Business Operations

What’s the Next Phase of Digital Evolution?

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In late 2021, the Manufacturing Leadership Council launched the Manufacturing in 2030 Project, a comprehensive examination of the factors that will influence the industry leading up to the year 2030 and beyond. The latest milestone in this sweeping project is the release of The Next Phase of Digital Evolution.

This groundbreaking white paper examines the global megatrends like population, the economy, sustainability demands, and technology development – all of which will impact business decisions and are essential for manufacturing competitiveness.

Data’s Growing Role: Data is perhaps manufacturing’s most important asset, tracking everything from individual machine performance to the status of global supply chains. Developments in digital systems for factories, high-powered industrial networks and advanced communication technologies are giving rise to the ability to collect data.

Combined with a rise in analytics capabilities, manufacturers are now able to apply that data in powerful ways to improve processes, speed innovation, find new business opportunities and ultimately create conditions for greater competitiveness.

A Rising Middle Class: Population trends will influence where manufacturers build new factories, who they hire, the products that they make, organization for supply chains and who they are selling to.

Africa and Asia are projected to have the strongest population growth, and while traditional middle-class markets in the U.S., Europe and Japan are expected to grow at only modest rates, 88% of the next billion entrants into the middle class will be from Africa.

What’s to Come: Manufacturers will also need to consider their role in creating sustainable business practices and how they will overcome persistent workforce challenges. Institutional investors are pressuring businesses to significantly improve environmental practices, while the already yawning gap in skilled workers is expected to skyrocket to 2.1 million unfilled openings by 2030.

Technology could have a role in solving both of those issues. On the sustainability front, data can be key to monitoring emissions, utility consumption and waste, while also giving rise to new processes that improve on those metrics. For the workforce, data can empower workers to make more informed decisions, automation can eliminate repetitive tasks, and technologies like augmented and virtual reality can enhance training and upskilling.

To learn more about these and other insights, download the full white paper here.

Press Releases

New Study | Stricter Interest Expense Limits Costs Half Million Jobs

Failing to Address EBIT-Based Limitation Harms Manufacturers’ Competitiveness

Washington, D.C. – Following the release of an analysis on the economic impact of failing to reverse a stricter limitation on deductions for interest on business loans that took effect earlier this year, National Association of Manufacturers Managing Vice President of Tax and Domestic Economic Policy Chris Netram released the following statement.

Key Findings:

The stricter EBIT-based 163(j) interest expense limitation before market adjustments would cost:

  • 467,000 jobs;
  • $23.4 billion of employee compensation; and
  • $43.8 billion in GDP.

“Manufacturers are already facing incredible economic headwinds due to increased input costs, rising interest rates, labor shortages and snarled supply chains. This analysis shows that failing to reverse the damaging change to the tax treatment of interest on business loans disproportionately harms manufacturers at a perilous time—costing hundreds of thousands of jobs and billions of dollars in economic growth.

“America is an international outlier in imposing such a strict interest expense limitation. With nearly half a million American jobs at stake, Congress must act by year’s end to reverse the stricter EBIT-based limitation and allow manufacturers to continue to invest for growth.”

EY’s Quantitative Economics and Statistics group prepared the analysis.

Background:

Prior to 2022, the interest expense limitation was calculated based on a company’s earnings before interest, tax, depreciation and amortization (EBITDA). This year, a stricter limitation based on a company’s earnings before interest and tax (EBIT) took effect. By excluding depreciation and amortization from the calculation, the stricter limitation increases the tax burden on manufacturers that make investments in long-lived capital equipment.

-NAM-

The National Association of Manufacturers is the largest manufacturing association in the United States, representing small and large manufacturers in every industrial sector and in all 50 states. Manufacturing employs more than 12.8 million men and women, contributes $2.77 trillion to the U.S. economy annually and accounts for 58% of private-sector research and development. The NAM is the powerful voice of the manufacturing community and the leading advocate for a policy agenda that helps manufacturers compete in the global economy and create jobs across the United States. For more information about the NAM or to follow us on Twitter and Facebook, please visit www.nam.org.

Policy and Legal

Kigali Ratification a Win for Manufacturers

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The Senate voted yesterday to ratify the Kigali Amendment—an international greenhouse gas–reduction accord that is more meaningful than any the U.S. had agreed to before. Long advocated by the NAM, this ratification is a major step forward for manufacturers and their ability to compete effectively and sustainably.

A climate-action model: In a strong bipartisan 69–27 vote, the Senate approved the amendment, a change to the 1987 Montreal Protocol that phases down the use of hydrofluorocarbons (commonly used refrigerants) in favor of more efficient next-generation alternatives.

  • The measure, which the NAM called for in its climate change roadmap, “The Promise Ahead,” “could help avoid a half-degree Celsius of global temperature increases by the end of this century,” according to POLITICO Pro’s E&E News (subscription).
  • The ratification builds on a move for which manufacturers also pushed, the 2020 legislation requiring the Environmental Protection Agency to issue rules to phase down nonessential HFCs by 85% by 2036.

Manufacturers approve: Many manufacturers were delighted by this move. “Trane Technologies applauds senators on both sides of the aisle for voting to ratify the Kigali Amendment,” Trane Technologies Chair and CEO Dave Regnery told Input.

  • “In addition to creating 33,000 U.S. jobs, stimulating $12.5 billion in new investment in the U.S. economy and boosting U.S. exports by 25%, ratifying Kigali aligns with our bold commitments to reduce emissions through sustainable innovation.”

Accountability for China, India: Critically, the legislation fortifies “our global leadership and put[s] the U.S. in a position to hold countries like China and India accountable,” NAM Vice President of Energy and Resources Policy Rachel Jones said in a communique to Congress—which was quoted by Environment & Public Works Committee Chairman Sen. Tom Carper (D-DE) on the Senate floor Tuesday.

  • The amendment will also “protect American workers, grow the economy and improve our trade balance all while encouraging further innovation to strengthen America’s technology leadership,” Jones wrote.

Inside the NAM’s advocacy: “We were able to leverage our longstanding policy experience, strategic partnerships and our depth of relationships in the Senate to adeptly navigate the ever-changing and challenging politics,” said NAM Senior Vice President of Policy & Government Relations Aric Newhouse.

  • “Ultimately, the NAM’s support and long-term engagement was able to shepherd this crucial priority for manufacturers across the finish line in a bipartisan way that doesn’t force a false choice between environmental protection and economic growth.”

The last word: “This action proves that if we work together—if we rise above politics and partisanship and focus on solving problems—we can make our vision of a brighter tomorrow into reality,” Jones said in a statement.

Workforce

How One Manufacturer Is Reinvigorating a Small Nebraska Town

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Deshler, Nebraska, has a population of 747. It has one grocery store and one gas station, and its local high school graduates approximately 18 seniors each spring. It’s also the global headquarters of international irrigation firm Reinke Manufacturing, which employs a large number (about 600) of the town’s residents.

A great job: Working at Reinke has many perks, including generous pay and benefits, but until recently, the company had a hiring challenge to overcome in one specific area: housing.

  • “We are so rural that we were having difficulty getting people,” Reinke Manufacturing President Chris Roth said. “We could recruit them easily, but then it was like, ‘Well, where am I going to live?’”

A solution—with an added perk: Around 2012, Roth and other leaders at Reinke came up with a fix: The company would purchase a house for a new employee and rent it to him at a reasonable fee.

  • After that, the firm was on a roll. “We started to buy up lots with homes that needed to be torn down, homes that have been vacant for years … and put up something else” in which employees could live, Roth said. The move has “improved the town, too,” he added.
  • The first build was a fourplex with efficiency apartments. “There’s a bedroom in the back, a bathroom and a kitchenette. People like those; they’re really nice.”

Expanding a vision: The efficiencies are mostly for single people, however, and Reinke wanted to have options for prospective employees with families, too. So, it began thinking bigger.

  • “Our second fourplex was a building with two duplexes,” Roth said. “These are two-bedroom units, and small families live there.”
  • Soon the company began purchasing single-family homes, too. It currently rents out seven such houses—all available for sale to the employees.

Even bigger: In early 2021, Reinke made its biggest investment in affordable employee housing yet. It purchased an entire motel in nearby Hebron, Nebraska, and turned it into apartments.

  • The building now houses 40 people, some of them families. “It was run down when we bought it, but all brick and had a newish roof, so we were able to save a lot of it,” Roth said.
  • In addition, the company recently broke ground in Deshler on a two-story, eight-unit housing complex of two-bedroom apartments that will be ready in spring 2023.

Game changer: Since Reinke got in on the housing game, recruitment and retention of top employees “is easier now,” Roth said. “They’re willing to move because they know we’ll have housing. If you’re going to move several states, you want to know where you are going to live … There really isn’t anything on Apartments.com [in Deshler].”

  • Another benefit for Reinke employees has been that their new landlord requires less up-front outlay. “A deposit and first and last months’ rent is a lot, and it can be a problem for a lot of folks,” Roth said. “We don’t necessarily need all that.”
  • The program is so popular, Roth said, there’s currently a waiting list for the units.

Other efforts: In addition to employee housing, Reinke is increasing its presence and education efforts at the local schools in a bid to recruit talent sooner.

  • The company started an employee-taught welding program at Deshler High School, which allowed the company to develop its own curriculum using American Welding Society Standards.
  • “It gives us the opportunity to get in front of kids and teach them skills that we need,” Roth said. Reinke offers a similar program to adults through a cooperative effort at a community college.
  • A Reinke-run middle school program helps students learn to use CNC machinery, with which the company manufactures parts. Through another program at the middle school, the company teaches a class on AutoCAD, software that allows users to create detailed two- and three-dimensional drawings, as well as courses on basic electrical and hydraulics skills.

 The last word: Worker housing and manufacturing classes for young people will do more than create a top-notch workforce for the company, Roth said.

  • “A lot of times kids will graduate and go to Omaha or Lincoln, and they don’t come back,” he said. “This is a way, hopefully, to keep people here in Deshler. They make very good money, have great benefits, so we hope they stay … and keep the town going.”
Press Releases

Manufacturers: Kigali Ratification a Blueprint for Bipartisan Climate Action

Washington, D.C. – Following the Senate’s 69–27 vote to ratify the Kigali Amendment to the Montreal Protocol, National Association of Manufacturers Vice President of Energy and Resources Policy Rachel Jones released the following statement:

“The Senate’s vote to ratify the Kigali Amendment is a blueprint for the type of bipartisan climate action that meets science-based targets while strengthening manufacturing competitiveness. It will reduce emissions by the equivalent of 80 billion metric tons of CO2 by 2050, with the potential to create up to 150,000 more U.S. jobs by 2027. This action proves that if we work together—if we rise above politics and partisanship and focus on solving problems—we can make our vision of a brighter tomorrow into reality.

“Manufacturers have supported the ratification of the Kigali Amendment for years. This treaty will be a boon for manufacturing, for global trade and for products that protect health, safety, comfort and productivity worldwide. Ratification further strengthens our global leadership on the phasedown of hydrofluorocarbons and will help the U.S. hold countries like China and India accountable on emissions. This shows that we can tackle climate change while strengthening our global competitiveness as we deploy next-generation technologies.”

-NAM-

The National Association of Manufacturers is the largest manufacturing association in the United States, representing small and large manufacturers in every industrial sector and in all 50 states. Manufacturing employs more than 12.8 million men and women, contributes $2.77 trillion to the U.S. economy annually and accounts for 58% of private-sector research and development. The NAM is the powerful voice of the manufacturing community and the leading advocate for a policy agenda that helps manufacturers compete in the global economy and create jobs across the United States. For more information about the NAM or to follow us on Twitter and Facebook, please visit www.nam.org.

Policy and Legal

What Manufacturers Need from Regulatory Reform

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While smart regulations can enhance manufacturers’ competitiveness, there are far too many cases of unwieldy or unnecessary rules getting in their way. That’s why the NAM is standing up for regulatory reform and providing policymakers with a list of solutions to pursue today.

The challenge: The annual regulatory cost burden for an average U.S. firm represents 21% of its payroll, forcing manufacturers to divert resources away from important investments. For smaller manufacturers, the burden can be disproportionately painful, creating barriers to growth and development.

Our work: At the NAM, we’re advocating for a predictable regulatory agenda that is based on science and facts and that offers flexibility for innovation.

  • The NAM’s agenda, contained in its policy blueprint Competing to Win, seeks to combat the fundamental problems in our outdated regulatory system.
  • That includes ensuring that regulations focus on outcomes and rely on data; improving regulatory analysis; minimizing unnecessary burdens; strengthening industry outreach; preserving the ability of companies to grow; and reducing the abuse of our legal system.

What we’re saying: “Manufacturers in the United States should be able to grow, compete and win without being stymied by outdated and unnecessary regulations,” said NAM Director of Regulatory, Tax and Domestic Economic Policy Alex Monié.

  • “We are proud of the work that the NAM has done to reduce the burden on businesses while also protecting the men and women who make things in America.”
  • “We are committed to pressing forward so that every manufacturer can support their workforce, participate in market innovation, contribute to their communities, promote competitiveness and advance U.S. leadership.”

Learn more: Check out the NAM’s full regulatory reform agenda in Competing to Win—a strategic blueprint for the policies that manufacturers in America need to compete with the rest of the world.

Press Releases

Manufacturers’ Third Quarter Outlook Shows Continued Supply Chain Issues, Growing Workforce Needs and Rising Costs

Washington, D.C.The National Association of Manufacturers released its Manufacturers’ Outlook Survey for the third quarter of 2022, which shows mixed results around a challenging economic environment, inflation, supply chains and the workforce. The NAM conducted the survey Aug. 16–30, 2022.

“Three out of four manufacturers still have a positive outlook for their businesses, but optimism has certainly declined. The majority of respondents are expecting a recession this year or next, and it’s clear the challenging environment is taking its toll. Manufacturers have shown incredible resilience through multiple crises, but the challenges of inflation, supply chain strains and the workforce shortage are taking a toll,” said NAM President and CEO Jay Timmons.

Key Findings:

  • 78.3% of manufacturing leaders listed supply chain disruptions as a primary business challenge with only 10.8% believing improvement will occur by the end of the year.
  • Attracting and retaining a quality workforce (76.1%), increased raw material costs (76.1%) and transportation and logistics costs (65.9%) were not far behind supply chain challenges as the biggest problems faced by manufacturers.
  • More than three-quarters of manufacturers felt that rising material costs were a top business challenge (tied with workforce challenges and slightly below supply chain worries), and 40.4% said that inflationary pressures were worse today than six months ago. In addition, 53.7% noting that higher prices were making it harder to compete and remain profitable.
  • The top sources of inflation were increased raw material prices (95.2%), freight and transportation costs (85.4%), wages and salaries (81.7%), energy costs (54.4%) and health care and other benefits costs (49.0%), with 21% also citing the war in Ukraine and global instability.
  • When asked about what aspects of the CHIPS and Science Act were most important for supporting manufacturing activity, 69.6% of respondents cited strengthening U.S. leadership in energy innovation and competitiveness.

“This is a clear indication that we need urgent action to beat back the macroeconomic problems that are causing headwinds and preventing manufacturers in the U.S. from their full potential. Our ‘Competing to Win’ agenda gives policymakers the roadmap for solutions manufacturers need now to make our industry more globally competitive and, in turn, to boost optimism and confidence.

“Federal policies alone won’t solve everything, which is why we will continue to be part of the solution—innovating ways to deliver for our customers and spearheading efforts like the NAM and The Manufacturing Institute’s Creators Wanted workforce campaign.”

Due to the consistent economic headwinds, manufacturers’ confidence has declined, with 75.6% of respondents having a positive outlook for their company, the lowest since Q4 2020.

Conducted by NAM Chief Economist Chad Moutray, the Manufacturers’ Outlook Survey has surveyed the association’s membership of 14,000 manufacturers of all sizes on a quarterly basis for the past 20 years to gain insight into their economic outlook, hiring and investment decisions and business concerns.

The NAM releases these results to the public each quarter. Further information on the survey is available here. Click here for more on “Competing to Win.”

-NAM-

The National Association of Manufacturers is the largest manufacturing association in the United States, representing small and large manufacturers in every industrial sector and in all 50 states. Manufacturing employs more than 12.8 million men and women, contributes $2.77 trillion to the U.S. economy annually and accounts for 58% of private-sector research and development. The NAM is the powerful voice of the manufacturing community and the leading advocate for a policy agenda that helps manufacturers compete in the global economy and create jobs across the United States. For more information about the NAM or to follow us on Twitter and Facebook, please visit www.nam.org.

Business Operations

Lincoln Electric Tour Showcases Innovation

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A word of caution about the Manufacturing Leadership Council’s plant tours: Attending one could make you rethink your manufacturing operations.

Inspiration abounds: The MLC, the digital transformation arm of the NAM, recently hosted a plant tour of Lincoln Electric’s headquarters in Cleveland. Inspired by the innovation on display, one attendee vowed “to go back to my own company and start asking what’s stopping us from implementing similar technologies and practices.”

  • The two-day Lincoln Electric event included visits to the company’s welding and training center, its machine division, its 3D printing facility and its automation-solutions center.
  • Tour participants also learned how the business is overcoming workforce shortages through culture and technology solutions.

What is Lincoln Electric? Lincoln Electric was founded in 1895 as an electric-motors manufacturer. Today it is a global industry leader in welding equipment and consumables, additive manufacturing and automation solutions. The company has locations in 19 countries and serves customers in more than 160.

Welding school: The first stop on the tour was Lincoln Electric’s world-class welding school, first opened in 1917 and relaunched in 2018 as the 130,000-square-foot Welding Technology & Training Center.

  • Students at this state-of-the-art facility begin their training at virtual welding stations before moving to one of 150 training booths to use the real “arc.”
  • Lincoln Electric also offers virtual classes, a turnkey curriculum for customers and “train the trainer” courses for welding instructors.

3D printing: Tour participants also got a look at the company’s Additive Solutions Center, the largest platform of its kind, which boasts 18 3D printing cells. It serves customers in the automotive, aerospace, marine and energy industries.

  • The equipment prints replacement parts, molds, tooling and prototypes measuring up to eight feet long and weighing more than 8,000 pounds.
  • It can print in a variety of metals, including mild steel, stainless steel, nickel alloys, bronze and Inconel.

Automation solutions: The Automation Solutions Center tour stop demonstrated Lincoln Electric’s twin answers to the manufacturing skills gap: innovation and tech solutions that increase productivity.

  • The technology on offer includes automated arc welding products, collaborative robots, metal fabrication and assembly line solutions.
  • Demand for Lincoln Electric’s collaborative robots is up as manufacturers cope with workforce shortages, tour participants learned.

High-performance culture: Tour attendees also learned about Lincoln Electric’s high-performance culture, which rewards success and provides employees with opportunities for growth and development.

  • The company’s Incentive Management System for the production workforce includes output-based pay to maximize personal earnings potential, an annual profit-sharing bonus, a no-layoffs policy and an open-door policy.
  • “I found the networking time to be highly valuable and came away with several ideas on employee retention,” said a tour participant.

Future focus: Looking ahead, Lincoln Electric leadership said the company’s core focus must and will be on its people—to continue to build a pipeline of talent and attract and develop the next generation of leaders.

Press Releases

Manufacturers Wake Up to Welcome News of Railway Agreement

Washington, D.C. – Following news of a tentative agreement between U.S. railroad companies and unions to avoid a strike, National Association of Manufacturers President and CEO Jay Timmons released the following statement:

“This morning’s announcement of a tentative agreement between the railroads and their workers is a welcome relief. Manufacturers had been putting into place contingency plans as they were facing disruptions with moving their supplies and products. Manufacturers thank President Biden, Secretary Walsh, Secretary Buttigieg and others in the administration who understood the stakes and stepped in to help prevent a very serious nightmare for the supply chain.”

-NAM-

The National Association of Manufacturers is the largest manufacturing association in the United States, representing small and large manufacturers in every industrial sector and in all 50 states. Manufacturing employs more than 12.8 million men and women, contributes $2.77 trillion to the U.S. economy annually and accounts for 58% of private-sector research and development. The NAM is the powerful voice of the manufacturing community and the leading advocate for a policy agenda that helps manufacturers compete in the global economy and create jobs across the United States. For more information about the NAM or to follow us on Twitter and Facebook, please visit www.nam.org.

Policy and Legal

NAM Competes to Win on Taxes

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The NAM is leading the way forward on a range of policies to help boost innovation, opportunity and competitiveness for manufacturers in the United States—and that includes tax policies that ensure manufacturers can continue to compete and win.

The record: During tax reform, the NAM achieved its key priorities—a lower corporate income tax rate, a reduced tax burden on pass-through business income, the adoption of a modern territorial tax system, the retention of the R&D tax credit and the adoption of incentives for capital equipment purchases.

  • Thanks to a more competitive tax code, manufacturers across America have been investing in jobs, facilities and their communities.

The road ahead: Of course, the NAM isn’t taking its eye off the ball. We are committed to protecting our gains and furthering progress—and that means ensuring the tax code continues to incentivize manufacturers’ ability to invest in innovation and growth. We’re focusing on three important tax priorities in the months ahead.

Research and development: On Jan. 1 of this year, a harmful tax change went into effect that makes R&D more expensive in the United States by requiring businesses to deduct their R&D expenses over a period of years.

  • The NAM has been leading the charge to ensure the tax code continues to support innovation by allowing businesses to fully deduct their R&D expenses in the year in which they are incurred. Check out these company stories on the importance of tax policies that support R&D.

Interest deductibility: When manufacturers borrow funds to buy capital equipment, the interest they pay on those loans is tax deductible up to a certain limit. But a recent change in the tax law modified how that limit is calculated—shrinking the deduction, making debt financing more expensive and leaving less capital for job creation and investment.

  • The U.S. is the only OECD country with such a strict interest limitation, so the NAM is working with members of both parties in Congress to reverse the new limit calculation and enhance manufacturers’ ability to compete. Read more about the NAM’s work on this provision here.

Full expensing: Under present law, manufacturers can deduct 100% of their investments in assets with long useful lives, supporting their ability to acquire vital equipment and strengthening their competitiveness. However, the ability to deduct 100% of these costs begins to phase down at the beginning of 2023 and is set to completely expire in 2027.

  • The NAM is leading the business community in advocating for full expensing permanency, joining with members of Congress to support legislation that would create certainty for manufacturers. See how full expensing has benefited small manufacturers in the United States here.

The last word: “The NAM is fighting to protect manufacturers across the country,” said NAM Senior Director of Tax Policy David Eiselsberg. “Protecting R&D, interest deductibility and full expensing will provide the tax certainty necessary for manufacturers to continue to invest in jobs and growth.”

Learn more: Check out the NAM’s full tax agenda in “Competing to Win.”

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