U.S. Manufacturing Subsector Growth Vs. Size
The 2022 Annual Report on U.S. Manufacturing Industry Statistics provides a comprehensive overview of the U.S. manufacturing sector's performance, with a focus on various subsectors. Here's a breakdown of the key points, some strategic advice for manufacturers, and suggestions for Industry 4.0 service providers.
Overall U.S. Manufacturing Performance
U.S. manufacturing remains a powerhouse, contributing $2.3 trillion in value added, which represents 12.0% of the GDP. Although the U.S. is the second-largest manufacturing nation after China, it faces challenges in maintaining competitiveness, particularly against rapidly growing economies. Economic Value Added (EVA) is a firm-specific measure used to estimate the economic profit of a company. It is designed to reflect the actual profitability of a business, considering both the company's operating profit and the cost of capital. (See Graphic).
Employment Dynamics: Between January 2005 and January 2010, U.S. manufacturing employment saw a sharp decline of 19.6%. Although the sector has gradually recovered, as of July 2022, employment levels were still 10% below the 2005 levels. This suggests that while the sector is resilient, it has yet to fully bounce back to its pre-recession levels.
Labor Productivity Trends: Manufacturing labor productivity in the U.S. has not seen substantial growth recently. The multifactor productivity index, which measures efficiency in the use of labor, capital, and technology, has shown limited improvements. This points to a need for more effective integration of new technologies to boost productivity.
R&D Investment: The U.S. ranks 5th globally in research and development expenditures as a percentage of GDP, reflecting its strong commitment to innovation. Despite this, the manufacturing sector's R&D expenditures grew at a modest compound annual growth rate of 2.7% between 2017 and 2018, indicating room for further investment to stay competitive globally.
Safety Concerns: While nonfatal injuries in manufacturing have been decreasing, the industry still experiences a higher rate of nonfatal injuries compared to other private industries. This highlights the ongoing need for safety improvements and the adoption of safer technologies and practices within the sector.
Supply Chain Complexity: The U.S. manufacturing sector is deeply intertwined with global supply chains, with intermediate imports accounting for 18.2% of total intermediate goods in 2020. This indicates a significant reliance on international supply chains, underscoring the importance of managing risks associated with global disruptions.
Advice for Manufacturers
Invest in Technology: Given the slow productivity growth, manufacturers should prioritize investments in automation, artificial intelligence, and other Industry 4.0 technologies. These tools can help streamline operations, reduce costs, and improve product quality.
Focus on High-Value Sectors: Manufacturers should consider focusing on sectors where the U.S. has a competitive advantage, such as computer and electronic products, and chemical manufacturing. These industries are likely to see continued growth and demand.
Resilience Planning: The pandemic highlighted the importance of resilience in manufacturing. Companies should invest in supply chain diversification, risk management, and flexible manufacturing systems to better withstand future disruptions.
Advice for Industry 4.0 Service Providers
Target Key Subsections: Service providers should focus on high-tech and high-value subsectors like electronics, chemicals, and machinery. These areas are ripe for digital transformation and have the potential to deliver significant returns on investment.
Offer Integrated Solutions: Manufacturers are looking for end-to-end solutions that can help them navigate the complexities of modern manufacturing. Offering integrated systems that combine IoT, AI, and data analytics can provide a competitive edge.
Emphasize ROI: Given the cautious approach many manufacturers are taking towards new investments, it's crucial to clearly demonstrate the return on investment for Industry 4.0 solutions. This includes showcasing how these technologies can directly improve productivity and reduce operational costs.
References:
National Institute of Standards and Technology (U.S. Department of Commerce) - Annual Report on U.S. Manufacturing Industry Statistics: 2022: https://nvlpubs.nist.gov/nistpubs/ams/NIST.AMS.100-49.pdf
