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The Dangers of Uncertainty

Aug. 15, 2019
How well is manufacturing poised to handle the challenges ahead

The value of any machine is its consistency. You want to know that whatever the machine’s function, it will perform that task on every cycle, every shift, every day. Consistency is engineered into the machine at the design stage and, when properly operated, is expected to perform well and maintain that performance throughout its lifecycle.

You have to maintain the machine, of course, and watch for the warning signs of disrepair or misuse. You have to train your team to make sure mistakes are minimized and the machine can function as it was designed.

Manufacturing successfully navigated the 2009 recession by going back to some of those basic ideas—good maintenance, proper training, and an attention to efficiency and productivity. The manufacturing sector led the United States out of recession and into a period of economic growth, and re-established American manufacturing as a global leader in innovative design and efficient processes.

One of the keys to that growth was that business was more-or-less predictable. Business leaders like predictability. They want to know what’s likely to happen, within a reasonable tolerance, and to be able to plan for it. That planning leads to consistency, and that consistency leads to profits.

If the American business machine sounds a lot like the machine on your plant floor, that’s because they are a lot alike. The problem with the business machine today is that it’s become less predictable.

Federal business tax cuts fueled a huge run-up in business expansion, and that was good for everyone’s business. But global tariffs—which are essentially business taxes—drove uncertainly for U.S. suppliers and manufacturers. Brexit drove more confusion, and that’s not yet resolved. We’ve seen global political and social unrest, which fuels even more uncertainty.

And as a result, manufacturing has slowed down. The monthly PMI Index from the Institute for Supply Management is a trusted barometer of manufacturing health. In August 2018, the PMI was at 60.8—more than 20% above the index’s 50% threshold for manufacturing growth. In July 2019, that index had fallen to 51.2%, its lowest level in three years.

The cause? Simple, according to the business leaders who contribute data to calculate the PMI: “All aspects of business remain strong, but we’re starting to see the frictional effect of tariffs on exports,” said one plastics producer.

“China tariffs continue to be a concern,” added a computer and electronics producer. “The uncertainty of future tariffs involving China, Canada, and Mexico is also a concern.”

Overall, the economy continues to grow—the PMI also measures overall economic growth, and that threshold is 42.9%, and the index has been above that level for more than 10 years. But that also indicates the importance the manufacturing sector has on the economic health of the U.S. And given that America remains the largest single manufacturing in the world, its sneeze may give the rest of the global economy a cold.

It’s that nasty word—"uncertainty”. Manufacturers hate uncertainty. Machine design teams work relentlessly to factor out uncertainty. Operations teams monitor and measure and manage uncertainty. What they don’t do is ignore the warning signs and do nothing.

And what they never do is repeat the mistakes that caused the machine to malfunction in the first place.

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