Whirlpool Corp., Benton Harbor, Mich., made headlines recently because it moved some of its washing-machine production from Mexico to northwestern Ohio. Its reasoning for the move: The Ohio plant was more automated and its electricity costs were actually lower than those of the production lines in Mexico. Transportation costs also figured to be lower because the front-loading laundromat washers in question won’t have to be shipped across a border to get into Whirlpool’s U. S. distribution network. All this despite the fact that production-worker wages in the Ohio plant are about five times higher than those of similar positions in Mexico.
Whirlpool’s reshoring of its washing-machine jobs is part of a trend that promises to continue in 2014. In the last three years, estimates are that more than 80,000 U. S. manufacturing jobs have been created from production that has been moved here from foreign countries.
Job reshoring is one of the reasons manufacturers are generally upbeat about economic conditions going into 2014. The asset-management group Longbow Research LLC, Independence, Ohio, says the U. S. potentially has a quite favorable three to five-year economic outlook partly because of reshoring efforts and because the U. S. could potentially become a net energy exporter thanks to recent technological breakthroughs in harvesting natural-gas deposits.
Longbow says the reshoring movement really took hold when manufacturers started running out of capacity in emerging markets as economies started to grow after the recession. This shortfall caused a lot of soul searching about the long length of global supply chains. Longbow thinks the trend of shifting work back to the U. S. will probably continue for at least the next few years, until manufacturing costs equalize by about the middle of the decade. Component makers will be the big winners in this move, the firm says.
Other reasons for optimism emerge from the Institute of Supply Management’s most recent economic survey. It found more than a third of the supply-chain professionals surveyed see business being better than it was last year. Most notable: Almost none of those asked are looking for a year worse than the one we’ve just finished.
ISM estimates manufacturers will see their revenues in 2014 rise an average of 4.4%. Capital expenditures, a major driver in the U. S. economy, are also expected to climb by 8% among manufacturers. Industries expecting the most improvement in the first half of 2014 include plastics and rubber products, electrical equipment, appliances and components, transportation equipment, miscellaneous manufacturing, and fabricated-metal products.
The future seems to be equally bright on the employment and cost fronts. Manufacturers expect to employ a workforce that is 2.4% bigger than last year and think their raw material costs will be tame. Manufacturers also report operating at 80.3% of their normal capacity going into 2014, up slightly from last spring. And they expect capacity use to rise another 6.3% in 2014 for industries that include transportation equipment, electrical equipment, appliances, and machinery.
ISM isn’t the only organization predicting growth in manufacturing industries. The Equipment Leasing and Finance Foundation says manufacturing should be robust in 2014 because of the strong housing-market recovery, falling natural-gas prices, and healthy auto sales. More-dependable economic growth should help generate stronger overall investment in equipment and software, its thinking goes. And there are only a few exceptions. ELFF thinks agriculture-equipment investment will stay weak and perhaps decline a bit. Investments in construction equipment declined slightly in 2013 and will likely drop another 5 to 10% in 2014, it says.
One big growth area for the coming years is automation and efficiency. The Freedonia Group, Cleveland, for example, says world demand for electric motors will rise 6.5% annually through 2017. The market research firm TechNavio, Elmhurst, Ill., sees servomotors growing at a rate of over 6% annually through 2016. One key reason for the growth is a quest for better energy efficiency. The research firm Marketsandmarkets, Dallas, expects the overall market for energy-efficient motors to grow at almost a 20% rate from 2013 to 2018.
There are developments in the works that will accentuate the trend. In 2014, many additional categories of motors will likely be regulated for energy efficiency. The regulations will begin kicking in during 2015, but the planning process for these changes will be in high gear over the coming months. “The DOE recently adopted a petition from a coalition of motor manufacturers as part of a notice of proposed rule making for medium-sized motors,” says Baldor Electric Senior Product Manager John Malinowski. “We asked the DOE not to raise the level of efficiency above that of NEMA Premium, but we wanted the scope of the rules expanded, and DOE agreed.”
The new rules will cover 56-frame motors as well as a lot of motors not now included in energy-efficiency regulations including those with special shafts, special bases, and numerous others. Because there are fewer exceptions, it will be easier for the DOE to judge compliance with the new rules. “Previously, you could build a motor with a shaft a quarter-inch shorter than standard that would exempt it under the old rules. The loopholes were easy to jump through,” says Malinowski.
There is another energy-efficiency rule for small motors expected to cause ripples among industrial concerns. Covering quarter-horse up through 3-hp motors, it is the first U. S. energy-efficiency legislation that applies to single-phase motors. “The single-phase motor you bought before the regulation takes hold might sit in a smaller body with only a start capacitor. Now, a motor with the same rating will have to use a Type 56 body with a shoebox-sized enclosure on top for a start and a run capacitor,” says Malinowski. “And the price will go up because of the extra materials and labor.”
It also looks as though the DOE will cast a wider net to get further gains in energy efficiency. “Instead of just trying to push the efficiency of electric motors ever higher, DOE is talking to industry experts about taking a more-comprehensive approach,” says Malinowski. “Makers of fans, pumps, and compressors all have different ideas about the best way to make these devices more efficient. There may be different approaches for each of these areas.”
And there are other motor qualities that are likely to get attention from manufacturers in the coming year. “There is a recognition that productivity is more important than energy efficiency in the U. S. because the energy here is much-less expensive than in other parts of the world. So motor manufacturers are looking at different ways of making motors last longer and be more robust,” says Malinowski. “For example, there has been a movement to ground the shafts of motors powered by inverters because the commercial buildings into which into which inverter-driven motors sometimes go are notorious for having poor grounds.”