college. (Think about if) they chose instead to become a manufacturing employee, learn a skilled trade, make money day-one, move out of the family’s basement and have their own place, and not have student debt that’s going to plague them for the rest of their life.
Davenport: The parents were doing disservices to their children. … When I graduated high school from Ottawa Hills in ’87, there was no expectation that my dad was going to pay for college. I don’t know when that changed.
Greene: We really do need to take everybody to the next level, and (figure out) how can (our companies) grow. People are the limitation on growth. We know about equipment, we all find money to finance it, it’s the people that are limitations.
Given the people struggles, where do you look to deploy capital next year?
Davenport: We have to look at more equipment that’s faster. We’ve got to look at things that’ll take stress off of our people — the very repetitive motions that they’re doing. How can we do that in a different way? How can we use automation to come in and assist, and then how do you reward those people as well?
Greene: The thing we’ve got to be invested in is being faster, being better, improving your quality, and improving your environment. And so I think you’ve got to invest, but you do have to be prudent with it because, as we said before, we’re in a cyclical business and that cycle will turn.
Shaw: Research and development really is going to be what we’re going to use the time for. We’re looking at designing our own equipment, because if everyone else can get it off the market, then they have the same thing we do, so we’re tasking our technical people to really design our (future). If we build and design it in-house, I have a team of people who can go launch it and teach our own technology. And now those experts work for me.
Ermatinger: That’s definitely is a trend, to keep it in-house because you get to keep your own intellectual property on your processes that you approve. But more so … your uptime is faster because your people know how it works because they built it. … There are instances recently where I’ve seen the manufacturer go and buy machine owners, just for the purpose to have their own built-in (team), and several of them that are in stamping industries right now have teams that deal with the day-to-day, and then they have another team that deals with R&D.
Does the volatile political environment of the past year in any way influence your decision making or your outlook going into 2018?
Ermatinger: It hasn’t affected us. We’ve been gearing up and we continue to gear up, so I’m buying as much demo equipment to show the process working, and hiring as many people as fast as I can. I’m trying to be prudent, but it’s hard to when the demand is so high. I feel like I’m short-staffed even though I probably could increase 30 to 40 percent this year. … So that’s a little scary. But politically, I think the only thing would be the tax reform. That could change everything.
Good or bad?
Davenport: That would be good for hiring.
Greene: (It would mean) dollars to invest in the business and the people. I think it’s actually a positive, and it levels the playing field. Like it or not, we’re all competing internationally, and it levels the playing field if the tax rate is more reasonable.
Shaw: That tax bill is so large. There’s going to be positives to the company, but there’s also negatives in there to your people. … The good businesses will look at that and say, ‘OK, there’s a gain here, (but) where did my people lose? What are they losing, and how can we help bridge that gap.’
Davenport: If I put all (the tax savings) into the company bucket, you might as well just put a sign outside that says ‘Jireh Metal: slowly going out of business.’ That’s not the prudent thing to do. … If you want to be a company that’s going to be able to sustain itself, you must take care of your people. … We’ve got to figure out how to deal with that because our people, who we say are our most important asset, they are being impacted, and we need them to be able to do their thing. If they can’t do their thing, we don’t win. We’re all in this thing together.
On the trade side, President Trump has talked about getting rid of NAFTA. How are you watching those discussions from your companies?
Greene: I’m as pro-American as anyone, (but) NAFTA is something that actually has been good for the automotive industry. We make parts in North Carolina, we ship them to Mexico to be assembled, and then they go to Toledo to go into a Jeep Wrangler. The complexity of the automotive industry requires that there is some passage across the borders.
Shaw: Is there really a market for some of the stuff that’s being outsourced? … Our plant in Canton sells into Canada to GM. The one in Mexico we put because GM has their plant there. … We’re a Korean-based company, and our owner has invested in the U.S. market and he’s assured us that the North American market is where he wants to grow the most.
It seems any discussion around NAFTA is most tied to the automotive industry. Do you see it affecting any of the other sectors that you are serving?
Greene: We don’t see it so much because there’s a real push in the appliance area for American-made, and even LG and the Samsung are now building plants here.
Davenport: I think about the American manufacturing and I’m bullish about it. Every country that’s ever been low-cost, the standard of living has always increased, and they’re no longer low cost. What we have to do is really figure out automation, people and equipment so by the time we all get this ready and get it figured out, the low-cost countries won’t be low-cost anymore, and we’ll be ready and waiting for them and say, ‘Come on back home, come on back over here because we’re ready for you.’ We’ve done very well with people on-shoring.
Shaw: In West Michigan, most of us are supplying an assembly part of some kind, either automotive or appliance or whatever. The more that those stay in the U.S., or move back to the U.S., the stronger we’re all going to be.
A year from now, what’s something that we could be talking about that we aren’t talking about right now?
Greene: You just have to be so nimble today. You’ve got to be a well-oiled machine if you want to be able to be successful with this. You’ve got to be able to turn on a dime and face reality, whatever that reality is. It’s going to change everyday, but if we don’t face reality then we’re going to get surprised.
Davenport: I think consolidation is going to occur. … I think you will still see more collaboration as well. It’s kind of amazing that people who should be natural rivals are actually kind of coming together.
Shaw: The overall community atmosphere. West Michigan is an industry leader in office furniture and automotive, and if you do business outside of West Michigan or go around to other plants, people come here and they’ll tell you it is different.
Ermatinger: I think a big change for us is going to be the technology, even for us. It’s going at the pace that we can’t keep up. … What’s going to happen next year, I think it’s going to be that times 10. (It’s going to enable companies to say,) ‘I can change something that’s been in the industry for 50 years and do it differently right now and beat the competition.’
Published in Crystal Ball
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