Will 2019 Be Smooth Sailing?

Part of my job is to anticipate the future and like the captain of the ship, steer a course that avoids turbulence as much as possible. Unfortunately, in business there are few adages such as “Red sky at night, sailor’s delight; Red sky at morning, sailor take warning”. As a result, organizational leaders must keep a watchful eye to spot those trends which affect their industry.

One of the benefits of travel, whether by air or car, is the isolation which allows the mind to freely flow. Occasionally, these episodes provide an opportunity for reflection. On a recent journey, I noticed six trends emerging in the metal finishing industry.

  1. Managers are Increasingly Relying on data. Increasingly, metal finishers are no longer making decisions on the basis of “gut” feeling or aesthetic appeal. Finisher’s want data. Objective decision making has replaced subjective. In order to make the best decisions, finishers want to ensure the quality of the data they are provided. Data means ensuring its relevance and validity to the decision making process. Clients want to know to what tests a supplier’s product or process has been subjected. Many times they want samples of their own parts or independent lab testing to verify claims. Finally, it is increasingly more common to validate a process or product with a trial in the client’s facility. As the risk associated with a decision increases, the constituency of the decision making process expands. Collaboration with the client is more important than ever to make sure the right decision is made.
  2. There is less “grey hair” in the workforce. The old guard is retiring. According to AARP statistics, there are over 10,000 people in the US turning 65 each day! While not everyone retires at 65, as more and more workers reach retirement age, their replacements tend to be younger and less experienced. This generation is used to relying on data driven decision making. This trend may be driving the decision making process. In order to properly interpret the data, the decision maker needs to fully understand the issue. This requires knowledge of the finishing process. The challenge we face is training a new generation of finishers. Other than the NASF CEF program and some other private courses, there is not a lot of training available. Very few institutions offer degrees or even courses in finishing. In house training and supplier provided training is more in demand.
  3. There continue to be shortages in the labor supply. According to the Bureau of Labor Statistics, the US unemployment rate in January, 2019 was 4%. Even though the labor participation rate is up, unemployment remains at historical lows. Many finishers report that entry level positions in finishing operations are unfilled. In order to meet the demand for workers, I hear a lot of discussion about the use of automation and robotics to load and unload finishing lines. Recently, one Illinois finisher began operating an almost completely automated robotic electroplating line. Robotics are found in a majority of manufacturing industries. It is only a matter of time before robotics will be commonplace in the metal finishing industry.
  4. Isolationism and tariffs are having an impact. The cost of imported goods subject to tariffs seems to be causing an expansion of US manufacturing activities. Combined with some favorable tax considerations many manufacturing operations are expanding fabrication activities. A great amount of these operations manufacture products that need to be finished, as opposed to higher technology processes without a demand for finishing. I have seen additional operations and expansions in many of our client’s facilities.
  5. The pressure for “green” processes and operations continues. The challenges surrounding PFOS and PFAS usage continue. The problems of Flint, Michigan have increased public awareness of chemicals in the water supply. In addition, some increased capabilities to measure minute quantities is leading to “if you can measure it, it must be regulated at that level”. Parts per trillion is replacing parts per million! A failure of the general public to understand chemistry continues to fuel a public “chemophobia”.
  6. Inflation may not be the menace it was thought to be. The new normal is a relatively modest rate of interest—very modest to those of us who remember 20+% interest rates! Even with these rates, leverage can still be a problem. We are starting to see the first signs of problems in some of our client’s receivables. This may just be an isolated instance, or it may be an early sign of some issues in the larger economy.

While 2019 looks to be another good year for the finishing industry, the water is not completely placid and we may encounter some storms on the voyage. Like any good sailor preparation and a watchful eye on the horizon will help us avoid calamity.