Dichotomy exists between plastics industry and overall manufacturing

While we were excitedly trolling the aisles of NPE2015, agog at the amazing machinery and molds churning out plastic parts and companies showcasing their latest and greatest technology, the overall manufacturing economy was in the doldrums.

On March 25, the U.S. Department of Commerce released the "Advance Report on Durable Goods Manufacturers' Shipments, Inventories and Orders for February 2015." New orders for manufactured durable goods in February decreased $3.2 billion, or 1.4%, to $231.3 billion. This decrease, down three of the last four months, followed a 2.0% January increase. Excluding transportation, new orders decreased 0.4%; excluding defense, new orders decreased 1.0%.

Transportation equipment, also down three of the last four months, led the decrease at $2.5 billion, or 3.5%, to $69.5 billion.

While those figures look gloomy, most of the moldmakers and molders at NPE2015, who supply the automotive industry, said they were very busy. However, that optimism isn't across the board, according to the Original Equipment Suppliers Association in the March "OESA Automotive Supplier Barometer."

March's Supplier Sentiment Index (SSI) remained on the "positive" side at 51, but that was down from January's index of 61, a hefty drop revealing that supplier optimism decreased and pessimism increased. The number of suppliers indicating an "unchanged" outlook increased, however. The increase in pessimism stems from mid-size companies with revenue of $50 million to $1 billion.

With 80 respondents, the March survey focused on supply-chain related issues and strategies, with supply-chain constraints continuing to be a topic of discussion, said the OESA summary. "While the percent of respondents reporting that they do not have supply-chain constraints fell year-over-year, 50% of suppliers continue to report sub-tier constraint concerns. For suppliers still seeing possible supply constraints, they are concentrated in the critical areas of powertrain, electrical and chassis," the survey summary noted.

It's probably no big surprise to Tier 1 and Tier 2 moldmakers that "receiving late customer engineering change orders was rated the highest in probability of occurrence and near the top in terms of severity of impact to operations." Lack of timely response from the OEMs or Tier 1 molders to mold design issues that crop up can throw a real monkey wrench into the build schedules. That's long been a complaint of moldmakers. But, of course, when molds are late it's the moldmaker's fault, right?

The good news, said the Barometer summary, is that the financial distress among sub-tier suppliers was rated lowest in both occurrence and severity. Financial distress among sub-tier suppliers (moldmakers and molders, for example) has been a major concern among automotive OEMs and Tier 1 suppliers for several years, and it's a primary reason these sub-tiers were put on "watch" lists.

Overall, the percentage of North American suppliers having no sub-tier suppliers on their watch lists declined year-over-year between 2012 and 2014. However, this year, there is an increase in the number of suppliers reporting 3 to 5% of their suppliers on the watch list, driven primarily by quality (42% say this is the number one reason sub-tier suppliers are on the watch list), and delivery performance (25% cite delivery performance as a reason to put a sub-tier on the watch list).

Talking to molders and moldmakers at NPE also revealed that the shortage of skilled workers is still impacting their businesses. More and more moldmakers, it seems, are creating their own apprenticeship programs in-house as a way to maintain a supply of skilled workers.

While the plastics and moldmaking industries continue to beg for skilled workers, the total nonfarm payroll employment increased by a meager 126,000 in March. While that left the unemployment rate unchanged at 5.5%, that figure doesn't account for the number of people employed part time for economic reasons (sometimes referred to as involuntary part-time workers because they want and need full-time work), which was little changed at 6.7 million people in March. These people are working part time because their hours have been cut back or because they are unable to find a full-time job. The "fix" that is supposed to take place to the 30-hour full-time work week introduced in the Affordable Care Act hasn't happened yet, leaving a lot of people working 29 or fewer hours.

In March, the average workweek for all employees on private nonfarm payrolls declined by 0.1 hour to 34.5 hours. The manufacturing workweek decreased by 0.1 hour to 40.9 hours, and factory overtime remained at 3.4 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls decreased by 0.1 hour to 33.7 hours.

Manufacturing jobs were down 1,000 in March, but the demand for skilled labor remains high.

 

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