Manufacturing 5.0: We’re at the beginning of a new industrial revolution
n the wee hours of Easter morning 2020 — as the pandemic raged and most people were sleeping — there was a quiet but important handoff happening in Ohio.
About 2 a.m. a group of about 20 companies turned over a 3D-printed mold to other manufacturers so they could begin making clear plastic face shields that would protect thousands of health care workers, state employees and other essential workers.
Until the pandemic, Ohio — the third-largest manufacturing state in the U.S., behind only California and Texas — didn’t produce personal protective equipment (PPE). But manufacturers, working with nonprofits and the state of Ohio, stepped up.
“They moved mountains,” said Ethan Karp, president and CEO of the Manufacturing Advocacy and Growth Network, or MAGNET, that serves Akron, Cleveland and all of Northeast Ohio.
Karp said the story of how more than 2,000 Ohio companies ramped up PPE production within weeks is a parable for “onshoring,” or the return of manufacturing and production to the U.S. from overseas.
Onshoring is a trend that began before the pandemic as companies compared costs and feared geopolitics, natural disasters and other crises could interrupt their business.
And Karp, Lt. Gov. Jon Husted and others working with Ohio manufacturers say the desire to onshore has only accelerated since the pandemic.
How much manufacturing might return to Ohio, or grow anew in the state, is not yet clear.
It will take enormous investments in technology, ongoing cooperation and networking among companies already here and a lot more skilled employees, some with certificates that take only a few weeks to earn, others with new specialized college degrees.
But getting onshoring right is important, particularly in Northeast Ohio, where Karp said that 50% of the economy still depends on manufacturing.
Ned Hill, an economist at The Ohio State University who studies American manufacturing, said this is one of the most interesting times for manufacturing he’s seen during 40 years, the beginning of the fifth industrial revolution.
“It’s a time of confusion, change, turmoil and opportunity,” he said
Fords, iPads, furniture, ketchup packets.
There are shortages of many products Americans crave as they emerge from the pandemic.
Mahesh Srinivasan, who teaches at the University of Akron and directs the Institute of Global Business there, calls the shortages a “perfect storm of certain things coming together.”
Steel, he said, is a good example. When the pandemic hit, demand dropped, so manufacturers cut back on production to avoid a glut. But as the pandemic lifts and the economy heats up, steel makers need more time to come back online.
“No one expected the economy to rise so sharply,” he said, adding that it’s being bolstered both by pent-up demand and U.S. stimulus money to families.
“What do you have for a family of four? $5,600. That’s good money and if you have a wish list of things you want to do — home improvement, a new washer and dryer,” he said.
In addition to short supplies, he said there are transportation bottlenecks, both by land and by sea.
About 74% of U.S. shipping depends on trucking. There was a shortage of drivers before the pandemic and it only got worse during the pandemic, with about 25,000 drivers dropping from the workforce.
Meanwhile, there are not enough giant shipping containers to handle the demand of global trade. A 40-foot container traveling from Shanghai to Los Angeles cost about $1,800 pre-pandemic. About a month ago, he said that cost had risen $4,500 and in some cases, where supplies were critical, had reached into the five digits.
“It’s just economic theory 101,” he said. “Supply and demand. Prices are going to go up.”
Many people say supply chains are broken, Srinivasan said.
“But really, I think the supply chains and professionals are doing a wonderful job keeping up,” he said. “If you’re not used to going on a 10-mile run, it’s hard on a body just to catch up.”
Most shortages will be resolved within six months to a year, Srinivasan said. But not all. Microprocessor chips — almost exclusively made in Asia and used in everything from cars and trucks to toys and phones — may not be fully back in supply until 2023.
That could have devastating consequences, particularly for the auto industry. Some analysts say automakers could lose more than $60 billion this year as auto factories in Ohio and elsewhere slow or halt production because they don’t have the semiconductors they need.
President Joe Biden last month told corporate leaders that the U.S. should be the world’s leader in computer chips, and his $2 trillion infrastructure proposal would set aside $50 million for the semiconductor industry, mostly to expand manufacturing in the U.S.
“We need to build the infrastructure of today, not repair the one of yesterday,” Biden told computer and technology leaders. “China and the rest of the world is not waiting and there’s no reason why Americans should wait.”
Show us the money
Ohio manufacturing advocates are pushing for federal money to be spent here on other manufacturing in other sectors, too.
Ryan Augsburger, who was promoted to lead The Ohio Manufacturers’ Association in January, said Ohio is expected to get $22 billion in stimulus funds, divided about equally between the state and county and local governments.
It’s not yet clear how state officials plan to use that money, but Augsburger wants a portion of it to help Ohio manufacturing thrive.
“You could spread that out to different interests, but it’s not transformative,” Augsburger said. “But we have a one-time opportunity to position Ohio to have a competitive advantage.”
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