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New Bells and Whistles in Manufacturing Ring up Near Record Output

June 21, 2017
Fourth industrial revolution
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Ignore the drumbeat for the need to rescue the U.S. manufacturing sector. Manufacturing is not dead; far from it. Manufacturing has long buttressed the U.S. economy in myriad ways, and it seems poised to continue.

What’s changed about manufacturing is not output, but employment. It’s true, the industry has lost millions of jobs, but manufacturing output has surged at the same time and is approaching record levels, according to data from the Federal Reserve Bank of St. Louis.

How does that happen? With thanks to automation, technology, 3D printing, artificial intelligence, the Internet of Things (IoT), and robotics. And yes, that can mean robots trolling factory floors. Some 85% of manufacturing job losses are attributed to technological advances, according to a study by the Center for Business and Economic Research at Ball State University.

The Bane and the Beauty

Is that a good thing or a bad thing? As the St. Louis Fed puts it, it depends. “Employing people is clearly important. Yet, when an industry needs fewer people because it is better at doing something, this is viewed as a gain by economists: Workers who aren’t needed any more can move on to produce something else.”

There was a time when a distribution center’s inventory and order flows were calculated by floor managers who had to know where everything was located in the warehouse for replenishment. Today that’s all handled speedily with sensors that track movement and supply in real time, and the floor manager is now coding software.

We’re living in the Fourth Industrial Revolution, following the pipe dreams that became the steam engine, the conveyor belt, and the early iterations of IT and automation technology. It is what management consultant McKinsey & Co. calls “a new wave of technological changes that will decentralize production control and trigger a paradigm shift in manufacturing.” And it has by cutting costs, and upping efficiency and output dramatically—but with fewer human beings.

Today, while some manufacturing jobs are finally being added after decades of decline, there are still nearly 5 million jobs that have been wiped out since 2000, according to the Bureau of Labor Statistics. Then, there were some 17.3 million positions of all kinds in factories, plants, mills and every other place where new products are created from raw materials or components, which is manufacturing as defined by the Census Bureau. As of April, that employment based stood at roughly 12.4 million.

Here’s a statistic worth chewing on: Every robot brought into the U.S. workforce between 1990 and 2007 replaced 5.6 human jobs, according to the National Bureau of Economic Research. “The effects are most pronounced on industries most exposed to robots, on workers with less than a college degree, and on routine manual, blue-collar, assembly, and other related occupations,” according to the report.

It’s often cheaper to use robots than it is to employ people here or abroad to do the same work. Consider the automotive welder: A human welder will run up average employment costs of $25 an hour, including benefits, according to a study by Boston Consulting group. A robotic welder has an equivalent operating cost of $8 an hour, and installation, maintenance, and upkeep can be amortized over a five-year period. It’s estimated that those costs can drop to as low as $2 an hour in short order.

Manufacturing: A Breeding Ground of Innovation

All this automation, AI, the IoT and predictive analysis, to name a few, are helping step up productivity and introduce new products into manufacturing plants. At textile mills, for example, the once-labor-intensive craft of textile fabrication, from design and coloring, to fiber construction, fabric creation, finishing, and delivery forced many fabric makers to opt for standardization as a means of controlling profit margins.

Technology has given the textile manufacturer a means to manage that tailor-made madness quicker with better efficiency, and lower handling costs and supply-chain logistics.

There’s this too: A fledgling group is bolstering a “domestic manufacturing-based revolution” that “transforms traditional fibers, yarns, and fabrics … into highly sophisticated devices and systems.” Yep, smart clothes made of fabric with embedded semiconductors that will measure, analyze, and monitor, say, your body temperature and adjust the warmth levels accordingly. The Defense Department is looking at it to develop combat uniforms that could change colors to signal a friend or foe is ahead, or make soldiers invisible to night-vision goggles.

In aviation, machines are creating single-piece structures out of solid metal to replace the time-consuming process of riveting many pieces together while robots are used to join aircraft parts in final assembly—all jobs that humans once performed. 3D printing processes are prompting engineers to roll out all-new engine designs that combine the best of jet and turboprop technology. And these technologies can be adapted to any industrial asset used to monitor, analyze, and improve its performance in ways humans can’t. A gas or wind turbine, for example, can be programmed to generate the most power while self-analyzing its maintenance needs before problems occur. That can create a huge opportunity to dramatically lower maintenance costs.

So don’t be so gloomy about manufacturing. Sure, it may be going through a shake-out period, or what economists describe as “structural transformation” in which jobs disappear and new opportunities emerge. But just as farmers learned to become tradesmen when the economy shifted from agriculture to industrial, so too will today’s displaced manufacturing workforce likely be retrained and redeployed in a way that provides a greater benefit to the economy.

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